Off to See the Wizard Ignite Presentation 12/6/07

1. Off to See the WizardIgnite Presentation12/6/07 DFJ Portage Venture Partners, LLC One Northfield Plaza, Suite 530 Northfield, IL 60093 847/ 446-9460

2. Draper Fisher Jurvetson Portage Network Resources 35 offices 100+ partners 500+ portfolio companies $7B under management

3. Cash Is King, Burn Is An Anchor • “All companies that go out of business do so for the same reason - they run out of money.” • -- Don Valentine, founder of Sequoia • Simple framework for decision making: • Determine when $0 cash (glue month in mind) • Understand key drivers of CF (WC, salary, rent, etc) • Bankrupt and profitable…how? • Evaluate how every decision moves the Ground Zero date • Use downside scenario for burn mngt ($0 rev??), and upside scenario to drive sales team/compensation

4. When To Go for Venture (or Not)? • Angel/Self Fund • Low cash needs • Life style business • Linear growth • Niche business • No plans to sell • No interest in biz partners • Venture Funding • Significant cash needs • Exponential growth • Large market opportunity • Cooperative w/investors • Finite exit horizon • Benefits from additional domain knowledge & networks Most in this room should not go for venture money -- not a good use of time, will end in tears

5. How to Go for Venture • Get a qualified, personal introduction • Do your homework on the firm, partner & industry • You better know the industry/risks better than they • Know the likely push backs & have responses • Don’t get defensive! • Don’t come across naïve • We have no competition • Our financials are conservative • First mover/patents/etc are barriers • Maintain contacts, network like crazy • Most likely, won’t get $ that round or that company

6. Like Hollywood, the Story Is Key • Grandmother test • Do industry friends (& granny) get your value proposition • You’re selling soap • How clearly do people see vertical application & use • “Aren’t you just like…” (must kill this in 30 secs or trouble) Inertia is your enemy • Market inflection is the driver between hero & idiot • Ideal: don’t change routines, don’t change mental map • Study Spielberg & Bruckheimer

7. The Mind of the VC • VC’s like to: • Run in Packs (themes) • Stay close to familiar domains (add value) • Avoid sectors of past failure • Use pattern recognition • Graveyard test • Analogs/binder tab • Need 10x return • SO, DO YOUR HOMEWORK…VISIT WEBSITE/GOOGLE ON PAST DEALS & BIO Gary Snoman

8. Why 10x…Are VC’s Just Greedy?

9. Pigs Fed, Hogs Slaughtered Aggressively concerned about dilution Cramdown financing hurts everyone Overpromise to get high valuation Valuation Death Spiral Management replaced, crisis hits (poor numbers & no mngt) Reality sets in…slow growth, niche market Investors nervous about post-$, pissed about overpromise • Don’t fool yourself • Don’t go VC when you should go angel • Raise just what you need • Valuation: don’t be penny wise…

10. Enterprise Out, Consumer InWill Swing Back in the Coming Years Source: Goldman Sachs

11. The Great Reckoning • The financial crisis … is back with a vengeance. • I’ve never seen financial insiders this spooked — not even during the Asian crisis of 1997-98. • This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created. • Paul Krugman, NYT

12. The Rebirth Past 100 years: US highway system, microwave oven, antibiotics, recombinant DNA, airflight/jets, space program, global electric & phone systems, universal access to education, integrated circuit, articial heart, fusion/atomic bomb, polio vaccine, electron microscopes, cell phones, radio, television, air conditioning, lasers, imaging, fiber optics, nylon, radar, PC, etc… Destructive Capitalism Has Always Driven Innovation “The next 20 years of change will be equivalent to the past 100 years of change.” -- Ray Kurzweil Accelerating Returns Sources: TIME, April 13, 1998; genealogy newsletter, http://ftp.rootsweb.com/pub/roots-l/messages/01jan/141803