Ottawa Wireless Cluster February 10, 2005

1. Ottawa Wireless Cluster February 10, 2005

2. Agenda • Why OAA ? • Alliance Overview • Process • Q & A www.ottawaangels.ca

3. What is the problem? • Seed stage companies typically require $0.5 M to $2M to reach cash flow positive or progess to become VC financeable • Typically requires a number of Angels to pool the required amount of seed financing • Finding the ‘number’ of Angels willing to invest is extraordinarily inefficient • Finding the investable companies is extraordinarily inefficient for individual Angels www.ottawaangels.ca

4. Entrepreneur View • Angels typically invest $25K per deal • Company needs $0.5M to $2M • Need to find 20 to 80 angels www.ottawaangels.ca

5. Investor View • Approximately 600 hours of effort to close a deal • Studies show that portfolio should have at 7 - 10 companies 1 Deal creation 100 hours 3 Detailed due diligence 300 hours 10 Detailed screening 120 hours 40 Business plans reviewed 80 hours www.ottawaangels.ca

6. Our Experience • Groups like Purple Angel and Band of Scoundrels work, • but still need to leverage a larger pool of Angels • Significant effort to de-risk investments • Deal flow • Due diligence • Deal construction • Ongoing advising and helping • Entrepreneurs spend too much effort raising capital • not focusing on their core business www.ottawaangels.ca

7. OAA Solution The OAA will address 5 risk factors: • Size and structure of seed round • Due diligence • Company formation, guidance and governance • VC partnerships • Portfolio diversity www.ottawaangels.ca

8. Majority must be angel members Board of Directors All must be angel members Managing Angels Members Structure • The Ottawa Angel Alliance is a “Not for Profit Corporation” • Not a fund • Angels / VCs invest directly into companies www.ottawaangels.ca

9. Managing Angels Rainer Paduch Laurie Davis Irving Ebert Rod Anderson www.ottawaangels.ca

10. Board of Directors • Irving Ebert • Managing Angel • Ken Lawless • CEO Ottawa Life Sciences Council • Rick Norland • Finance, IT, Life Sciences • Jeffrey Dale • CEO OCRI • Laurie Davis • Angel Member www.ottawaangels.ca

11. Membership • 26 Paid Up Angel Members • Handful of others ‘committed’ • ~30 others ‘interested’ • Venture Capital Members • BCE Capital • Vengrowth • Ventures West www.ottawaangels.ca

12. Angel Roles & Responsibilities • Good faith effort to do 2 X $25K investments • Due diligence expertise (2 per year) • Attendance at 50% of meetings • Refer deals • Participation in governance • Alliance • Investee companies • Trustee of voting trust www.ottawaangels.ca

13. VC Roles & Responsibilities • Participation in seed rounds • “Letter of Intent” level of commitment to Series A • Access to research to support due diligence • Attendance at 75% of meetings • Refer deals www.ottawaangels.ca

14. Mgmt Roles & Responsibilities • Detailed management of deal flow • Detailed due diligence • Find and manage subject matter experts • Deal structure & terms • Company guidance and governance • Links to other angel organizations • Administration of the alliance www.ottawaangels.ca

15. Compensation Model • Active angels are entitled to compensation • Source – investee company (after closing) • 3% cash, 3% warrants • Use of funds (guideline) • 1% cash, 1% warrants to Champion • 1% warrants split among very active angels • Remainder split among Managing Angels • Compensation to angels is structured as a consulting agreement between the angel and the investee company. www.ottawaangels.ca

16. Compensation Model (con’d) • Administration of the alliance • Source - dues and sponsorship • Use of funds • Administration • Managing Angel expenses (max $1000/month) www.ottawaangels.ca

17. Monthly Meetings Member Presentation Investment Call Insufficient Interest No Prescreen Engagement Letter Identify Champion Circulate 2 Pager Call for Involvement Term Sheet Due Diligence Member Subscription Voting Trust Fill out the round Business Design Fill Gaps Failed to Progress Close Investment Memo Investment Committee Presentation Post Close Activities Failed to Close Investment Process New Prospect www.ottawaangels.ca

18. Investment Committee • Decisions whether a company proceeds to Member presentation • Makeup • 4 Managing Angels (Permanent) • 1 VC Member (6 month rotation) • Marc Wickham • 2 Members at Large (6 month rotation) • Scott Simpson • Rick Norland www.ottawaangels.ca

19. Voting Trust • Objectives • Collect shareholder votes into one larger voice • Provide greater visibility into investee company by the minority shareholders • Speed up shareholder decision making • Simplify shareholder voting to meet the needs of later VC investors www.ottawaangels.ca

20. Prospect Funnel www.ottawaangels.ca

21. Target Company • Not rigidly formulated • Ottawa area preference in geography • Life Sciences / IT / Telecommunications • Management Team Important www.ottawaangels.ca

22. Management Domain Expertise Problem / Pain Market / Size / Share Product / Offer / Road Map Differentiation / Barriers to Entry Target / Lead Customers Business Model / Pricing / Margins Channels / Path to money Competition / Positioning Financials Total Financing Requirements Use of Proceeds Valuation Exits for Investors What we look for www.ottawaangels.ca

23. Thank-you • Questions ? www.ottawaangels.ca