What gets our attention?-- First meeting and beyond

1. What gets our attention?--First meeting and beyond PRESENTATION:

2. Know your audience • Are you prepared for a venture partner • How will your life change? • Is your capital structure clean? • Do senior management and early investors agree with seeking venture capital? • Do your homework • Research VC websites • Ask trusted advisors to find the right match • Get an Introduction • Use of funds • Prepare a business plan that assumes getting funded • Determine how much money you really need? • Secondary/recapitalization opportunity

3. First Meeting/Screen—typically a phone call • VC’s want to qualify via phone • Don’t push unnecessarily for a meeting • Do a great job on the phone with a 20-30 minute conversation • Keep it simple • Get to the value proposition quickly • Why do customers need your product/service • What to prepare? • 15-20 slides, case study of a specific client implementation • Make executive summary and a more extensive slide deck available • Save a detailed business plan for follow-up • Create a need/desire for the investors to want to know more • Goal: In person meeting

4. First “in person meeting” • Issues to address • Focus on the questions that came up on the prior phone call • Don’t plow through your slides • Listen carefully, create a dialogue • Business Model • Re-establish the value proposition quickly (i.e. problem/solution) • How do you make money? • Recurring/repeating revenue • Scalability –is your business right for VC funding • Fast growth a must, risk taking will be the norm • High gross margins and customer perceived value add • VC’s need to see at least a 5-10x return • Articulate potential exit opportunities • Are you building for an exit or is this a lifestyle business? • Goal: Visit from the investors to your facility

5. Subsequent Meetings • Build a relationship • Update on sales momentum • New management hires • Ask for advice • Chemistry with the partner you are working with • We are always doing diligence • Are you coach able? • Do you follow up with introductions? • Are you doing your homework? • Call CEO’s from other investments • Are you looking for money or a partner? • Goal: Valuation/term sheet discussion and presentation to partnership

6. Post-term sheet/diligence meetings • Self assessment • Current management team is realistic about their own weaknesses • VP Sales-#1 position next to CEO • CEO-if 1st time with VC backing, open to feedback a must • CFO-CEO right hand or book keeper? • Owners accept that dilution can lead to higher valued business • VC requires a meaningful ownership position in the Company • 10-20% option pool for key hires and employees • Management team is running the Company – VC interests should be aligned with executives (post investment)

7. Term Sheet • Don’t get locked up in a term sheet without Investor conducting initial due diligence • Pre-term sheet phase • VC looking for fit with their investment strategy • Post-term sheet phase – due diligence process • VC looking for reasons to confirm investment strategy • Deal negotiation • It is critical for the entrepreneur to work with an attorney who understands VC process and ‘what are market terms’

8. Edison Venture Fund Priority Deal • Presentation checklist example: • Brief history of your Company • Market overview and positioning • Current and next generation products and services • Competition • Marketing programs/Lead generation • Sales and Distribution channels/Key partners • Largest customers • Pricing and renewal process. • Client teams (sales, service, support) • Backlog and sales pipeline -- very important! • Current P&L and balance sheet • Projected financials (quarterly 2004 and 2005-06) and cash flow • Management team and organization • Development plans • Use of proceeds • Lessons learned • Edison contribution