Stanford University Data Mining and E-Business

1. Stanford University Data Mining and E-Business

2. INTRODUCTION • WARREN H SPAR • 20+ Years on Wall Street: Capital Markets & Corporate Finance • Partner at Lehman Brothers • Managing Director at Bankers Trust/Alex Brown/Deutsche Bank • Experience with a variety of industries including Software, Marketing Services, Financial Services, and Business Services • Closed over $100 billion dollars worth of transactions • M.B.A. from University of Chicago • SPARRING PARTNERS • Boutique investment bank with special focus on advising privately-held growth companies in the software & technology-enabled businesses sectors • Licensed broker-dealer; Member FINRA / SIPC • Sell-Side Advisory:Strong access to senior management of leading global strategic buyers • Equity Capital Raising:Well-connected to the top venture capital and private equity firms in the U.S. • Debt Capital Raising:Strong relationships with global debt lenders, traditional and non-traditional • Private Equity Fundraising:Relationships with U.S. endowments, foundations, pension funds, family offices, and advisors/consultants

3. VC Misses – Bessemer Venture Partners’ Anti-Portfolio 3

4. Don’t Get Discouraged! 4

5. Most Popular Websites: August 2001 vs. August 2007 Ranked By Monthly Attention 5

6. On The Internet, There Are No Entrenched Companies! 6

7. craigslist 7

8. The Biggest Ideas Are Often Born Out Of Ordinary Needs! 8

9. I VENTURE CAPITAL MARKET 9

10. I VENTURE CAPITAL MARKET VENTURE CAPITAL INVESTMENTS LAST TEN YEARS Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial 10

11. I VENTURE CAPITAL MARKET VENTURE CAPITAL INVESTMENTS BY QUARTERS Source: PricewaterhouseCoopers/National Venture Capital Association MoneyTree™ Report, Data: Thomson Financial 11

12. I VENTURE CAPITAL MARKET PRE-MONEY VALUATIONS LAST TEN YEARS LAST TWELVE QUARTERS 12 Source: Dow Jones VentureSource and Thomson Financial, PWC, NVCA

13. I VENTURE CAPITAL MARKET RISK / REWARD PROFILE Angel Investors High Risk Early-Stage Firms Modest Returns High Returns Growth Equity Private Equity Low Risk 13

14. I VENTURE CAPITAL MARKET What Makes a Good Business Model • Total Addressable Market (>$1 billion) • Conversion / Adoption Rates • Network / Viral Effect (Bloomberg, Facebook) • Revenue Model • Predictability of  Revenue (Recurring vs. Non-Recurring) • Profitability • EBITDA Margin • Growth Rates • 10% per year or per month? • Concentration of Client base • Depth of Management Team • Proprietary Technology / Barriers to Entry 14

15. I VENTURE CAPITAL MARKET Ideas for New Companies • Think “In-the-Box” • Mimic Ideas from Overseas • Auction Sites • Ringtones • Improve on Existing Technology / Idea • Apply One Technology to Another Industry • GPS • Think “Out-of-the-Box” • Create a Whole New Market • Social Networks • Cleantech • What Do You Think? 15

16. I VENTURE CAPITAL MARKET Starting Your Own Company • The Earliest Capital is the Most Expensive! • Beg your friend and family for money • Don’t pay yourself • Beg your developer friends to build the software for you • Give sweat equity to whomever you need in the early stages of the company • Penny pinch on everything – you most likely don’t need a CFO, nice offices, etc. Just get the product out of the door! 16

17. I VENTURE CAPITAL MARKET Using A Knowledgeable Banker • Use a banker with domain expertise • Avoids conflicts with potential investors • Creates a perception of professionalism and investor demand • Running a sale process increases valuations and will result in better transaction terms • Bankers have strong relationships • Bankers have valuable insights into markets • Bankers can offer “out-of-the-box” thoughts on potential investors 17

18. I VENTURE CAPITAL MARKET The Capital Raise Process STAGE I Develop Marketing Materials • Executive Summary • PowerPoint Presentation • Financial Model STAGE II Contact Institutions • Contact Potential Strategic/Private Equity Investors • Distribute Executive Summary • Schedule Conference Calls/Meetings STAGE III Meetings & Conference Calls • Engage in Conference Calls/Meetings • Initial Due Diligence STAGE IV Review Term Sheets • Review Term Sheets • Negotiation Process • Select Acquirer/Investor STAGE V Due Diligence & Closing • Complete Due Diligence • Documentation • Close and fund 18

19. I VENTURE CAPITAL MARKET Important Transaction Terms • Pre-Money Valuation + Investment = Post-Money Valuation • Participating vs. Non-Participating Preferred • Liquidation Preference • Anti-Dilution Provisions • Pay-to-Play 19

20. II Case Studies 20

21. II CASE STUDIES – COMPANY A SUBSCRIPTION GROWTH 21

22. II CASE STUDIES – COMPANY A SUBSCRIBER GROWTH BY EDITION 22

23. II CASE STUDIES – COMPANY A CHURN 23

24. II CASE STUDIES – COMPANY B MEMBER GROWTH 24

25. II CASE STUDIES – COMPANY B PAID SUBSCRIBER GROWTH 25

26. SELECTED PAST CLIENTS

27. SELECTED PAST CLIENTS

28. For further information, please contact: Warren SparSparring Partners Capital420 Lexington Ave, Suite 2458New York, NY 10170warren@sparringpartners.com Tel: 212-490-6525