Structuring a For-Profit Incubator NBIA Conference May 2000

Incubators Focus Involvement Types

For profit  Financial support  Rigorous screening  Equity share  Private or open Not for profit  No direct financial support  Open entry  No equity share  Industry clusters, universities, government

Focus Internal focus  Ideas from within  Higher equity share External focus  Ideas from outside  Varied equity

Involvement Active  Hands-on management  Significant resources  Specific expertise in most areas Passive  Hands-off management  Introductions to affiliated vendors  Expertise in some areas

NetStrategy For Profit  Detailed screening process  Significant equity share  Varied funding Focus  Internal  External Involvement  Management level varies  Full complement of resources  Expertise available in all disciplines

Idea Origins NetStrategy Launch Team External: An idea is received through the NetStrategy website interface. Internal: An idea is conceived within NetStrategy and presented for consideration. Net Executive Principal in training Business Dev Executive Seasoned executive Business Architect Mentor/shareholder

NetStrategy Launch Process I st Stage Three defined steps NetLaunch 2 nd Stage Specific short-term objectives & milestones 3 rd Stage Long-term objective

NetStrategy Launch Process 1 Management Market Competition AnalysisScreeningPresentation 1 st Stage Evaluation

NetStrategy Launch Process 1 2 Business model Revenue potential Potential value AnalysisScreeningPresentation AnalysisScreeningPresentation 1 st Stage Evaluation

NetStrategy Launch Process Meet with management Capital requirements Scalability Exit strategy AnalysisScreeningPresentation AnalysisScreeningPresentation 1 st Stage Evaluation

NetStrategy Launch Process Primary Decision Point Commit Key Staff Business architect Initiate search process Commit Resources Allocate office space Purchase equipment Assign teams Commit Funding Seed capital $250,000 & up

NetStrategy Launch Process Growth 2 nd Stage Implement Brand Sell Initiation Eyeballs Revenue Earnings MilestonesPreparation Business plan Technology Marketing

Graduation NetStrategy Launch Process 3 rd Stage Outside funding Valuation 2 Self-sustaining Viability 1 IPO – Sale - Merger Liquidity event 3

NetStrategy Resources Capital  $250K to $2M in hard dollars  Varying amounts in soft dollars

NetStrategy Resources Capital Technology  State-of-the-art hardware & facilities  Sponsor company  Deferred expenses/equity

NetStrategy Resources Capital Technology Legal  Company organization  Contracts & agreements  Mergers & acquisitions  Stock options  Intellectual property

NetStrategy Resources Capital Technology Legal Accounting  Payroll  Taxes  Receivables & Payables

NetStrategy Resources Capital Technology Legal Accounting Human Resources  Interviewing & hiring  Training & development  Performance management  Benefits

NetStrategy Resources CapitalFacilities Technology Legal Accounting Human Resources  Class “A” office building  Spacious, personal work areas  Workout room w/ showers  Living room  Break rooms

NetStrategy Resources CapitalFacilities TechnologyPublic Relations Legal Accounting Human Resources  Press releases  Article development  Speaking engagements  Trade shows  Print, TV & radio interviews

NetStrategy Resources CapitalFacilities TechnologyPublic Relations LegalMarketing Accounting Human Resources  Brochure development  Advertising  Marketing materials

NetStrategy Resources CapitalFacilities TechnologyPublic Relations LegalMarketing AccountingBranding Human Resources  Testing  Customer surveys  Media exposure

NetStrategy Resources CapitalFacilities TechnologyPublic Relations LegalMarketing AccountingBranding Human ResourcesManagement Advisors  Successful entrepreneurs  Subject matter experts  Mentoring program

NetStrategy Resources CapitalFacilities TechnologyPublic Relations LegalMarketing AccountingBranding Human ResourcesManagement Advisors NetStrategy’s extensive resources minimize distractions and allow principals to focus on their core business needs. They benefit from the highest quality in every service provided, they conserve funding, and they increase their speed to market – the biggest competitive advantage.

Funding  Seed round - $2M valuation  First round - $4M valuation  Second round - $50M valuation  Sports team  Racing legend  Value $100M Private funding Equity exchanges Internal funding

NetStrategy Companies