The Founding Team A Discussion Ralph C Derrickson President & CEO Managing Member RCollins Group, LLC

Page 2 Health care that comes to you ® Welcome ›Introductions & welcome ›Who is the founding team? ›3 points of view: investor, manager, entrepreneur ›Dynamics ›Considerations ›Questions

Page 3 Health care that comes to you ® Adequate Management? Our research showed that investors are extremely reluctant to invest without knowing their risk concerning “adequate” management. High Tech Start Up The Complete Handbook for Creating Successful New High Tech Companies John L. Nesheim

Page 4 Health care that comes to you ® ›The people who get to claim victory? ›The scapegoats for a failed business or investment? ›The reason investors make investments? ›The reason other people join the company? ›The reason the company succeeds or fails? Who is the founding team?

Page 5 Health care that comes to you ® Where do you draw the line? ›The people that are there when the business becomes a viable enterprise ⁃ Figured out their product and how to sell it ⁃ Figured out how their business model works ›Can say no to additional investment – they don’t need the money ›Does it include the board of directors or investors?

Page 6 Health care that comes to you ® The investment decision – the 3 “Ms” ›Market – if the business did “it” would anyone care? ⁃ Is there a market for the “it” ⁃ Are there competitors? ⁃ How does the market buy? ⁃ Aspirin or vitamins? ›Model – if they did “it” would it make money? ⁃ What is the unit transaction of the business? ⁃ How profitable is it? ⁃ Can it be replicated ›Management – is this the right team to do “it”

Page 7 Health care that comes to you ® Investor: is this the right entrepreneur? ›Experience: ⁃ Anything relevant? Any experience at all? ⁃ Done something similar? Will they try to repeat? Dissimilar and try to repeat? ⁃ Do they know the market – players, dynamics? ⁃ Can they sell their product or service? ›Management: ⁃ Can they hire people that will help them? ⁃ Can they manage people? ⁃ Do they inspire confidence in employees – investors? ›Character? ⁃ Do you trust them? With the money? With the business? ⁃ Do they recognize their own strengths and weaknesses? ⁃ Are their goals the same as yours – do they measure success the same way? ⁃ Will they “step aside” if need be? ⁃ Do they own enough to matter? Do they own too much? ›Do they have a plan for building value? Is it the same as yours?

Page 8 Health care that comes to you ® Entrepreneur: is this the right investor ›Do they have a track record of investing in this space? ›Does the partner know the space? Have relevant experience? Have any experience? ›Do they have the credibility to help me with other investors? ›Do they have the contacts to help me recruit, get more investors, or find customers? ›Do they have the money to support me down the road? ›Know the difference between being on the board and running a company? ›Do you trust them? ›Will they push me aside? They can fire you but you can’t fire them!

Page 9 Health care that comes to you ® Manager: is this the right team? ›Much different at the start, then later ⁃ Pioneers vs. settlers ›Do I believe they can help me make the company successful? ›Can I work with them? ›Can I trust them? ›Can they accelerate/contribute to institutional learning? ›Can they shape the culture – is their personality or their behavior strong enough? ›Will people model their behavior after them – are they a natural leader? ›Can they handle a start-up?

Page 10 Health care that comes to you ® Dynamics – Fund Raising Burn Rate? Time? Value enhancing milestone? If schedule slips? Next funding window? Valuation Step up? Post Money Value? Next pre- money value? Capital Raised?

Page 11 Health care that comes to you ® Dynamics – Cash Position Elation Terror Paranoia?

Page 12 Health care that comes to you ® Dynamics – Changing Priorities Product Development Sales & Marketing Fund Raising Recruiting Investor Relations & Board Meetings What don’t I know Competitive and or Regulatory Threats People issues: politics – favorites – paranoia – burn out - sleep SeedDevelopmentSales & Marketing

Page 13 Health care that comes to you ® Dynamics! Product Development Sales & Marketing Fund Raising Recruiting Investor Relations & Board Meetings What don’t I know Competitive and or Regulatory Threats People issues: politics – favorites – paranoia – burn out - sleep Burn Rate? Time? Value enhancing milestone? If schedule slips? Next funding window? Valuation Step up? Post Money Value? Capital Raised? Elation Terror Paranoia?

Page 14 Health care that comes to you ® Considerations ›Experience vs. attitude? ›Interviewing is an unnatural act – do your home work! ›You never add to a team – you reform it with every new team member and shift in phase. ›Rarely exit the same business you entered! ›No recipe for success so don’t try to follow one.

Page 15 Health care that comes to you ® Questions

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