KICKSTART SEED FUND: IGNITING INNOVATION KICKSTART SEED FUND OVERVIEW GAVIN CHRISTENSEN, MANAGING DIRECTOR, KICKSTART SEED FUND Aug, 2009

Agenda  High-Level Overview  Kickstart Seed Fund  The Opportunity  Fund Strategy  Fund Structure 2

High-level concept 3  The Mountain West is a innovative and entrepreneurial region with tremendous potential  The Kickstart Seed Fund is a unique seed fund that can help catalyze entrepreneurship in the region through:  Aligning key ecosystem participants  Supplying seed capital  Providing investment leadership  Educating all participants  Facilitating access to follow-on capital and strategic partnerships  By accomplishing this, Kickstart Seed Fund will create outsized strategic and financial rewards for all participants 3

Strong Partner is critical to success Key role in community Trusted agent Long history of exits Third Fund Manages front and back end Economics don’t work well Venture Capital is sitting at Table vSpring Overview 4

Traditional Funding Continuum 5 SEED/START-UP FUNDING SEED/START-UP FUNDING DEVELOPMENT FUNDING DEVELOPMENT FUNDING EXPANSION FUNDING EXPANSION FUNDING OPPORTUNITY DEVELOPMENT OPPORTUNITY DEVELOPMENT CONTINUED GROWTH CONTINUED GROWTH ANGELS, FOUNDERS & SEED FUNDS VENTURE CAPITAL – GROWTH EQUITY PE - PUBLIC MARKETS VALUATIONS INCREASE BUSINESS RISKS DECREASE MENTORING NEEDS DECREASE $5M-20M$500K-5M $50K-500K >$20MSweat

Opportunity 6

Rocky Mountain Innovation  Regional innovation clusters in Management Software, Internet and Communications, and Life Sciences  15,000 technology companies, public technology companies 2  Over $16B in total R&D spending 3  Well-funded research universities in region 7 Source: 1. US Economic Census, Credit Risk Monitor Website ( 3. AAAS Survey, 2005 (

Startup creation from universities 8 Since 2004, schools in UT, AZ and NM are creating startups at record levels Source: AUTM Startups created from licensed university technology by year

Top start up creation universities 9 In 2006, University of Utah was 2 rd in the nation in startups created from licensed technology Source: AUTM Startups created from licensed university technology

The Case for University Spin-Outs More likely to have large outcomes Go public at 114x the rate of other startups 2. Less likely to fail Rate of Going PublicFailure Rate Source: National Council Of Entrepreneurial Tech Transfer.07%

History of success for University spinouts… 11

Kickstart Seed Fund 12 R&D relationships Seed Companies 5-10 VC-backed Startups Fund I ~ $10MM of seed capital

Post- Bubble Seed Capital 13 Source: Venture Source, NASVF

Seed Capital hasn’t recovered 14

Regional Gap in Seed Funding 15 Investments in UT and NM since 2003 Source: Venture Source, Utah Angels

Bridging the Technology Commercialization Gap 16 R&D Institutions Mission Commercial Sector Basic Research Applied R&D Business Development Full-Scale Commercialization Early-Stage Capital Market Insight Human Capital

Kauffman Foundation Kickstart Ecosystem Alignment Trusted, informal networks Startups Universiti es/ Labs Early Stage VCs Angel Investors Industry 17 Capital, value add, syndication Technology transfer, student opportunities, economic development Deal flow, “clean” deals Deal flow, economic alignment, coinvestment and follow-on rights Deal flow, outsourced R&D, executive involvement & education Kickstart Seed Fund

Financial Investors Kickstart Seed Fund – 1 st Close Startups Universities / Labs Early Stage VCs Angel Investors Industry Kickstart – Aligning Utah’s Ecosystem 18

University Alignment Invest at threshold to participate in investment committee > $500K Attend investment committee meetings Financial Commitment Facilitate knowledge and best practices sharing between fund stakeholders Technology Commercialization Engage cross-functional teams to assist in commercialization Create supporting curricula Business plan competition Student Involvement 19

Value to the students  Kickstart Seed Fund Class  vSpring/ Kickstart Seed Fund has partnered with BYU/ Nathan Furr to create a innovative new class to prepare students to actively participate with the fund in due diligence/ working with seed-stage companies  Internships  vSpring/ Kickstart Seed Fund operates a summer intern program of 25+ students. Including three international internships this year.  Entrepreneurship  KSF actively sponsors and supports every business plan competition  Create an information marketplace that actively connects the right talent and technology in our network 20

Fund Strategy 21

Kauffman Study: Mitigating Risk Strategic Choices  Due diligence: venture capital-style due diligence pays off  Experience: engaging individual with direct industry experience  Participation: High participation is interacting with the company 1 or 2 times per month, Low is 1-2 times per year 22 1 HIgh due diligence was defined as > 20 hours spent Source: Kauffman Study: Returns to Angel Investors in Groups, 2007 Average Return Impact High 1 due diligence: 5.9X Low due diligence: 1.1X High experience vs. low experience nearly 2X improvement: High participation: 3.7X Low participation: 1.3X

Potential Portfolio Composition 23

Deal Types 25% of deals Very big idea technology Needs investment to spin out of the lab/ university Commercialization 50% of deals Sweet spot deal for fund, Pre-Series A, Traditional Seed deals, First institutional money Company has a business plan, license, some team Seed 25% of deals Most likely to be internet deals close to cash flow positive, Very efficient business model May have other investment from Angels etc… Early Stage 24

Fund Structure 25

The Fund Structure 26 Kickstart L.P. Kickstart, LLC Investment Committee Investors (LPs) GP LPs that invest > $1 MM LPs that invest > $.5 MM Invested Capital Management Fee ROIC Carry Managing Member Portfolio Investments Non Managing Member

Next Steps  Expansion  Model has wide applicability in multiple regions A local sport Alignment first, collaboration second  Tying this to a new model for commercialization  Exploring right model for addressing multiple regions 27

Gavin Christensen Managing Director, Kickstart Seed Fund Thank You 28