Innovation Summit at NAU September 9, 2012 James Goulka Managing Director Arizona Technology Investor Forum 1

 Net worth of $1 million or more Or  Income for each of last 3 years › $200,000 pa if single › $300,000 pa if married 2

 No liquidity  Unproven management  Unproven technology  Unproven markets  Unknown competitors lurking in the bushes  No predictability 3

 $20 billion invested in 2010  61,900 deals in 2010 Source: Center for Venture Research, University of New Hampshire

 Able to assess and absorb the risk  Invests own money  Invests brainpower › Due diligence on investment › Board or Advisor › Know-how  Invests time  Opens contact database 5

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 Super Angels (Ron Conway)  Domain Magnets (Pat Sullivan, the Crowns)  Angel Groups (ATIF) 7

 Can make smaller investments ($25,000)  Leverage from multiple brains  Leverage from single center  Shared due diligence  Aggregated capital = better terms  Multiple ways to invest  Multiple ways to participate  Fun 8

 55 Phoenix individual investors  Entrepreneurs, Technology Executives, Accountants, Lawyers, Investment Bankers, Consultants  23 investments  $6.2 million invested  Direct and through ATIF Sidecar Fund I  Partner with Desert Angels & NM Angels 9

 Software & SaaS  Semiconductors & Sensors  New Materials  Non-invasive medical devices  Capital efficient green tech 10

 The business, not the technology  What is the pain point?  How acute is it?  The customers › Who are they › How many of them are there  How do you get them?  Why will they pay for your solution? 11

 Where › Arizona › Southwest  Size: $250,000 - $1,500,000  Stage › Prototype or Alpha customer › Revenue not required (but nice) 12

Valuation 13

 2 equal sized investments  Target Return for portfolio: 25% p.a.  At the end of year 1: › 1 fails: complete loss › Need 50% p.a. on the other one  Critical Problem: Don’t know which is which  Therefore expect 50% p.a. on all 14

 Achieve 50% returns by explosive growth › Not linear growth, eg service businesses › Technology powers the growth  3-5 year investment horizon › Not the grid, but controllers of the grid › Not Vinod Khosla’s “science projects” › Not businesses to hand to your children  Exit typically sale to large entity 15

 Deal Terms  Due diligence  Taking care of the team: Option Pool  Governance 16

200 Inquiries 100 Applications 24 Semifinalists 12 Presenters 6 Investments 17

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