The Funding Process From The Entrepreneur’s Perspective Dan Dykens CEO Norbury Financial Systems, LLC

My Background Hedge Fund business 10 years Hedge Fund business 10 years Built software to address internal needs Built software to address internal needs $225 million industry software acquisition announced $225 million industry software acquisition announced Inspiration to start a software company Inspiration to start a software company Evaluate the market size Evaluate the market size Ask others who have “been there done that” Ask others who have “been there done that” Just do it Just do it

Where is the Money? Friends & Family? Friends & Family? Angels Angels Venture Capital Venture Capital Government Government Banks Banks Hedge Funds Hedge Funds Strategic Investors Strategic Investors

Who Will Invest? Friends & Family: If they don’t trust you why should a stranger? Friends & Family: If they don’t trust you why should a stranger? Angels: They often know your business because they were in your business Angels: They often know your business because they were in your business Venture Capital: Don’t hold your breath Venture Capital: Don’t hold your breath Government: Johnny Bravo Investors “Only if the suit fits” Government: Johnny Bravo Investors “Only if the suit fits” Banks: Must be an established business with diversified AR Banks: Must be an established business with diversified AR Hedge Funds: Difficult to get to Hedge Funds: Difficult to get to Strategic Investors: Far & few between but value your business more than others Strategic Investors: Far & few between but value your business more than others

Angel Investors Individual or member of a group Individual or member of a group High net worth High net worth Typically industry veteran Typically industry veteran Likes helping develop businesses Likes helping develop businesses “Been there…done that” “Been there…done that” Not as valuation sensitive as VCs Not as valuation sensitive as VCs Make quick decisions Make quick decisions

Venture Capital Professional investors Professional investors Heavily invested in Tech, Telecom & Healthcare Heavily invested in Tech, Telecom & Healthcare Funds and deals getting bigger Funds and deals getting bigger Shying away from pre-revenue deals Shying away from pre-revenue deals Willing to pay more for less risk Willing to pay more for less risk Require internal consensus Require internal consensus Process oriented Process oriented May pressure you for a premature exit May pressure you for a premature exit Follow the herd Follow the herd Quick to remove management Quick to remove management

VCs No Longer in the Business of Funding Start-Ups Percentage of VC Dollars Invested in Seed Deals by Year

The Numbers Odds of dying from a gunshot wound: 1 in 314 (.0032%)* Odds of getting funded by Battery Ventures: 1 in 357 (.0028%)** *Source: National Safety Council **Source: Boston Business Journal June 15, 2007

Angels vs. VCs First Half 2006 Angel Investment First Half 2006 VC Investment Early Stage Late $12.7 Billion 1,736 Deals Mostly Early Stage $13 Billion 24,500 Deals Mostly Late Stage 136 Seed 396 Early Stage Source: UNH CVRSource: PricewaterhouseCoopers

Government SBIR Grants American-owned and independently operated American-owned and independently operated For-profit For-profit Principal researcher employed by business Principal researcher employed by business Company size limited to 500 employees Company size limited to 500 employees Department of Agriculture Department of Commerce Department of Defense Department of Education Department of Energy Department of Health and Human Services Department of Homeland Security Department of Transportation Environmental Protection Agency National Aeronautics and Space Administration National Science Foundation

Strategic Investors Large industry players who know your business Large industry players who know your business Don’t need the “education” on why they should invest Don’t need the “education” on why they should invest Can be leveraged for industry contacts and client introductions Can be leveraged for industry contacts and client introductions Potential acquirers Potential acquirers Willing to pay higher price because they value your business more Willing to pay higher price because they value your business more May reduce acquisition interest from their competitors potentially resulting in a smaller exit May reduce acquisition interest from their competitors potentially resulting in a smaller exit

Norbury Funding Self funded $400k & spun technology out Self funded $400k & spun technology out Raised $675k from a who’s who list of financial technology angels and hired a team Raised $675k from a who’s who list of financial technology angels and hired a team Raised $1.3 million form a more diverse group of angel investors and started generating sales Raised $1.3 million form a more diverse group of angel investors and started generating sales Raised $700k from existing investors and launched major software upgrade Raised $700k from existing investors and launched major software upgrade Closing on $2 million bridge round with two hedge fund managers Closing on $2 million bridge round with two hedge fund managers In discussions with a bulge bracket investment bank about a large strategic investment In discussions with a bulge bracket investment bank about a large strategic investment 4 VCs have expressed interest in investing after we sign a distribution deal with the above mentioned investment bank 4 VCs have expressed interest in investing after we sign a distribution deal with the above mentioned investment bank

Need a Thick Skin Hedge fund manager never ran a software co. Hedge fund manager never ran a software co. Hedge funds are overheated “bubble market” Hedge funds are overheated “bubble market” Soft dollars are going away Soft dollars are going away Thick client is too difficult to build and maintain Thick client is too difficult to build and maintain If this is such a good idea why hasn’t someone already built it? If this is such a good idea why hasn’t someone already built it? Your valuation is too high you won’t be able to raise needed money Your valuation is too high you won’t be able to raise needed money Your market isn’t big enough Your market isn’t big enough

Advice Recognize what you are good at and what you are not Recognize what you are good at and what you are not Focus on your strengths Focus on your strengths Hire a great supporting cast to fill talent gap Hire a great supporting cast to fill talent gap You need to have done it before…if have not, you need to be an expert in your industry You need to have done it before…if have not, you need to be an expert in your industry Be open to suggestions but do not blindly follow Be open to suggestions but do not blindly follow Avoid VCs if you can Avoid VCs if you can Avoid VCs if you can Avoid VCs if you can

Questions & Answers