May 2010 Company Due Diligence Process The University of Texas at Austin

What Is Due Diligence? Market –Value Proposition –Opportunity –Customers Team Technology Risks ATI Value Add and Fit Doing your homework on a company can mean the difference between success and failure! 2

Why Due Diligence Is Important 3 The due diligence efforts highlight companies that  Have strong potential to generate new jobs and create wealth  Directly leverage ATI’s capabilities and knowledge  Provide educational opportunities for University faculty and students Investment risk: Do we think this company has a good chance to succeed? ATI impact: Can ATI add distinctive value to this company? ATI Admissions Performing due diligence increases ATI’s effectiveness in serving the needs of the companies.

Strategic coaching and mentoring Business plan development Access to UT and community talent Corporate and professional partnerships, networks Funding proposals and introductions Business infrastructure support We work directly with early stage companies Support broader Austin tech community Why DD Is Important - Part 2 4 ATI spends significant time with companies after they are admitted, so understanding if and how we can help the company is critical.

Roles and Responsibilities 5 The due diligence efforts require intense interactions from multiple stakeholders Internal Process  Interns lead the process and provide recommendations  ATI staff support the interns and facilitate their work as needed  Domain experts are utilized in a highly targeted, efficient manner RoleResponsibilityTypical Actions ATI Staff  Manage high level process  Provide coaching to interns  Manage entrepreneurs as needed  Discuss methodology  Provide sources for research  Provide contact information for domain expert  Coach interns through process ATI Interns  Perform due diligence  Have a perspective on candidate companies  Secondary research  Calls with entrepreneurs  Calls with domain experts  Internal discussions  Weekly presentation Entrepreneurs  Provide input for due diligence  Submit business plan and related materials  Calls with staff / interns Domain Experts  Provide insight on technology and opportunity  Calls with staff / interns

Initial Screen Basic Due Diligence Deep Dive Due Diligence Director Review Success Committee (includes Industry Experts) Admit/Decline Decision Made Due Diligence Steps 6

What is the market pain being solved? How does the company solve this pain? Are customers aware of the pain? How big is the pain being solved? (painkiller vs. vitamin) What changes and costs must the customer incur to purchase the products? Value Proposition 7

What is the market size? What are the major segments in the market? What are the general growth rates? What are the market dynamics? Does the company have additional markets identified to grow into? Barriers to entry? Market Assessment 8

Who are the customers and how does the company plan to reach them? What is the company’s go-to-market strategy? How does the company price its products or services? What are the company’s financial projects? Customers and Revenue Model 9

How committed is the team? What is the background/experience of the team? –Industry –Prior start-ups Is the Founder/CEO coachable? What major team members is the company missing? Management Team 10

Who are the major competitors? How are the company’s products/services different than their competitors? Where are the competitors in their stage of company development? –Funds raised –Executive team –Product development Competition 11

What is the technology and where is it in the development cycle? How is the technology protected? –Patents –Trade secrets How much does it cost to build? –Prototype –Quantity Technology 12

How much money has the company raised? How much do they want to raise and how do they want to use it? What does the capitalization table look like? How much cash does the company have and how long can it operate? What are the financial projections and are the assumptions sound? What is the company’s form of incorporation and legal situation? Funding & Finances 13

What key risks has the company identified? What key risks were uncovered during due diligence by ATI interns/staff? –People –Technology –Market What are current economic factors? Key Risks 14

How can ATI help the management team? –Relationships –Connections to funding –Business planning –Strategic Advice/Coaching –Space Can ATI help the company given current resource allocations? ATI Value Add 15

How can ATI help the management team? –Relationships –Connections to funding –Business planning –Strategic Advice/Coaching –Space Can ATI help the company given current resource allocations? ATI Value Add 16

Overview Take time to research and understand the company’s: –Market –Team –Technology –Risks –ATI Value Add and Fit Bring in experts to help you assess the viability of a company Perform due diligence properly and increase your odds of picking companies that will succeed! 17

Questions 18

Graduate from ATI Review Vet Internally Vet Internally Vet Externally Vet Externally Set Milestones Technology People Market Admit into ATI Up to 3 years or: 1)When a major funding round is obtained 2)When significant cash from operations are achieved 3)When ATI can no longer add significant value 4)Death Incubation Process at ATI Screen 19