1. Bruce Lichorowic 1 W HITE & L EE LLP Soup to Nuts 2001 A Brave New World January 20, 2001 Bruce W. Lichorowic

2. Bruce Lichorowic 2 Soup to Nuts 2001 PACKAGING THE COMPANY AND PREPARING FOR FUNDING What can you expect? Bruce W. Lichorowic

3. Background…BWL n Focus u Solutions for troubled companies n Issues u Funding, operational, marketing n Partners u VC’s, Angels, Board, Entrepreneur n 20+ years u Turnarounds

4. Bruce Lichorowic 4 Funding Environment “ So what’s going on?” n 210 Start-Ups…shut down* u $1.5B in venture capital u 60% in Q4, ’01 n Dot com lay-offs…~15,000 n Investors are nervous * Reuters, 1/17/01

5. Bruce Lichorowic 5 Smart $ Became Dumb $… n Before Mega-funds u VC’s had time to work with their companies u Be active board members u Make strategic introductions u Contribute to the success

6. Bruce Lichorowic 6 Smart $ Became Dumb $… n After Mega-Funds u VC Partner must invest more $ u Carry more Deals u Sit on more Boards u Spend less time with their Companies

7. Bruce Lichorowic 7 We Live in Interesting Times “ If your looking for $” n VC’s Activity u 1 year ago…. 4-5 financings a week u Today… ~4-5 financings a month u Taking Care…Current Portfolio n Funds being returned…LLP’s n Institutional Investors…On Hold n Possibility of economic recession n Reminders of early 80’s

8. Bruce Lichorowic 8 What does this all mean? “ B2B” n Back 2 Basics u Strong…“addressable” market u Strong Technology…”secret sauce” u Strong Team…no OJT u Business model…that makes sense l Strong business propositon! n Rethink Quickly u Don’t throw everything out!

9. Bruce Lichorowic 9 Preparing for Funding…Today 1. Market… 1. Identified the Problem your Fixing ID 2. Technology u Does it work? 3. Team u Right People 4. Business Model u Holds Water…

10. Bruce Lichorowic 10 Early Stages Financing n Need to Identify your Stage 1. Seed 2. Series A 3. Series B 4. Series C

11. Bruce Lichorowic 11 Seed Round 0-6 months n Market/Marketing u Markets Identified, Web Site n Technology u Whitepaper n Team u Founders n Business Model/Plan u One pager Executive Summary n Fundraising u Founder/Angels

12. Bruce Lichorowic 12 Rethink… Technology n “Secret Sauce”… Core Technology n Underlying technology behind the products n Meet customers needs and applications 0 1 0 1 0 1 01 0 1 01 0 1 1 1 1 Internet Personalization Technique Dynamic segmentation of on-line users Adaptive response to on-line users Cooperative Multi-Agent Search

13. Bruce Lichorowic 13 Series A 6-18 months n Market/Marketing u Analyst Approval l VP Marketing, Core Message, PR Launch n Technology u VP Engineering, Proof of Concept, Alpha n Team u Development, Marketing n Business Model/Plan u Basic Executive Plan l VP Business Development n Fundraising u Lead VC with Existing Angels

14. Bruce Lichorowic 14 Rethink… Cash Required Breakeven TOTAL CASH REQUIRED BREAKEVEN

15. Bruce Lichorowic 15 Series B 12-24 months n Market/Marketing u Customer Approval n Technology u Beta or FCS n Team u CEO, VP Sales, Marketing Professionals n Business Model/Plan u Detail Plan l Strategic Partnerships n Fundraising u Syndicate of Investors, Lead VC

16. Bruce Lichorowic 16 Rethink… Product Roadmap PRO 1.0 Product #1 Product #2 Product #3 Q2 2001Q3 2001 Q4 2001 1H2002 2H 2002 Q2 2001Q3 2001 Q4 2001 1H2002 2H 2002 1.0 2.0 1.0 2.0 PRO 2.0 PRO 1.0 PRO 2.0

17. Bruce Lichorowic 17 Series C 18-24 months n Market/Marketing u Key Message…”why are customers buying?” n Technology u FCS with milestone releases n Team u CFO, Audit Firm n Business Model/Plan u Polished Presentation, Focus Plan, Reference Sites n Fundraising u Syndicate Investors with VC Lead or u Mezzanine if IPO is imminent

18. Bruce Lichorowic 18 Rethink… Revenue Sources n Licenses n Hosting n Professional Services

19. Bruce Lichorowic 19 Rethink… Annual Cash Required

20. Bruce Lichorowic 20 Rethink… Cash Detail

21. Bruce Lichorowic 21 Rethink… Marketing Strategy n No Hat-Tricks n True sustainable pipeline n No big splash n Don’t announce before the product is ready n Build on yourself n Marketing should grow with the company n Keep in Balance u Marketing vs Engineering

22. Bruce Lichorowic 22 Rethink…Channel Strategy Seed AccountsSeed Accounts Early AdoptersEarly Adopters Major AccountsMajor Accounts ChannelsMarket Segments Technology Integrators Marketing Partners Direct Sales Indirect Sales IntegratorsIntegrators Business Development Mid-MarketMid-Market Vertical MarketsVertical Markets

23. Bruce Lichorowic 23 President Rethink…Team n Clear roles and responsibilities n General management experience n Morph… functional skills Operations Finance & AdministrationSalesMarketing President Product/ServiceDevelopment

24. Bruce Lichorowic 24 Top 10…Must Haves 1.One Page Business Brief 2.Value Proposition…10 words 3.Stay 6-9 months ahead…burn rate 4.Hit your established milestones 5.Get a reference customer site…ASAP 6.Calculate to the month…breakeven 7.Accurately describe…use of funds 8.Hire a respectable management team 9.Business Integrity* 10.Strategic Partnerships*

25. Bruce Lichorowic 25 Top 10…Personal Checklist 1.Don’t fall in love with the product or the company 2.Funding is a full-time job 3.Don’t assume VC’s are going to Help 4.Constantly rethink your Plan 5.Watch out…quick fix consultants 6.Check your ego at the door 7.Plan on 3 near-death experiences 8.Always tell yourself the truth 9.Know where the “Exits” are 10.Trust your instincts

26. Bruce Lichorowic 26 Bruce W. Lichorowic Specialist for Distressed Companies