2. 1 Returns-On-Innovation “Financing start-ups” E.Factor, 25th of June 2008 Kissing the right frogs? or kissing the frogs right? Tom.Paffen@capitalc.eu

3. 2 Returns-On-Innovation Venture Capital Finance horizon Private Capital markets IPOs Follow- Ons Convertibles Mergers & Acquisitions Company Development Finance need SEED CAPITAL EARLY STAGE LATER STAGE TURN-AROUND BUY-OUT BRIDGE First € 500k - € 50 mln

4. 3 Returns-On-Innovation Entrepreneurs’ Funding: Many Options  Your Personal Funds  “3F” – Friends, Family, and Fools  Personal Credit Cards and Other Borrowings  Business Angels  Corporate Direct Investment  Venture Leasing  Governmental loans  Mezzanine Financing  Merger and Acquisition  Initial Public Offering  Secondary/Follow-on Public Offering  Private Placements – Debt & Equity  Buyout/Acquisition Financing  Corporate Debt  Venture Capital/Private Equity

5. 4 Returns-On-Innovation 5 Questions before calling a Venture Capitalist Do you have enough growth ambitions? Do you want to be a co-investor/shareholder in the company you are working in? Do you know how much capital you need and what the use of proceeds will be? Are you willing to have “outsiders” in the board to discuss operations and strategy? Do you know what the goal/buss.model of the venture capitalist is?

6. 5 Returns-On-Innovation

7. 6 What is the business model of a VC?

8. 7 Returns-On-Innovation Succesfull (ICT) Innovations: Predictable? “Well-informed people know that it is impossible to transmit the voice over wires and that were it possible to do so, the thing would be of no practical value”, - Boston Post, 1865. Alexander Graham Bell,1876: ”What is the use of communication over a distance? I don’t know anybody over there?” "I think there is a world market for maybe five computers." - Thomas Watson, Chairman of IBM, 1940/3/9 “Television will never be a medium of entertainment” – David Sarnoff, RCA, 1955., "640K ought to be enough for anybody."Bill Gates, 1981 End 80s:” Mobile Phones are only needed for Emergence services” Early 90s: The Internet: “no serious business use - ” Consumer Need for Broadband in 2015 maximum 50Mbps - Jet-Stream, 2005.

9. 8 Returns-On-Innovation Kissing the frog right? - The Art of kissing

10. 9 Returns-On-Innovation Kissing the right frog: “ Elevator Pitch” Now or Never feeling: Focus on how and why prospective customers will buy from you, and pay you money. YOUR VALUE PROPOSITION MUST BE COMPELLING, QUANTIFIABLE, PROVEABLE, REFERENCEABLE, AND EASILY EXPLAINABLE…

11. 10 Returns-On-Innovation Kissing the right frog: The real prince? Management Team(!) –Track-record –Commitment (co-investment / time) –Complementary team (technology/marketing) Business Activity –(potential) consumenten needs –Vision / Trends –Adressable market / First customers Product/Technology Advantage –USPs –Competition –Alliances and/or Patents Investment Rationale/Financials –Investment Need/ Use of Proceeds –Business Model (recurring revenues) –Perspective on ROI / Exit scenario –Key financials