1. Venture Capital in Eastern Europe – theory and reality Allan Martinson Managing Partner MTVP

2. AS MartinsonTrigon: –~12 m EUR investment vehicle –Founded in 2005 –1st fund of Martinson Trigon Venture Partners –Geography: the Baltics and Russia –4 investments signed by far, 2 in works –4 professionals + Trigon Capital investment bank –Next fundraising in late 2006 MartinsonTrigon – summary

3. The Team Allan Martinson, Managing Partner –Founder of the Baltic News Service in 1990 –CEO of MicroLink, the largest Baltic technology holding in 1998-2004 –Member of boards in >10 TMT companies Joakim Helenius & Trigon Capital –The largest Baltic investment bank –~500 m EUR under management –AM, CF and direct investments Andres Susi, Associate Sven Nuutmann, Associate Pekka Sivonen, Chairman of the Investment Committee

4. Typical investment between EUR 0.5-3m (average EUR 2m) –In syndicates with other VC’up to EUR 10 m Strong control either through majority stake or strong minorities + shareholders agreements Extensive support to the management Earnout & option schemes Holding period 3-5 years Exits through strategic sale or IPO MartinsonTrigon’s investment profile

5. Portfolio Offshore programming in Russia IT services and data communications in Lithuania Music TV franchise in the Baltics CRM collaboration technology company in Russia/USA

6. What is Venture Capital?

7. Stakeholders of VC industry Enterpreneurs VC investors Venture Capitalists Strategic buyers or stock market Ideas $ $$ Companies $

8. Venture Capitalist’s life cycle Fundraising –Up to 2-3 years of selling the story and concept to the fund’s investors Pipeline generation –Active and passive search of potential investee companies in interesting industries –Less than 1% of reviewed companies will get investments Early negotiations, signing of term sheet –From 1 month to several years Due diligence and final negotiations –From 3 to 9 months Signing and closing of investment Holding period –2-7 years Exit Closure of the fund –Typical lifetime 7-10 years

9. What is Venture Capital? VC industry produces mature companies from raw ideas and young teams by adding finances, experience and contact network VCs are human and always invest into humans, not into companies Taking in venture capital is an orchestrated marriage

10. Popular myths about VC Myth: VC is long-time, strategic partner –Fact: VC is short-to-medium time financial investor Myth: VC invests into good companies or business plans –Fact: VCs invest into good teams in rising industries Myth: VC invests into R&D –Fact: Less than 10% of VC money ends up in R&D, 90% in commercialization Myth: VCs like seed stage companies –Fact: In most cases, VCs prefer later stages Myth: VC will have all his time for my company –Fact: Typical VC with 10 companies can spend 80 hours/year on a company

11. MTVP’s 5 evaluation criterias 1.Do we believe into the people and the team? 2.Does the company target a fast-growing market? 3.Does the team have competitive advantage over competitors 4.Do we understand the business and add value? 5.Are the risks reasonable?

12. Baltic VC landscape Two dedicated high-tech funds: –MartinsonTrigon (2 Baltic investments) –ASI Private Equity (3 Estonian investments) Occasional investments by generalist PE players –Mostly into IT services and telecom companies Handful of angels –~10-20 angel investments No direct presence of foreign VC funds State-sponsored VC programs in Estonia and Latvia

13. Russian roulette 4 high-tech VC funds operating locally: –Russian Technologies, MTVP, Intel Capital, ABRT –U.S. VCs have done ~10 deals (Bessemer, Insight Partners, Merifin etc) –IT and telecom investments by general PE Up to 10 success stories –Rambler Media, RBC, Aelita, Acronis etc State-sponsored VC initiatives under way ($550m) Hundreds of companies available for pipeline Growths 50-200% p.a. Finances, accounting, reporting, taxes usually in mess Strong global ambitions, often not matched with management experience