1. imagen Funding via Partnership Pamela Lipson Case study: Imagen Partnership parameters imagen MIT Enterprise Forum, September 18, 2003 No Money Down: Raising Capital from Unconventional Sources

2. imagen Funding options as a function of Markets and Technologies Technology Maturity Emerging Mature Emerging Market Maturity Mature Customer Funding Flexible Funding Many funding options here (VC) Fixed-funded project Let’s consider a concrete example…

3. imagen Imagen technology THE PROBLEM: Visual pattern recognition over a wide range of acceptable variations. Unacceptable Variations

4. imagen Imagen technology at work: Potential Markets Image web search Face Recognition Trademark Search

5. imagen Looking for a Partner Secure funds to develop technology for a particular market Find a partner who is already in the general business to shoulder most of the market risk Develop a relationship that would allow both parties to work together to match the technology to the market needs Gain experience creating a commercial product Develop intellectual property base Develop name recognition

6. imagen Imagen and Teradyne find an opportunity to explore together Chip ShooterFine Pitch Placement ReflowScreen Printer Printed circuit board manufacturing: Opportunity to visually test boards while they are being manufactured INSPECTION SYSTEMS

7. imagen Imagen’s technology extends to printed circuit boards Parts and boards have a wide range of acceptable appearances. This variation must be distinguished from true defects.

8. imagen Partnership through thick… 1998, Imagen & Teradyne start in earnest Initial targets: Large US electronic manufacturers (EMS) 1999, Successful Beta test with large-cell-phone-manufacturer 2000, Begin to ramp production for first customer ship

9. imagen Partnership through thick and thin 2000 high tech crash, reduction in demand for electronics Manufacturing sites & buying decision ‘center of gravity’ changes to Asian areas New indigenous competitors pressure western Average Selling Prices End-product & technology evolution result in a change in product requirements

10. imagen Teradyne and Imagen react together Imagen enhances technology to address new product requirements Teradyne works on machine infrastructure & cost down Teradyne and Imagen form a heavy-weight (multi-disciplinary) team to focus on Asia wireless accounts (early adopter for in-process test) The results… Break-in accounts in China, Taiwan, and USA Evaluations starting in Korea, Japan, and Europe First long term studies of machine’s performance –End of line defects reduced by an order of magnitude

11. imagen End of case study Now for some general remarks about partnerships.

12. imagen Partnerships: Advantages Funding sufficient to weather the storm Can approach markets & products that do not follow traditional VC return curves. Partner brings significant assets to the table –Experience –Access to the market –Brand recognition. Disadvantages Dependence for possibly critical functions Inherited inertia from bigger partner Difficult to transition to other markets and other products.

13. imagen 1.Funding for technology development –Fixed/ Variable based on Milestones 2.Monetary Rewards –technology milestones –sales milestones 3.Intellectual Property ownership –Original IP/New IP –Field of Use, geography, period of time, customer segment 4.Equity 5.Marketing control of product and technology 6.Sales control 7.Separation Criteria Pre-nuptials for a Successful Partnership ?

14. imagen Conclusion: For an emerging technology in an emerging market – partnership is a good funding choice lipson@imagen-inc.com Technology Maturity EmergingMature Emerging Market Maturity Mature Customer Funding Flexible Funding Via partnership Many funding options here (VC) Fixed-funded project