1. Establishing Community-Based Seed Capital Funds Gregg Barcus Emerging Growth Group Des Moines

2. Increasing Interest Heightened Interest In Venture Investing –1990’s Media Coverage of VC Returns –View that Venture is Possible for More Investors –Economic/Community Development Interest “Brain Drain” “Gazelle” Companies 2002 Legislative Initiatives –Programs and Media Coverage

3. 2002 Legislative Initiatives Fund of Funds –Iowa Capital Investment Corporation –$100M State Tax Credits to Develop a VC Industry Angel Tax Credit –Iowa Capital Investment Board –20% Tax Credit for Cash Investments in Qualified Businesses, or Community Based Seed Capital Funds Reduction in State Premium Tax –Insurance Industry VC Commitment

4. “Qualified Business” Iowa-based Less than 3 Years Old Less than $3 Million in Net Worth Minimum $250,000 in Equity Secured Entrepreneurial Management Experience Certain Excluded Business Types

5. Community Seed Capital Fund $500K-$3Million in Size At Least 10 Investors No One Investor > 25% Ownership Invests at least 33% of Investments in 2 Qualifying Businesses in 3 Years Qualifications Modified in 2004: –$125K Minimum Size –At least 5 Investors –1 Business Investment Required Within 3 Years –(Also Expands Qualifying Business Tax Credit to Corporate Investors & Previous Investors)

6. Result:Many Local Community Funds Iowa City Cedar Falls/Waterloo North Iowa (Mason City) Several More in Discussion Plus New Managed Funds –Cedar Rapids –Des Moines (2)

7. Starting a Seed Capital Fund Rural Angel Investor Network (RAIN) Funds –State Template – IDED –Low Cost –LLC Structure –Volunteer/Member Management Managed Funds –Individually Designed –Typically LP Structure

8. Issues to Consider Investment Objectives –ROI, ROI, ROI –Investment “Territory” -- Local or Statewide? –Deal Flow of Qualified Companies –Defined Investment Process –Management Issues – Intake, Due Diligence, Monitoring, Exit –Legal Counsel –Patience

9. Biggest Hurdles Adequate Deal Flow Management

10. An Initiative Coming… An Angel Network Fund of Funds Organization, Management of Pooled Funds –Broader State Coverage –Retain Local Focus –Best of Both Worlds