1. 1 Getting First Funding to Take a Company From Nothing to Something Non-VC Funding Sources and Bootstrap Strategies Presented by Robert A. Adelson, Esq. Engel & Schultz, LLP – Boston, MA October 2, 2007

2. Robert A. Adelson, Esq. © 2007. All Rights Reserved 2 Non-VC Cash Funding I: Loans, Government & Institutions Bank Loans, Home equity Asset based lenders A/R, inventory, factors Equipment Financing SBIR & STTR Fed Grants Phase I: 75-100k; delays Competitive; Govt needs Leverage to commercialize MA Quasi Public Agency loans Local Job creation incentives University / incubators Private Foundations

3. Robert A. Adelson, Esq. © 2007. All Rights Reserved 3 Non-VC Cash Funding II: Commercial Partners & Licensing Customers / Suppliers Large sale order, advance pay Favorable supply terms to you Strategic Partners Manufacturing Rights Distribution rights Leverage scale, channels Pro: Valuation, possible exit Con: Reliance, captive risks Technology Licensing Restricted, product, application Escrow, IP rights, Upfront Payments

4. Robert A. Adelson, Esq. © 2007. All Rights Reserved 4 Non-Cash & Thrifty techniques To Build Enterprise Value Management team Equity allocation Commissions Responsibilities shared Board of Advisors Strategic Advisors Experience, credibility, contacts Informal but involved & respected In-License of Technology University / Govt Laboratories Outsource/Offshore development IP on a Shoestring ITU Trademarks / Trade secrets Copyrights / Provisional Patents

5. Robert A. Adelson, Esq. © 2007. All Rights Reserved 5 Bootstrapping Strategies To save Cash, delay VC funding Manage cash flow Delay Payments of all kinds Good credit history/references You’re late but you pay Avoid fixed commitments Part-time, temp employees Consultants Subleased /shared space Virtual office Manage customer expectations Outsource where possible

6. Robert A. Adelson, Esq. © 2007. All Rights Reserved 6 Tending to needs of Founders To delay or avoid VC funding Keeping the day job Salary & Access to business resources CAUTION: Clean careful departure! Using your severance Including COBRA benefits Paid window of opportunity Shadow management Ready to join when funding in place Keeping your sanity for long haul NOT necessary to bankrupt yourself Or divorce spouse & family Consulting for revenue Keeping cash positive is Keeping the dream alive to succeed

7. Robert A. Adelson, Esq. © 2007. All Rights Reserved 7 Thank you! Robert A. Adelson, Esq. Engel & Schultz, LLP 125 High Street, Suite 2601 Boston, MA 02110 617-951-9980 x 205 radelson@engelschultz.com www.engelschultz.com