Transmedia Capital Summary

Seed stage venture fund investing in new technologies that impact the traditional media and entertainment industries March 2009

The Landscape
The New York Times, February 9 th 2009
“ I believe that the paradigm has changed for the venture business…”
“ Exits are now mergers or acquisitions at a sale price of $20 million to $100 million “
“… this suggests that a true venture capital firm should be reverting to smaller-scale funds invested in early-stage companies”
Alan Patricof
The “Grandfather of Venture Capital”, Founder GreyCroft Ventures, Patricof & Company/Apax Partners

Accelerate over the next 5 years
Be driven by technology innovation and entrepreneurial companies
Create extraordinary investment opportunities
A Rapidly Changing Landscape Traditional media and entertainment industries are witnessing unprecedented levels of change that will:

Traditional media and entertainment has been the sector most impacted by innovation in new technology
Technology innovation is forcing traditional media and entertainment incumbents to “outsource” innovation through acquisition at rapid pace
Why Online Media and Entertainment Distribution Monetization Content

Investment Thesis Disruption of traditional media & entertainment Industries Evolution of traditional venture capital economics New realities for online media start-ups Transmedia Capital

2,700 record stores closed in the last 4 years
5,000 record industry employees laid off since 2000
The Decline of Traditional Media The Music Industry decline over 25% since 2000 Source: Rolling Stone Magazine

20 year trend of declining sales and circulation
Core revenue model (subscription/classifieds) rapidly being displaced
Print media losses accelerate
The Decline of Traditional Media Q4 2008 newspaper revenues $1Billion less than same quarter previous year, and lowest since 1996

Erosion of upfront buys and dilution of ad rates
$80B domestic TV ad market re-allocating budgets online rapidly
“ On demand” viewing changing engagement models
The Decline of Traditional Media
18-24 year olds spend more time online
than watching TV
Source: Nielsen Media Research

Massive one-time shift of ad dollars to online in-process
30% of media consumption is online, but online ad spending still less than 10% of marketing budgets
Online ad budgets on track to surpass traditional media
Radio by 2008
Print by 2010
While Online Growth Surges Source: Yankee Group Online advertising market expected to double in 5 years $50.1B predicted by 2012 *

Online Advertising Growth in $Billions Source: pwc/iab

“ On-demand” global workforce increases productivity
Lower costs for equipment, connectivity, storage
Open source platforms reduce software costs/complexity
Social media pipeline powers massive viral adoption
Average angel round of investment $250K*
Exits are occurring sooner and with more frequency
New Reality for Startups * Center for Venture Research Time and cost to Develop-Launch-Grow-Exit shrinking fast

Declining demand for large initial financing
Avg. VC investment size in 2007 - $7.7M*
Experienced, deal savvy entrepreneurs don’t need it
Limited domain expertise and relevant value-add
Exit requirements pre-defined by aggressive multiples
Current VC Dilemma * Center for Venture Research
Increasingly larger VC funds require big investment rounds

The Venture Capital Gap $3M - $10M $10K - $100K $100K - $3M Year 1 Year 2 Year 3 Friends & Family Traditional Venture Capital Transmedia Capital

872 media acquisitions in 2007
32% higher than in 2006
Total value hits $104 billion
Volume of exits holding strong regardless of softer economy
Media Markets Continue to Grow Online media & marketing services set record acquisition volume

Record Acquisition Activity Continues, even in the Face of Global Financial Crisis

Disruption Creates Opportunity Sampling of the 834 Acquisitions in 2007, all online media start-ups 3 AOL Feed module distribution 7x $3.5M $25M Sphere 1 Electronic Arts MMO social networking site 10x $3M $30M Rupture 5 Hearst Matchmaking, social networking 10x $1M $10M eCrush 1 Conde Nast Social News 100x $100K $10M Reddit 1 Yahoo Video creation 10x $1M $10M Jumpcut 1 Yahoo User data acquisition and tracking 10x $1M $10M MyBlogLog 2 Yahoo Website discovery 50x $1.5M $75M Stumbleupon 3 Google RSS feed subscription and distribution 12x $8M $100M Feedburner 4 Fox Personal media hosting 22x $13.5M $300M Photobucket 3 Cox Vertical Ad network 11x $27M $300M Adify Yrs Acquirer Value Prop ROI Raised Deal Company Average ROI = 24x Avg. Total Funding = $6M Avg. Time to Exit = 2.4 years

Investment Themes Video On Demand Social Commerce Media Affinity Ad Models Vertical ad networks Product engagement Advanced web analytics Place shifting New Current Youtube, Sling Media, Tivo Netflix, Joost, Facebook Craigslist, Digg, Glam Last.fm, iTunes, MySpace Legacy TV Film Print Music

Network of active industry entrepreneurs/engineers/domain experts provide “mentor capital” to portfolio companies
Source of significant deal flow and due diligence resources
12 month commitment to each portfolio company to help accelerate growth
Paid a stipend and participate in the General Partner carry
Dedicated relationship with Transmedia Capital
Unique Venture Partner Structure Sampling of Venture Partner current or previous company affiliations: Venture Partners provide Mentor Capital to each and every portfolio company

Fund Allocation Strategy
Establish early foothold
Mentor network increases
success rate
Support performers vigorously
Maintain ~15% position
Side Car provides additional LP upside
Deliver 4X – 6X multiple over life of fund
Seed Stage Investment Level $150K-$1M Pre-Money $2.5M-$6M Stage Partial team, Alpha product Volume 8-10 per year Growth Investment level $1M-$3M Pre-Money $30M - $100M+ Stage Major growth, rapid adoption amongst customers, revenue trajectory Volume 1-3 per year Follow-On Investment Level $400K - $2.5M Pre-Money $8M- $20M Stage Live product, customers, initial revenues Volume 4-6 per year

Seasoned management team of industry insiders
Highly sector-specific approach (media/advertising)
Unparalleled “under-the-radar” access to deal flow
Extended mentor network increases success rate, deal-flow and enhances due-diligence of prospects
No comparable existing investment group
Why Transmedia Abundant exit opportunities over next 5 years

Transmedia Capital Summary

by Michael Downing on Mar 31, 2009

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