Investment committee from the inside: simple rules, fast decisions, big money Who and how decides on the future of projects?

RSG Capital & Prvi sklad RSG Capital established in July 2006, as a consultancy & debt financing company targeting early stage companies VC fund “Prvi sklad” , managed by RSG Capital established in March 2008 10 M € under management Focusing on early stage financing No industry focus Size of investment up to 1.500.000 € for a minority share (up to 50%)

RSG Capital established in July 2006, as a consultancy & debt financing company targeting early stage companies

VC fund “Prvi sklad” , managed by RSG Capital established in March 2008

10 M € under management

Focusing on early stage financing

No industry focus

Size of investment up to 1.500.000 € for a minority share (up to 50%)

The process Team Technology Market potential Rejected ~60%

Team

Technology

Market potential

What are we looking for? A great, capable team Innovative technology; product/service with unique value Elaborated business model Market potential / customer need Sound marketing strategy Scalability Reasonable valuation Profitable exit strategy Alignment of interest of investors’ with investee company’s interest

A great, capable team

Innovative technology; product/service with unique value

Elaborated business model

Market potential / customer need

Sound marketing strategy

Scalability

Reasonable valuation

Profitable exit strategy

Alignment of interest of investors’ with

investee company’s interest

Possible showstoppers Team issues Lack of focus No scalability, slow growth Not in investment focus Valuation No exit strategy Fierce competition Low margins IP problems

Team issues

Lack of focus

No scalability, slow growth

Not in investment focus

Valuation

No exit strategy

Fierce competition

Low margins

IP problems

People behind the process VC Fund Investment policy Legislation Investors Management Company Investment Committee Industry Experts Advisory Board

Investment Committee Optional – not all VC funds have an investment committee Typically consists of managing director (partner) and senior partners Decides on majority or consensus basis RSG Capital: 8-member Investment committee: Managing director Independent experts Representatives of investors NDA

Optional – not all VC funds have an investment committee

Typically consists of managing director (partner) and senior partners

Decides on majority or consensus basis

RSG Capital:

8-member Investment committee:

Managing director

Independent experts

Representatives of investors

NDA

Decision making Investment proposal Team Product/service Market Main terms included in term sheet Investment committee meetings: Pros & cons ~ collective intelligence of IC members Request for additional information Final decision of IC – majority basis, decisive vote of managing director Green light for further activities

Investment proposal

Team

Product/service

Market

Main terms included in term sheet

Investment committee meetings:

Pros & cons ~ collective intelligence of IC members

Request for additional information

Final decision of IC – majority basis, decisive vote of managing director

Green light for further activities

If things go wrong… Minimizing the mistakes: Things to do before investing Monitoring after the deal Hands on approach: taking action Management issues Underperformance (revenues, gross margin) Cost base not controlled Working capital problems

Minimizing the mistakes:

Things to do before investing

Monitoring after the deal

Hands on approach: taking action

Underperformance (revenues, gross margin)

Cost base not controlled

Working capital problems

If things go wrong… Before investing Know the team Know the market Understand business model Monitoring Close relationship w management Ask for information Keep in touch w the market Taking action Act on early warning signs Changes in management Good money after bad? Review all options Distributed responsibility – yes, but what’s more important is collective knowledge and experience Investment manager Investment committee

Before investing

Know the team

Know the market

Understand business model

Monitoring

Close relationship w management

Ask for information

Keep in touch w the market

Taking action

Act on early warning signs

Changes in management

Good money after bad?

Review all options

RSG Capital Venture capital management Tehnološki park 21 1000 Ljubljana T: +386 1 620 33 00 F: +386 1 620 33 05 [email_address] www.rsg-capital.si