The document discusses the challenges facing young entrepreneurs amid a significant downturn in equity markets and venture capital funding, emphasizing the need for cost conservation and sustainable cash flow strategies. It highlights shifts in investor priorities towards recession-proof sectors and emphasizes the importance of creating a strong capital strategy and effective investor networks. Key advice includes understanding market conditions, establishing a reliable board of advisors, and preparing thoroughly for funding presentations.

1. Young Entrepreneurs Roundtable Jolyne Caruso Fitzgerald Erica Duignan Minnihan November 6 th , 2008

2. Market Conditions The Major Equity Indices are off over 40% Credit spreads are at prohibitive levels M&A slowing – focus on strategic deals Number of VC deals down 13% Q3 v. Q2

3. Things You Probably Already Know This is not good news for any start up – cost of capital spike Credit driven crisis compounds challenges Bootstrapping will become mandatory for most Risk premiums rise for seed investment – valuations down Your projections and valuation will be “Buzz Cut”

4. What Angels are Thinking Net worth is down substantially Personal liquidity is reduced Existing investments need follow on dollars – debt and equity Down rounds for portfolio Exit opportunities diminished Cash to survive downturn is paramount – less VC funds Execution risk gains importance

5. “ Angels need to be honest with themselves and not ignore the reality of limited resources available to do new deals even while ‘protecting our own children.’ In the coming months alluring new opportunities will have to be reviewed in light of the blight of our existing children.” John May – Chair Emeritus Angel Capital Association October 14, 2008

6. What VC’s are thinking It’s time to “batten down the hatches” Spending must be controlled NOW Earnings and Growth Assumptions must be reduced in light of new economic conditions Worst case scenarios assessed Reduce debt to weather slowdown Second rounds are not inevitable Get cash flow positive ASAP

7. "During the bubble, something like 1,600 companies were funded… I see VCs clearing out a minimum of one-third plus of those investments… It’s why you have to keep your powder dry. You really have to watch what’s going on." Marty Pichinson – Sherwood Partners October 24, 2008

8. What Entrepreneurs Are Thinking Credit cards and HELOCs limited Cash conservation is first priority Avoid “death spiral financing” Reduce fixed costs Generate internal cash flow Revaluate customer base Slow recovery mandates survival mode

9. Deals Getting Done Companies that benefit from the downturn or are “recession-proof” Companies that save consumers money – BillShrink - $8mm Srs. B Reliable customer base with ability to pay – Higher One - $75mm “ Must have” products, no luxuries Hot Sectors: clean tech, software Low follow on capital requirements High level of scalability

10. Q3 2008 Deals By Stage # Deals Funded Q3 08 Startup/Seed – 348 Early Stage – 742 Expansion – 913 Later Stage – 927 Percentage of Total Capital Invested by Stage Source: PricewaterhouseCoopers/National Venture Capital Association

11. Q3 2008 VCs invest $22.6 billion Source: PricewaterhouseCoopers/National Venture Capital Association

12. Investor Priorities Shift Growth Sectors – Clean Tech Scalability – Software Proven Revenue Model Recurring Revenue Path to Market Acceptance is clear Customers have the ability to pay Proven management, no room for error

13. What Deals Look Like Now Valuations are down significantly Hurdle rates are harder to meet Exit scenarios are less lucrative IPO market closed, M&A market slow Fundamentals and quality earnings rule Investors are conserving cash for follow on rounds in portfolio companies

14. Angel stage valuations trend lower Chart and Data Provided by Angelsoft

15. Getting Your Deal Going You have an idea or business you think can attract funding in this environment Creating a capital strategy to access the market efficiently Understanding Investor Momentum Syndicating your deal across groups/firms What and who you need to close the deal

16. Angels looking for the top 1% Chart and Data Provided by AngelSoft

17. Strong Capital Strategy What is your capital strategy? Does it make sense? Should you be raising more/less now? Are you looking for the right amounts? Angels - $500K-$1 mm VC’s - $5 mm + Money should last at least 18 months Must be worth 10X post money in 3-5 years

18. Harness Investor Momentum Being prepared for due diligence allows you to take advantage of momentum Even the time of year is important Who is championing your deal? Connect with individuals who will support you before you make your presentation Know the outcome of the meeting before you go in, have an advocate

19. Syndicating Deals Angel Investor groups work cooperatively They will talk to each other and will almost never “compete” for your deal Most investors prefer you raise more, rather than less capital in early rounds Having a few groups interested will speed the process and can raise valuation Be sure to appoint a lead group and encourage diligence sharing to speed the process along

20. Closing the Deal Attracting interest can be easy Closing funding is the tough part Having a top notch board helps you close Who should be your Board of Advisors How do you recruit people for your BOA What is involved with being on the BOA How can your BOA help you close funding

21. Your Board of Directors What is the role of the BOD? Who will be on the BOD? When do I need to create a BOD? How can having good Board Members help me get funded? What should I be cautious about in choosing my Board? What do I need to provide the BOD?

22. The Right Investors What are you looking for in an investor? How can you use networks to raise capital Investors who understand your industry Investors who have a history with you Investors who can add value Rolodex access, expertise, intro to follow on capital

23. Resources and Reading “ Extending the Runway” – David Berkus “ Art of the Start” – Guy Kawasaki “ Winning Angels” – Amis and Howard www.angelinvestmentjournal.com www.unh.edu/cvr www.angelcapitaleducation.org www.kauffman.org www.angelsoft.net

24. Q&A