Effective strategies; Transforming traditional investment environments from risk-averse to risk-embracing. Portfolio Strategy: Top tips for building a successful portfolio.

1. Angel Investor Program
5 February, 2013

2. A Little About Me
 Paul Twombly
 40 years in technology - Telecommunications, Computer
Networking, Customer Relations Management (CRM) and
Software
 Began my career in telecommunications
 Started my first company at age 22
 Worked as an executive for ROLM Corporation for 6 years
 Worked as an executive for IBM for 6 years
 Involved in a series of start-ups from 1990 to 2008
 Last company was Foundry Networks which sold in late
2008 for 2.6B
 General Partner with XF Ventures
 Current member of 3 Angel Groups
 The Angels Forum
 The Band of Angels
 Keiretsu Forum
 Active as an Investor, Advisor and Board Member

3. Some of Paul’s Favorite Sayings
 How will I make money?
 Please don’t try to blind me with your
science.
 Who you co-invest with really does make a
difference.
 A Company’s valuation is always negotiable
 The Company never gets to pick it’s time to
exit.
 Never underestimate an entrepreneur.

4. Questions for You?
 Why are you investing?
 What do you hope to get out of
this program?

5. Topics
 Transforming investment environments
from risk-adverse to risk-embracing
 Tips for building a successful portfolio

6. Definition of Risk
 Dictionary definition:
The chance that an investment will
lose some or all of it’s value

7. What Should Be Important To Investors
 Market Opportunity
 Product/Service
 Team
 How will the company make money
 How will I (the investor) make money
Note: Each of these should be important to the entrepreneur as well
7

8. Market Opportunity
 Large (ideally nascent) market
 Size of the company’s addressable
market?
 What work has been done to validate
that market ?
 How is the company going to reach the
addressable market?
 What can or needs to be done to
accelerate the company’s reach?
 Who are the company’s competitors
and how can the company take
advantage of them?
8

9. Product/Service
 What is the company’s product/service?
 What problem is being solved and why should
I care?
 Why will customers buy it?
 Why is it disruptive in the target market?
 What is the product/service sustainable unfair
competitive advantage?
 Is the company’s technology protected?
 Has the company validated it’s product with
paying customers yet?
9

10. Team
 What am I looking for:
 Passion
 Integrity
 Experience
 Knowledge
 Skill
 Leadership
 Commitment
 Vision
 Realism
 Coachable

11. Team
 Who’s currently on the Team?
 What are their educational backgrounds?
 What are their business experience
backgrounds?
 What’s the team’s knowledge of the market,
technology and space being addressed?
 What skills does the Team have and what
skills are they missing?
 Who are the Team’s/Company’s advisors?
 Who are Team’s/Company’s Board members?
11

12. How Will The Company Make Money
 Does the Company have a Business Plan?
 Is a monetization model defined?
 Does the Company have a capital efficient
“scrappy” culture?
 What is the sales and distribution model?
 Does the pricing model make sense?
 What is the Company doing to continuously
reduce it’s product and operational costs?
Net > How is the Company going to make truck
loads of “high quality” money?
12

13. How Will I Make Money
 How much money needs to be raised?
 How will the funds be used?
 How long will the current round of funding last?
 How many additional rounds of funding will be
required?
 What has been done to establish relationships
with sources of capital with a history of
investing in similar businesses?
 How will dilution be prevented or mitigated?
 What is the exit plan and when will I see a return
at what multiple?
13

14. Typical Funding Cycle
Friends, Family & Fools $1 - $1M
Seed Money $10K - $2M
Growth Equity $2 - $5M
Expansion Equity $5 - $20M
Mezzanine $20M +
Public Market

15. And A Final Thought …
 Successful entrepreneurship is the
process of “converting creativity
and mental energy into wealth”
- N. R. Narayana Murthy