"Angel & Venture Capital Finance: Where is the Money Moving?" presented by James Geshwiler (Managing Director of CommonAngels) at December 2008 Web Innovators Group

1. Angel & Venture Capital Finance: Where is the Money Moving? James Geshwiler Managing Director, CommonAngels Web Innovators Group 9 December 2008

6. Who are the Top Investors? Source: MIT Entrepreneurship Center & HBS Study on Angel Investing, Feb 2000 Founder, Chairman Former CEO Successful company in your or complementary sector Professional Entrepreneur Angel Financial Return Angel Low Guardian Angels Operational expertise angel High Industry Experience High Low Entrepreneurial Experience

7. Angel Groups Addressing Void Left by VC Stage Pre-Seed Seed/Start-Up Funding Gap between $500,000 and $5,000,000, targeting average M&A and up Early Later Source Founders, Friends and Family Individual Angels Venture Funds Investment $25,000 to $100,000 $100,000 to $500,000 $5,000,000 and up (initial capital may be smaller, but exit targets higher)

8. Median Fund Remains ~$200M! Source: DowJones/VentureOne Median VC Fund Size (for funds greater than $20M)

9. Funds < $100M Disappearing Allocation of Fund Size by Number of Funds Raised per Vintage Year Source: DowJones/VentureOne

12. Typical Deal Process Submissions (~30 Plans Per Month) Managing Director pre-screens emailed submissions. Screening Team Review (5 – 10 Plans Per Month) Screening team votes on which companies to invite to general meeting. General Meeting Presentations (1 – 3 Plans Per Month) Managing Director polls members for level of investment interest in deals, recruits diligence team, and facilitates selection of deal lead to begin term sheet negotiations. Manage Investment Board member represents member interests and seeks an attractive exit. Deal lead closes transaction and the sidecar fund invests in companies that attract at least $250K in investment from at least 5 members. Diligence & Term Sheet Negotiations (Coordinated by Managing Director & Deal Lead) ENTER EXIT

16. Big vs Small Investor Incentives $ Exit Probability Big Investor (>$500M) : Has capital, incentive to push for big outcome, but can drive failure seeking bigger exit Small Investor (<$200M) : Has capital to avoid failure, incentive to sell earlier for similar IRR Courtesy Dharmesh Shah, founder Hubspot

17. Textbook Case Studies of Incentives SOFTWARE (Web 2.0) Medical Devices (Orthopedics, Non-invasive) Likely Clash: Small return for opportunity cost, incentives to dream big, assume more risk Low Likely Clash: Run out of money, cramdown, premature sale BIOTECH (drug discovery) CLASSIC TELECOM (routers, CLECs) High Company Capital Requirements Small Large Fund Size