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1 InfoLab Mark Wyatt Wednesday 5 th December 2007

2 2 EV – fund management organisation Institutional funds – investing for return Technology three funds - £34 million investing in technology RisingStars Growth Fund I RisingStars Growth Fund II SYIF Pilot Seedcorn Fund Private Equity Coalfields Enterprise Fund - £10m MBOs, expansion capital former English coalfield regions but focus on Yorkshire, North East and East Midlands 3 rd most active VC investor in the UK * * Source: Ernst & Young Venture Capital Insights Report 2004-2005 and 2005-2006

3 3 Venture Capital – Early Stage Technology Approach What do we do? provide start up and early stage seed capital to high growth technology businesses – sector agnostic predominantly in the North of England investment range £50k to £1.5m taking proof of concept investments to AIM listings, Series A rounds and trade sales

4 4 Technology team Julian Viggars (39) Head of Technology Investment Previously Investment Director, latterly NXD BioProjects Plc and Barclays Ventures At BioProjects – responsible for 2 largest investments, both start-ups. 1 sold recently for up to $100m. 1 listed on AIM – current value c.£40m BioProjects investors at IPO 1.5x cash 4 years at EV Edward French (39) Investment Director Previously MD of Bradford University commercialisation company – 7 spin outs formed Previously Chairman of UNICO – UK University spin-out association 13 early stage pre-revenue technology deals for RSGF 5 years at EV Dr Mark Rahn (36) Investment Manager PhD and MBA from Manchester Business School Freelance consultant to the early stage tech and seed VC industries – NESTA, NStar and University of Manchester Joined EV in 2006 Dr Mark Wyatt (35) Investment Director Formerly at Merlin BioSciences 9 RSGF deals, IPO of Plant Impact plc Sectors: medtech (pharma) and environmental 4 years at EV

5 5 Why use venture capital? Advantages –Money to grow the business more quickly –New contacts and management help –New networks –New business insight Disadvantages –Investors look for a high rate of return –Requires giving up a stake in the business –High levels of information required –Control and rewards shared

6 6 Networks – key to achieving competitive advantage

7 7 What is a fundable project? It is not as simple as Ive invented a super technology It is not a business plan with 200 pages of technical detail It is about the creation of a business opportunity that will give a fair return to all existing and future stakeholders

8 8 Typical early stage technology VC operating model Investment Criteria Differential value IPR - protectable position Clear exit potential Large market / unmet need Milestones People Prior knowledge and network Valuation & funding strategy Investment Principles Tranched Investments Lead Investor / Syndication Clean Starts / early stage Business building Right to Appoint NXDs Exit and Cash Focus

9 9 Sectors of Interest

10 10 Regional investors - invest locally, but think globally Next Device Acquired by USA business Experience of bus. dev. in Korea Peckforton Indian partners Acal CEO based in Japan USA based NXDs Plant Impact USA / European / Middle East

11 11 Wadaro – starting point Strong founders, been involved in one successful VC backed business before – Magic4 Founder investing alongside VCs, demonstrating belief in the business, sharing risk and upside Extremely well organised for a start up – clear milestones Required funds to develop technology

12 12 Wadaro – now RSGF II and NWBIS (YFM) invested Sector NXD on Board Partnering discussion ongoing

13 13 Chromatide – starting point Creative technical founder with industrial background and credible technical reference points Low level service turnover, and one royalty bearing development contract Interesting technology that required investment Scaleable IP protection Numerous market opportunities, but no clear commercial strategy

14 14 Chromatide – now Recruited non-executive chairman and SAB Refined strategy with expert consultants First investment: brought in knowledgeable co-investor (Malcolm Stewart at Liverpool Ventures) Identified potential CEO Entered into commercial agreement with Eka Chemicals, part of Akzo Expanded technical resource and secured GRAND award to further explore platform technology Development work underway, commercial interest already identified

15 15 Not all VCs are the same Do your homework Look them up in the BVCA directory Check out what they have been investing in on their website Call them to pre-qualify interest Focus your efforts on those that look like they invest in opportunities that resemble yours

16 16 Pitching to VCs Not all VCs require a plan, but they do require thought out and well present propositions Keep it simple and clear Remember, VCs need an exit, so how will you provide one Demonstrate you know how to reduce the risks in the venture Demonstrate openness, and think about how you answer questions

17 17 RSGF II – outlook Significant experience to date with RSGF I Commitment to tranched investment model Plans to achieve earlier syndication Chromatide with MSIF, Wadaro with NWBIS (YFM) two more syndicated deals in legals Focus on investee team building and evolution Build balanced portfolio

18 18 Questions?

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