BLACKSTONE ENTREPRENEURS NETWORK Carolina Innovation Seminar - UNC October 4, 2012

 Harness the collective wisdom of area Serial Entrepreneurs  Scour the region – on and off campuses  Select high potential ideas in the Triangle  Guide them to next inflection point using EIR’s knowledge, contacts and resources A joint program of Duke University, North Carolina Central University, North Carolina State University, the University of North Carolina at Chapel Hill, and CED-Council for Entrepreneurial Development, funded by the Blackstone Charitable Foundation. Objective – Support Innovation/Entrepreneurship resulting in more companies and economic impact for Triangle

Unique Model  “Portfolio” approach to building successful companies  Each client has a lead entrepreneur in residence (EIR)  EIRs meet regularly as a group to review and discuss strategies/tactics for each client:  Experience of group/team – value in collaboration  Connections/Networks of EIRs  Coaching Support Funds  Deal Team from Blackstone Group assigned to Network  Collaboration and resources of Network Partners

Current Portfolio 4

Client Snapshot Tethis & Joosy Cloud Tethis – Water desalination for fracking industry. Joosy – Management of content for CDMs. Chris Evans, Lead EIR MintMarket Online marketplace for local food allowing chefs in the Triangle to discover, purchase, and schedule delivery of food directly from area farms. Frank Plastina, Lead EIR KeonaHealth Tech software company developing solutions for providing better access to quality of care at a lower cost. Kay Wagoner, Lead EIR SLEDVision Software solution for State, Local and Education organizations to manage and negotiate their enterprise software contracts. (Vendor Management System) Lee Buck, Lead EIR 5

Blackstone EIRs Frank Plastina Lee Buck Kip Frey Igor Jablokov Alston Gardner Chris Evans Kay Wagoner Peyton Anderson Kevin Bowles

VC Market – Interesting Contrast New Venture Funds started in Q at lowest number (10) since Q ▫Down from 12 in Q and 14 in Q Returns to Funds gradually improving Q1 to Q4 ▫1 year – 12.8% vs 13.2% ▫3 year – 12.6% vs 10.0% ▫5 year – 5.9% vs 5.3% ▫10 year – 4.4% vs 3.3% ▫ Source - NVCA

Latest Numbers- Fundraising Venture Investments: Q vs Q (Billions/deals)2 nd Qtr st Qtr 2012 Overall Invest$ $ Early-Stage*$ $ Seed$.199 – 63$ Sequence – 1 st $1.05 – 282$ *Highest deals since Q PWC Money Tree

VC Survey Q High Confidence: ▫Cloud computing, software, healthcare IT, new media/social networking Low confidence: ▫Semiconductors, telecom, clean tech, biotechnology PWC Money Tree

VC Terms Series A – Q Median Pre- Money: ▫$11 million in Q2 - $9 million in Q1 Liquidation Preference: ▫91.7 % at less than 1 vs Q1 at 97% ▫8.3% at 1x -2x vs 0% in Q1 Participating Preferred: ▫32% in Q2 vs 51% in Q1 overall  25% in Series A vs 37% in Q1  21% were full participation and 4% were 3x cap Cooley LLP

VC Terms Series A – Q Anti-dilution: ▫90% broad based weighted average ▫No real change Pay to play: ▫4% in Q2 vs 6% in Q1 Drag along provision: ▫71% in Q2 vs 65% in Q1 and 59% in Q ▫Series A – 54.2% Cooley LLP

Academic Funding Models Development/Grant awards: ▫NCSU, Harvard, Utah, UNH, U. Mass Industry/Academic Institution: ▫Johnson & Johnson – Mass General Hospital ▫Merck – Flagship Ventures ▫Incubators with Venture Groups Academic Institution – State – Private Donors ▫Portland State University – tax credit for donors Funds: ▫Partners Innovation Fund, Mayo, Kaiser, Ascension ▫

IT IS A CAMPAIGN – IT IS ONGOING AND IT TAKES A LONG TIME

SourceTimelineTheir GoalsYour Concerns Bank Loans 2-4 months Payback, interest, collateral Rates & terms Credit Card 0-1 monthPayments, interestAbility to payback, interest rates Friends/Family (debt or equity) 0-3 months Success, paybackAbility to sustain relationships, return the $$ or make returns Customers/ Partners (bootstrapping) variesMutual sales, marketing and/or product outcomes Structure of relationship and ability to deliver Suppliers/Trade (bootstrapping) variesPayment relationshipCredibility, relationship Government Grants (for IP dev.) 6-12 months Funding particular initiatives Process & timeframe Angel Investors 4-12 months Return on investment, control Strings & outside involvement & scrutiny Venture Investors 4-12 months Return on investment, control Business growth curve, outside involvement & scrutiny A Summary of Capital Sources.

16 Equity Capital: High Growth Companies (by stage) Estimate exit potential based on multiples of revenue levels achieved Use projected 4-5 year revenues to estimate exit potential Companies with low profits and/or revenues < $2M: arms length equity capital not interested Angels look for $7-10M revenue targets with room for growth VCs (most) need to see north of $30-40M revenue with great potential No “exact” rules but stage of VC fund and total capital in use will point toward exit expectations Stage Crystallize Idea & Demo- stration Demo- stration Stage Funding Gap between $500,000 and $3,000,000, Early Scaling Growth Repeatable Growth Source Founders, Friends and Family Accelerators Individual Angels and Angel Groups Most 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) Market Entry & Early Growth Angel Groups and Angel Group Syndication Micro-cap Funds

Checking out ANY Investor NETWORKING ▫Get an introduction as high up the food chain as possible ▫Personal network or entrepreneurial organizations DO YOUR DILIGENCE ▫Industry focus – have they done deals in the industry ▫Size – average funding provided – initial, follow-on, age of fund ▫Stage of development – concept, revenue, team ▫Referral path/reputation – introductions to others ▫Experience, track record ▫Style & interaction with management – find the best fit partner ▫Call the CEOs of the portfolio and find out how the investor behaves ▫GET THE RIGHT INVESTOR FOR YOUR STAGE

A VC’s Playbook PLAN/PRESENTATION MUST BE FOCUSED CLEARLY-DEFINED USER BENEFIT – ROI NUMBERS MUST BE SUPPORTED

A VC’s Playbook THOROUGH REVIEW OF COMPETITION SOLID DESCRIPTION OF MANAGEMENT DEMONSTRATE CUSTOMER/MARKET KNOWLEDGE – TALK TO THEM BUT DON’T TELL ME IF YOU DID NOT ACTUALLY TALK

A VC’s Playbook DO NOT OUTLINE THE RISKS INVOLVED DO NOT INCLUDE VALUATION TRY TO AVOID “CONSERVATIVE” OR UNUSUAL FINANCIALS

A VC’s Playbook PRE-MONEY – DOES IT INCLUDE OPTION POOL OR NOT CONVERTIBLE NOTES – BE CAREFUL GOAL OF THIS MEETING: – GET TO THE NEXT MEETING

Bob Creeden Executive Director Blackstone Entrepreneurs Network blackstoneentreprenuersnetwork.org CONTACT