P roviding early and growth stage venture capital to: Experienced entrepreneurial teams with Excellent business propositions and Great market opportunities that will Generate significant investment returns.

2 Background  Newly minted MBA thwarted by the 80’s bust  Frustrated banker  What’s an economist to do?  Determined, focused, energetic  Hard work = luck  Sure I can build a new generation of network processors and create a new product category in telecommunications  Thank you Austin Ventures for kicking me out of my first start-up

3 The Idea  Experience  Research  Logic

4 Experience  Leverage what you know  Who can help

5 Research  Build relationships –Talk to industry participants – they will indicate problems they are wrestling with  Observe what the ‘players’ are doing –IP voice – reality –Cisco’s big bet –Next generation devices –Venture investment  Industry analyst may be no real help on strategy but can confirm market size (VoIP not VoIP applications)  It’s all about the customer – get to them, understand their needs and drive product requirements with their input

6 Logic  Vision – vision is toughest part but industry participants can lead you there – market indicators – what is the research telling you – the usual mistake is being too early – the other big mistake is being technology driven  Strategy – how quickly can product be defined? – what is good enough?  Execution – confirmation of market and product as quickly as possible. You need customer input

7 The Company  Team  Product  Market

8 Team  Relevant domain expertise  Blended experience  Positive environment – stay focused on what is ‘real’  “It’s been three months and I can’t pay my rent.”  Balance and patience relieves stress: Term sheet on my back Championship baseball team at exit

9 Market  Size matters – must be able to define a Total Addressable Market – your case for building a reasonably sized company in three to five years has to be plausible  Competition – what is happening with the existing vendors – are there any new start-ups funded  Go-to-market – how do you launch the product – how do you get known – how do you sell, service and support

10 Product  Input from channel partners, existing players and most importantly customers drive necessary features – use caution in early stages – Goldilocks syndrome  Create a product requirements document – constantly adapt it and use it to manage development progress – don’t skip this step, but be like Jack – nimble and quick  Open standards, broadest market (i.e. call control in the SIP world)  Pricing is a nightmare – you just have to live through it

11 The Deal  Cash flow  Investment Structure  Exit

12 Cash Flow  My favorite part – creating the score card  What is needed and when – what is truly relevant  Don’t be stingy when it comes to support and test  Don’t be oversold on marketing and sales infrastructure  Measurable milestones, meaningful results – build value

13 Investment Structure  Get critical input on your pitch from a friendly source  Find a good equity partner  Fear versus Greed  What was old is new again – investment climate is relevant (boom vs. bust) – paying customers are gold – managing cash is critical – provide alternative paths at every critical point – well researched plan will indicate funding needs and milestones which drive investment type

14 Exit  Begin with the end in mind – most exits are strategic acquisitions – Sarbanes Oxley and you  Number 109 (research again)  Less than 30 days to close  $4,  My suggestion: sell if the offer is over 38 times trailing twelve month revenue  Warning – never open the mail on closing day