1. Summer 2009 URG MBA Program Chapters 6-8

2. Financing the Venture Financing in Stages Successful or not? Milestones Build and maintain product R & D dimension On going or up-start? Management Team Reliable and sound business professionals Market Penetration Actual revenue

3. Raising Capital Based on past experience Management team Competition Currency of product/technology Maturity of product Need for product Market conditions Market penetration/saturation Capital markets

4. Raising Venture Capital Pre-seed Financing Seed Financing First State financing Second and third stage financing Pre-IPO Financing Condition of the company Sources of financing Use of the financed dollar

5. Sources of Capital Institutional Investors Banks Credit Unions High Net Worth Individuals (Angels) Locating requires neteworking Corporations Foundations (Kellog, etc.) Public Markets Financing with Debt

6. Practical Capital Raising Aspects Selling shares to stakeholders/shareholders Share price Basic value for calculating value of company Fully diluted Includes equity options and assumption of sales Pre-money value Prior to calculating the value of the share Post-money value Original total of shares, plus new issues

7. Venture Capital Pro’s and Con’s Management expectations Large market possibilities Potential long-term “edge” Synergisim of investors Anticipated exit Disadvantage

8. Next Steps Deciding on the best investment strategy Contacting and communicating with investors Due Diligence Investigation Legal examination Auditor examination SEC rules and reporting regulations

9. Legal and Contractual Responsibilities Restrictions for raising private capital Issuance in accordance with Rule 504 Exemption of 1 mil in sale over 12 months Issuance in accordance with Rule 505 Restricts sales exempt up to 5 mil but maintains regulations on banks, institutional investors, etc. Issuance in accordance with Rule 506 Restricts accredited investor sales of stocks Example: Impax Labs

10. Meeting Regulations Number and identity of offerees and buyers Investments are offered to people willing to “bare the rist” Offering document Outlines (PPM) company information Personal negotiations Corporate investors should be diligent with public offerings Investment contract

11. Terms Term sheet Investment Agreements Financial Matters Valuation Employee Stock Options Options for future investments Liquidation Right to control and right of information Founders and Managers rights Registration rights