1. ThingMagic LLC / September 18, 20031 Development Fees versus IP Rights: Creating an IP Portfolio without VC Funding Bernd Schoner ThingMagic LLC MIT Enterprise Forum, September 18, 2003 No Money Down: Raising Capital from Unconventional Sources

2. ThingMagic LLC / September 18, 20032 Outline and key messages  ThingMagic’s approach to funding  It’s all about creating an Intellectual Property Rights (IPR) portfolio …. and giving some of it up!  Case Study: Radio Frequency Identification (RFID) technology -- an ill-defined market  In an emerging market the timing of investments is everything!

3. ThingMagic LLC / September 18, 20033 ThingMagic – Business Model  Design, develop, and prototype communications and sensing systems  Provide technology services but participate in the upside of successful products  Earn royalties and spin-off promising technologies  Avoid equity funding and stay independent

4. ThingMagic LLC / September 18, 20034 Case Study: RFID technology I Tags Antennae Reader

5. ThingMagic LLC / September 18, 20035 RFID technology II  The MIT Auto-ID Center promotes the use of RFID chips in the supply chain  EPC tags to replace UPC (barcode)  Need for cheap tags  Need for intelligent readers

6. ThingMagic LLC / September 18, 20036 News from the RFID industry....  Auto-ID Center signs up 100 sponsor companies  Gillette buys 500 Million EPC tags  Wal-Mart imposes EPC readiness on its biggest suppliers but....  RFID tags have been around for 15 years, …. as tomorrow’s big opportunity  Many RFID companies/ventures have failed  Worldwide sales of readers is limited  timing is everything!

7. ThingMagic LLC / September 18, 20037 ThingMagic’s entry into the RFID market 100 units sold to the Auto-ID Center 2001200220032004 Sponsor Auto-ID Center Co-design reference design Licensed technology to Tyco/Sensormatic Next generation product release Product release

8. ThingMagic LLC / September 18, 20038 Funding, marketing, and productizing strategy  License technology to manufacturers in exchange for license fees, royalties, and development support  Establish the reader platform as the preferred hardware platform in the industry  Pursue a software licensing model  NO hardware manufacturing  NO end-user sales and distribution

9. ThingMagic LLC / September 18, 20039 Summary: How to build a company with customer development fees?  Retain as much IPR as possible  Be prepared to give up IPR for cash  Don’t accept “this is not how we do business ” as an answer to a creative proposal  Big marketing and development budget (top down approach)  Direct sales and distribution  Expensive travel What you probably won’t have/do…