1. Exit Strategies Mitch Ratcliffe Internet/Media Strategies Inc. & InnovationWORLD LLC

2. Goals »Understand the concept of an “exit strategy” »The options »The realities »Case Study: Google

3. Plan for success and “failure” »17 percent of companies that close are a “success” »33 percent of companies failed after four years, 60.5 percent after six years »Whether you are staying in the company or leaving, how you do it matters »17 percent of companies that close are a “success” »33 percent of companies failed after four years, 60.5 percent after six years »Whether you are staying in the company or leaving, how you do it matters Business success of new firms after four years, 1992-1996 Source:Small Business Administration; U.S. Census Bureau (excluding C corps.) and Congressional Budget Office

4. Exit vs. Liquidity »A fund's intended method for liquidating its holdings while achieving the maximum possible return. These strategies depend on the exit climates including market conditions and industry trends. Exit strategies can include selling or distributing the portfolio company ’ s shares after an initial public offering (IPO), a sale of the Portfolio Company or a recapitalization. www.ventureglobe.com/glossy.html »Potential scenarios for liquidating an investment while achieving the maximum possible return. For venture capital-backed companies, typical exit strategies include Initial Public Offerings (IPOs) and mergers with larger companies. www.championventures.com/glossary.htm www.championventures.com/glossary.htm »The business owner's intended method of retiring or transferring ownership of the company. www.oaktreeresources.com/Deal_Central/Glossary%20of%20M&A%20terms.htm

5. Transactions »Mergers and Acquisition (“M&A”): »36 Net deals in Washington in 2001, compared to 322 in California »Nationally, 71 VC-backed companies saw transactions in Q4-03, worth $2.3B at an average valuation of $67MM »Initial Public Offering: 13 VC-backed companies in Q1-04, »Six in biotech ($433MM) »Four healthcare/medical ($272MM) »Two semiconductor/electronics ($1.9B)

6. Transaction of last resort »Liquidation »Preferred investors (that’s the VCs, angels and anyone you ever want to talk to again) come after the banks that loaned you money »Always remember: It takes money to shut down

7. “Google is not a conventional company.”

8. A personal appeal to benevolent despotism »“S ergey and I intend to write you a letter like this one every year in our annual report. ” »“ As a private company, we have concentrated on the long term …. As a public company, we will do the same. In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations. ”

9. Not by Wall Street’s rules »Management declines to offer guidance. »Two classes of shares with 10:1 voting rights to make it “harder for outside parties to take over or influence Google.” »“ We are creating a corporate structure that is designed for stability over long time horizons. By investing in Google, you are placing an unusual long-term bet on the team, especially Sergey and me, and on our innovative approach. ”

10. Forced to go public »With 500 investors, they have to report some financial information »Need to provide investors liquidity »Need to provide employees liquidity »Expected to generate $1.2 billion in free cash this year

11. “ We would like you to invest for the long term …. ” »Management is selling shares, taking its payday at the IPO »Dutch auction, while “democratic,” amplifies the potential for irrational pricing »With $2.7 billion more in cash, what will Google do?

12. Google Realities »Management is taking care of itself »Allocating only 10 percent of free cash this year to investors would provide a 10x return on investment »Investors can be paid out with a “fair” profit while preserving private company advantages »It may not be “evil” to Google, but what about the rest of us individual investors?