2. Out of the lab and into the real World J Carl Allen Director and Venture Capital Leader Forrester Research, Inc.

3. The leading analysts of technology’s impact on business Founded in 1983 by George F. Colony Headquarters in Cambridge, Mass.; additional research centers in Amsterdam, Frankfurt, London, Norwalk, Conn., Paris, San Francisco, and Santa Clara, Calif. 598 employees globally 209 research professionals 1991 clients

4. Theme Taking technology out of the lab and into the real World

5. Agenda Who is investing in tech start-ups? Industry concerns for tech start-ups The structural changes in the IT marketplace »How start-ups can benefit The role of tech transfer - - where does it fit? Making the funding journey »Identify your equity customer and plan your funding roadmap Q&A

6. Who is Investing in Technology Start-Ups? The 164 BVCA members - - but mostly in the South 2003 private equity investment: »1274 companies: +7% from 2002 »£4074 million: -9% from 2002 185 start-ups were funded by BVCA members in 2003 »£73 million: 2% of total funds invested, 15% of company total, average of £395,000 per deal The North West represented only 7% of start-ups »£5.1 million and 13 deals There is a lack of VC focus outside of the South »Strong London/M4 corridor/Cambridge focus

7. Corporates have slashed supply lists by upto 95%: to the detriment of smaller/unquoted vendors* 90% of large corporates will not buy solutions >£50k from vendors with <£10M in revenues* EXITS: Established vendors are being very selective in acquiring feature/function to boost their offerings: VC’s need to market their assets for sale »900 IT M&A deals globally in H2, 2003 and H1, 2004 »Only 70 acquisitions by top 38 vendors, only 12 were European companies Liquidity: IPO routes still difficult in the short term, especially in Europe The global IT market has structurally changed and there are new rules of engagement Industry Concerns *Source: Forrester Research

8. Background: The Changing Deep Structure of the IT Industry The New Ecosystem - Follow the Money CIO/CTO/ IT Dept. Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Transaction C 1985

9. Background: The Changing Deep Structure of the IT Industry The New Ecosystem - Follow the Money Emerging Tech. Vendor Emerging Tech. Vendor Investor Network Service Provider CIO/CTO/ IT Dept. Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Transaction C 1990

10. Background: The Changing Deep Structure of the IT Industry The New Ecosystem - Follow the Money Emerging Tech. Vendor Emerging Tech. Vendor Investor IT Service Provider Network Service Provider CIO/CTO/ IT Dept. Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Transaction C 1995

11. Background: The Changing Deep Structure of the IT Industry The New Ecosystem - Follow the Money Emerging Tech. Vendor Emerging Tech. Vendor Investor Enterpris e Lines of Business Enterpris e Lines of Business IT Service Provider Network Service Provider CIO/CTO/ IT Dept. Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Transaction C 2000

12. Where does technology transfer and brokering fit? The New Ecosystem - Follow the Money Emerging Tech. Vendor Emerging Tech. Vendor Investor Enterpris e Lines of Business Enterpris e Lines of Business IT Service Provider Network Service Provider CIO/CTO/ IT Dept. Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Transaction C 2000 Academia

13. A Win - - Win Model Technology Transfer and Brokering Emerging Tech. Vendor Emerging Tech. Vendor Hardware and Network Equip. Vendor Hardware and Network Equip. Vendor Software Vendor Academia Cash Technology Stock Technology Broker, e.g. PAX TT Stock Cash Royalties Research

14. Making the Funding Journey 1. Understand the equity marketing paradox 2. Know your equity customer 3. Plan your equity funding roadmap

15. 1. Understand the equity marketing paradox The Entrepreneur/CEO has TWO marketing problems CEO Product 1Product 2 CapitalCustomers Angel/seed funding Venture Capital Bank Debt Corporates Aerospace Biotech Semiconductors E-Commerce

16. People Context The Business Opportunity The Deal 2. Know Your Equity Customer

17. Stakeholders Entrepreneur The Team Economy Technology Competition Timing Customer Business Model Opportunity Size Price Deal Structure 2. Know Your Equity Customer (Cont.)

18. 3. Plan your equity funding roadmap Version 1.0 Company Version 1.5 Company Version 2.0 Company Source: VenlogicLLC

19. Theme Taking technology out of the lab and into the real World

20. Recommendations Understand exactly where you fit into the new IT market ecosystem – either directly or using the channels Prepare for your two sales pitches »Your product and your equity Identify your equity customer and determine what they need to fully analyse your business »You only have one chance to pitch Do not ‘shop’ the deal »Be very selective in your approach and focus your energy and budget on the ‘best’ investors for your business Cash is king ! »Plan your equity roadmap like a military assault

21. J Carl Allen +44 207 323 7685 jcallen@forrester.co.uk www.forrester.com Thank you Entire contents © 2004 Forrester Research, Inc. All rights reserved.