1. What gets our attention?-- First meeting and beyond PRESENTATION:

2. 2 Know your audience Are you prepared for a venture partner How will your life change? Is your capital structure clean? Do senior management and early investors agree with seeking venture capital? Do your homework Research VC websites Ask trusted advisors to find the right match Get an Introduction Use of funds Prepare a business plan that assumes getting funded Determine how much money you really need? Secondary/recapitalization opportunity

3. 3 First Meeting/Screentypically a phone call VCs want to qualify via phone Dont push unnecessarily for a meeting Do a great job on the phone with a 20-30 minute conversation Keep it simple Get to the value proposition quickly Why do customers need your product/service What to prepare? 15-20 slides, case study of a specific client implementation Make executive summary and a more extensive slide deck available Save a detailed business plan for follow-up Create a need/desire for the investors to want to know more Goal: In person meeting

4. 4 First in person meeting Issues to address Focus on the questions that came up on the prior phone call Dont plow through your slides Listen carefully, create a dialogue Business Model Re-establish the value proposition quickly (i.e. problem/solution) How do you make money? Recurring/repeating revenue Scalability –is your business right for VC funding Fast growth a must, risk taking will be the norm High gross margins and customer perceived value add VCs need to see at least a 5-10x return Articulate potential exit opportunities –Are you building for an exit or is this a lifestyle business? Goal: Visit from the investors to your facility

5. 5 Subsequent Meetings Build a relationship Update on sales momentum New management hires Ask for advice Chemistry with the partner you are working with We are always doing diligence Are you coach able? Do you follow up with introductions? Are you doing your homework? –Call CEOs from other investments Are you looking for money or a partner? Goal: Valuation/term sheet discussion and presentation to partnership

6. 6 Post-term sheet/diligence meetings Self assessment Current management team is realistic about their own weaknesses VP Sales-#1 position next to CEO CEO-if 1 st time with VC backing, open to feedback a must CFO-CEO right hand or book keeper? Owners accept that dilution can lead to higher valued business VC requires a meaningful ownership position in the Company 10-20% option pool for key hires and employees Management team is running the Company – VC interests should be aligned with executives (post investment)

7. 7 Term Sheet Dont get locked up in a term sheet without Investor conducting initial due diligence Pre-term sheet phase VC looking for fit with their investment strategy Post-term sheet phase – due diligence process VC looking for reasons to confirm investment strategy Deal negotiation It is critical for the entrepreneur to work with an attorney who understands VC process and what are market terms

8. 8 Edison Venture Fund Priority Deal Presentation checklist example: Brief history of your Company Market overview and positioning Current and next generation products and services Competition Marketing programs/Lead generation Sales and Distribution channels/Key partners Largest customers Pricing and renewal process. Client teams (sales, service, support) Backlog and sales pipeline -- very important! Current P&L and balance sheet Projected financials (quarterly 2004 and 2005-06) and cash flow Management team and organization Development plans Use of proceeds Lessons learned Edison contribution