1. © 2001-2006 OutSystems. All rights reserved. Dealing with VCs. The point of view of an entrepreneur Paulo Rosado, CEO OutSystems

2. © 2001-2006 OutSystems. All rights reserved. Curriculum Vitae (on dealing with VCs)  First start-up Intervento, 1997-1999. –No VCs. Organic growth.  Executive Team of multinational company –Lived with a lot of VCs.  Second start-up OutSystems, 2001. –Raised €1M, 2001. –Raised € 2.2M, 2005.

3. © 2001-2006 OutSystems. All rights reserved. Funding: Angels/VCs, Banks and Your Savings  Banks control risk by asking for warranties –Useless as funding vehicle for start-ups.  Your last savings (house, parents retirement fund) are sacred. –Don’t touch them. They will be there if you fail.  Angels/VCs spread the risk among several investments –Control risk based on law of averages

4. © 2001-2006 OutSystems. All rights reserved. How VCs think  Give away $ in exchange for a % of ownership. –Minimize risk.  Wait 2-6 years.  Get ($ x N) –N > 10 would be good.  Conclusion: –VCs need an Exit.

5. © 2001-2006 OutSystems. All rights reserved. What VCs look for in a company?  People  Market  Offer w/ Unfair Advantage  Growth (potential)

6. © 2001-2006 OutSystems. All rights reserved. The right investment at the right time  Kitchen table –Personal funds. Work for free.  Seed/Start: product development, missionary sales –Angels, specialized VCs. –Help with Marketing and Business Model.  Market Development: scale sales –VCs –Reach profitability –Help with strategy, recruiting and exit.  “Generate cash like a cement company” –Banks

7. © 2001-2006 OutSystems. All rights reserved. Issues with Portuguese VCs  Not enough transactions to dilute risk  Banker legacy  Generalist –Cannot spot disruptive ideas  Network in the wrong market

8. © 2001-2006 OutSystems. All rights reserved. Issues with Portuguese Entrepreneurs The 3 roles Shareholder CEO Technical Guru Does not want to give up ownership. Cannot manage the company as it grows and concentrate on selling, investors, finance and HR. Start with great technology, get funding and concentrate on what you like (techie stuff). Experienced executive who has done it before.

9. © 2001-2006 OutSystems. All rights reserved. Issues with Portuguese Entrepreneurs (2)  No marketing at the “kitchen table”: –Is the market big enough? –Do they really need this product/service? –Do they have money to pay? –Is it cheap to convince, sell, delivery, get paid? –Do we have a price list?