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Page 1 DE-MYSTIFYING TECHNOLOGY VENTURE CAPITAL 2000 Arjun Gupta Founder & Chief Believer (CEO) TeleSoft Partners www.telesoftvc.com
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Page 2 KEY MESSAGES Stick-to-the-knitting Do-your-own-homework Blow-it-out-of-the-ballpark www.telesoftvc.com No better time to start a solid communications company – phenomenal infrastructure build-out worldwide. Carrier capital expenditures worldwide exceeded $100+BN in 1999. Plenty of diverse sources of capital at all stages – angels, traditional VCs, industry focused funds, mega-funds, hedge funds, corporate funds, buyout funds, etc. There are mega opportunities to build high-quality, large companies, either independently or with strategic acquisitions.
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Page 3 THE MACRO TELECOM OPPORTUNITY Source: International Telecommunications Union; McKinsey; World Bank ~1995-1996. From TeleSoft-I Investment Proposal (8/1/98). www.telesoftvc.com
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Page 4 KEY SEGMENTS IN COMMUNICATIONS www.telesoftvc.com NEXT GENERATION NETWORKS ROUTING & SWITCHING SERVER & STORAGE ARCHITECTURES TRANSMISSION SYSTEMS BROADBAND WIRELESS NETWORK TERMINATION MIDDLEWARE & SERVICES Core Edge QoS QoS SAN & NAS DWDM Opto-electronics NMS & OSS “Black hole” Integrated Access CPE/CTE/NTE NETWORK APPLICATIONS New s/wcategory Internet p-t-p p-t-m-p Qwest, Level 3, Hermes LMDS, MMDS, PCS CLECs,CAPs SEMICONDUCTORs, TOOLs, OTHER
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Page 5 RECENT TECHNOLOGY VC INDUSTRY DYNAMICS Oak Spectrum Battery Benchmark Kleiner Perkins Redpoint Sequioa Accel <$250MM funds Forestman Little TPG KKR Hickes Muse Thomas Lee Carlyle Group Welsh Carson Meritech Bowman Seligman Attractor TCV ICP General Atlantic Amerindo Madison Dearborn $50~$100BN ENTREPRENEURS Microsoft Cisco Intel MCI Frontier BT/AT&T Pequot Soros Galleon ANGELS: ~$1+BN www.telesoftvc.com HEDGE FUNDS: $10BN-$20+BN CROSSOVER FUNDS: $15BN-$20+BN CORPORATES: $5BN-$10+BN MEGA-VCs: $10BN-$15+BN LBOs: $20+BN TRADITIONAL VCs: ~$5+BN
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Page 6 COMPETITIVE POSITIONING MATRIX FOR EXISTING PLAYERS www.telesoftvc.com
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Page 7 KEY VALUE FROM YOUR VC $$$$$$ follow-on financings Recruiting management, board and advisors Product roadmap Corporate partnerships Anchor carrier customers & beta sites www.telesoftvc.com INCREASING IMPORTANCE
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Page 8 EXAMPLE VC INVESTMENT STRATEGY & PHILOSOPHY www.telesoftvc.com
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Page 9 THE VC’S CHALLENGE AT A GOOD COMMUNICATIONS FUND Funnel=~100%or~700 deals Explored=~20%or~140 deals Pursued=~10%or~70 deals Consummated=~5%or~30 deals Lost=~5%or~30 deals TeleSoft Guess Estimate: ENORMOUS DEAL FLOW OF GREAT IDEAS + GREAT TEAMS www.telesoftvc.com
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Page 10 CAPITAL SHOULD BE ONE OF SEVEN LEVERS FROM YOUR VC www.telesoftvc.com
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Page 11 Tech IPOs 1/1/80 – 3/31/98 Public Companies FOCUS ON BUILDING A GREAT COMPANY, DON’T WORRY ABOUT EXITS www.telesoftvc.com 16,528 private companies funded 70% 1,243 = 100% Source: Morgan Stanley 22% 8% Acquired Out-of-Biz U.S. PUBLIC MARKETS & QUALITY ACQUIRORS LIKE CISCO OR NT WILL BE THERE FOR HIGH- QUALITY COMPANIES 3/31/99 Snapshot
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Page 12 KEY SUCCESS FACTORS IN CHOOSING YOUR VC $$$ Capital (all the same!) Knowledge in your space Contacts in your space Chemistry with your team www.telesoftvc.com INCREASING IMPORTANCE
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