private equity

1. private equity

2. Topics for today • What is venture capital? • What do VCs look for? • VC process • VC value added process • VC terms

3. What is Venture Capital? • Investments in early stage small or medium sized, unlisted companies, • Can also consider investing in big projects and sometimes listed companies, if strategic- termed Private equity • Aim to increase the value of its investment without taking control by active participation in the management process • Exit by way of redemption,selling shares back to the promoters, to a third party in a private transaction, a trade sale or an IPO within a fixed time

4. Venture / Private Equity Funding Stages • Seed • Start-Up / Early Stage • Expansion Stage • Mezzanine Financing • Buyout / Leverage or Management More money More risk

5. What Do VCs Look For? • Management team • Market • Competitive Advantage • Capital Requirements • Exit Strategy

6. Management Team • (People) 3 • Managing a business, especially a start-up is not easy • We look to the founders to have the vision, drive, tenacity, conviction, experience, flexibility etc • Proven track record…serial entrepreneur • Chemistry is also important

7. Large Growth Market • Potential market size is very important • VCs look for winners Difficulties: Identifying change • Some products / services create the market • Some change the industry • Others are yet to be tested but has great potential

8. What is the Business Model? • Blinding Idea / Technology • Product / Service • Can it be commercialized? • Is it a Strong Value Proposition

9. Does the firm have a clear Competitive Advantage? • What is your unfair advantage? Is it sustainable? • Do they know market & competitors intimately • What do they have that others don’t? • What do they do better than any other company? • What if they’re up against copycats, reverse-engineers, 800lb gorillas? Need to answer the question What do they do differently from their competitors that their clients value?

10. Reasonable Valuation are important • What is too expensive? • What is too cheap? • P/E, Revenue Multiple, NPV, EBITDA? • Exit Strategy?

11. VC PROCESS • Marketing- news articles, talks, networking • Only meet people who cold call that have been recommended by someone who the VC respects. • Review business plans. The VC wants to check out the quality of your thinking. This is a work in progress but it needs to be done by you. • Court the business man. Check out their management ability by reviewing what they done in the past. • If we agree to proceed we may do some preliminary due diligence. In our case we review market size and do some character references. • If agreed in principal we prepare a PIM- Preliminary Investment Memo. • If approved we may give a draft term sheet. This outlines the broad terms on which we invest. • Due Diligence. Technical Due Diligence maybe outsourced to a technical expert. Accounting due diligence by an accounting firm, legal due diligence by a legal firm. This should take one month.

12. VC PROCESS (cont.) • Technical due diligence will include simple things like does it work? is it stable? competition analysis,- trying too understand the competitive edge in the technology. • Once due Diligence completed , move to agree term sheet. We go back to our investment committee to report our findings. No adverse findings then we move to contract. • Term sheet finalised move to completion. • Go to documentation.Need to complete all the conditions precedent. This process can take one month or more. • All the CP’s completed the deal becomes unconditional and money is released.

13. VC’s Add Value by taking a active role Help management • Identify Business Opportunities • Strategic Planning • Develop Scalable Business Models • Raise Sufficient Capital to Execute Business Plan • Build World Class Management • Increase Market Share • Build Barriers to Dominate

14. Examples of how VC’s can help • Network • Countries, companies, people – • Ajia Partners • Strategic & Business Advice • Markets, trends, technology, financials, overseas • Business courses • Executive Recruitment • Top management: CEO, CTO, Marketing, etc • Investment in JObstreet • Strategic Alliances • Macro picture and contacts • Help companies make contacts- use advisors • IPO & M&A Experience • Timing, Valuation, Expertise

15. Choosing the right VC is important • VC’s are NOT money lenders or banks • Choosing a VC is NOT about money • Choose one: • That you can work with • That can help you take your company to the next level • That has a proven track record • That share your views and aspirations • That has network and connections • That gives you a good valuation

16. Different VC have very different characteristics • Investment • Size, Instruments, Time to Exit • Stage of Company • Start-Up, Early Stage, Expansion, Mezzanine • Purpose of Funding • Industry Focus • Broad-based vs. focused • Management Participation • Active vs. laissez-faire

17. VC Terms • Typically use Redeemable Preference shares • Right to redemption in 5 years • Right to take over firm if not redeemed. • Breach of reserve matters means prefs can be redeemed • Have rachet provisions in case of down round • Value stays the same • Typically have board seat and reserve matters • Regular meetings, monthly accounts • Valuation maybe dependent on future performance • Based on future PE or sales multiple • Tranched release of money • Based on milestones to reduce risk

18. Evaluate thoroughly • Be prepared – trends move fast • A business plan is a living thing – if its broke fix it! • Rejection & failure are NORMAL • Learn learn learn • Chase your dream

19. Intelligent Capital • Partnership of three partners and a analyst • All partners have industry experience • Have started and owned 30 companies between the partners • Manage $15m first fund. Made 5 investments to date. • Focus on early stage companies where we can add value

20. Further Information Call Asgari Stephens tel : +6-03-9281-6588 fax : +6-03-9281-6598 email : asgari@intelligentvc.com

21. Thank you