Venture Capital  A 27 Year Perspective

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Confidential: Read and Return. 2. Gary Kalbach. 27 years as a venture capitalist$45 million invested over $600 million valueFounded two venture capital firms with $550 millionSeed investor in Sun Microsystems, Novellus Systems, Integrated Device Technology83 companies funded, 40 board seats,

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Venture Capital A 27 Year Perspective

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1. Confidential: Read and Return Venture Capital A 27 Year Perspective Gary Kalbach September 2005

2. Confidential: Read and Return 2 Gary Kalbach 27 years as a venture capitalist $45 million invested – over $600 million value Founded two venture capital firms with $550 million Seed investor in Sun Microsystems, Novellus Systems, Integrated Device Technology… 83 companies funded, 40 board seats, 50% worked Created the angel/institutional fund model BS, The Business School, University of California, Berkeley; MBA, San Jose State University

3. Confidential: Read and Return 3 Backyard

4. Confidential: Read and Return 4 Granddaughter In Garden

5. Confidential: Read and Return 5 West Coast Venture Capital El Dorado Ventures Investing since 1978 Seed/early stage – West Coast Information technology industry focus Enterprise software and services Communications 40+ Entrepreneurs – Technology Partners

6. Confidential: Read and Return 6 Seed Investor In… Sun Microsystems Integrated Device Technology Novellus Systems Access Health (acquired by McKesson/HBOC) Earthlink Networks Amati (acquired by Texas Instruments) Datasage (acquired by Vignette) NuSpeed Internet Systems (acquired by CISCO) Cyras Systems (acquired by CIENA) Efficient Networks (acquired by Siemens)

7. Confidential: Read and Return 7 The Process? Write business plan Raise venture capital Sell product Go public or sell company Retire

8. Confidential: Read and Return 8 Keys To Success My Perspective Management team Products and markets Markets that are not there – yet! Financing Ownership Opportunistic exits

9. Confidential: Read and Return 9

10. Confidential: Read and Return 10 Vision Thinking out of the box Example: Sky Dayton, EarthLink Networks At age 22, Imaging design firm, coffee house operator Vision of the need for connection to exploding Internet $1 billion company

11. Confidential: Read and Return 11 Drive Often multiple motivating forces Example: Bob Graham, Novellus Intel founder, built Applied Materials not recognized Driven to prove he could build a company Built a $1 billion company

12. Confidential: Read and Return 12 Leadership The team is usually right about the CEO – Listen! Example: Sun Microsystems Brought in professional manager Team revolted Scott McNealy promoted to President $18 billion company

13. Confidential: Read and Return 13 Problems Along The Way Suddenly out of money Key non-performing member of team Management team member leaves Product/Technology doesn’t work Market/Competitive landscape changes Investor group falls apart on vision/execution

14. Confidential: Read and Return 14 Management Teams Finance them Build them or Change them

15. Confidential: Read and Return 15 Markets In The Late 1990s Idealab! Paid $50M over 10 years to license the .tv extension from the Pacific Island country of Tuvalu eCompanies paid $7.4M for the domain name “business.com”

16. Confidential: Read and Return 16 2000 – A New Paradigm Brand: first Product: later Profitability: never

17. Confidential: Read and Return 17 Over-Funded Sectors Pet Assure Pet Food Giant Pet Food WareHouse Pet’s Choice Pets.com PETsMART

18. Confidential: Read and Return 18 Flawed Business Models You cannot fix slim margins with high-cost advertising WebVan did not have a viable business model

19. Confidential: Read and Return 19 What Went Wrong Too many inexperienced VCs Venture capital has traditionally financed B2B Most dot-com’s were consumer oriented

20. Confidential: Read and Return 20 What’s Happening Now Back to basics Customer-oriented/market-oriented

21. Confidential: Read and Return 21 How Do VCs Find Opportunities Successful entrepreneurs Successful entrepreneurs Other networks

22. Confidential: Read and Return 22 El Dorado Technology Partners Competitive Advantage Created 27 years ago Successful entrepreneurs Recognized experts in targeted industries Must be involved to co-invest Frequent interaction

23. Confidential: Read and Return 23

24. Confidential: Read and Return 24 How To Get Through The Funnel Business model that satisfies market Understanding of what it takes to build team, product lines and business Well thought out business plan Experience helps – crusty sales person vs. 5 PhDs

25. Confidential: Read and Return 25 Non-starter Quotes Founder will run to $100 million All you need is 1% of billion dollar market Year 5 sales of $1,457,987,238 with 50% profit Product will sell itself There is no competition

26. Confidential: Read and Return 26 In Conclusion Venture capital is an apprenticeship business Careers are built brick-by-brick Craftsmanship comes with experience

27. Confidential: Read and Return Thank You.

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