RCT BioVentures UCSF: Idea to IPO Business Plans

1. RCT BioVentures UCSF: Idea to IPO Business Plans

2. Different Purposes & Audiences • Raising funding: Marketing to very different people • Sophisticated (VC’s, Angels, Corporates, Government) • Unsophisticated (Friends & Family, Non-life science VC’s) • Post-funding: Setting expectations for investors • Attracting Resources (Employees, Partners) • Internal planning and measurement of success • Identifying strengths and weaknesses (holes in team) • Understanding your capital needs • Ongoing management reviews of strategy and plan

3. Early-Stage Funding Environment • M&A is the primary exit • Majority of exits below $100MM • Median acquisition price: $71MM, capital invested:$39M • Time to exit is 7 – 8 years on average

4. Venture Capital is in Crisis • Venture capital has performed very poorly over past 10 years • Most venture firms underperformed S&P • Limited Partner investors leaving VC as asset class • Number of venture firms are shrinking • Most remaining venture firms have shifted to later stages • Less risk • Faster exits • Put more capital in fewer deals

5. Understanding VC’s • Goal: Make returns for their Limited Partners • Generally, they are “closed-end” 10 year partnerships • Ask - When does your current fund liquidate? • They need returns in advance of fund liquidation date • ? - Will your plan take longer to exit than their fund’s life? • Ask - What are your return expectations? • If looking for cash on cash returns over IRR, they will want to put as much money to work as possible and shoot for the moon

6. What VC’s look for in Investment • Unmet clinical needs • Large market opportunities • Technology that lowers cost and delivers better patient outcomes • Clear FDA path; guidance documents • Well-defined Reimbursement path • Very hard to get VC interest in technology that needs new code • FTO & Broad, defensible IP • Proven execution team / path to build out team • Clear path to Exit (generally Acquisition)

7. Working with VC’s • Research VC to be sure you are in area of focus • Best way in is via an Introduction • Send a non-confidential summary • Must contain enough to get you to meeting / call • If interested, CDA can come later • Follow-up to get feedback & try to schedule meeting • Get to “NO” as soon as possible so you don’t waste your time • Give most efficient / best presentation you can. • Be as open and transparent as you can (share data, weaknesses)

8. Business Plan / Presentation Components • Always remember, you are telling a story! • Unmet Clinical Need / Market Opportunity • Your solution / products • Competition • Regulatory & Reimbursement Strategy • Intellectual Property • Development Plan • Commercialization Plan • Management team • Financial Plan / Capital Needs

9. Executive Summary • Goal: Get you to the next meeting • 1 – 2 pages • Abbreviated version of business plan • Unmet Clinical Need / Market Opportunity • Your solution / Products and Differentiation • Regulatory & Reimbursement Strategy • Intellectual Property • Development Plan • Commercialization Plan • Management team • Financial Plan / Capital Needs

10. Unmet Need • Be prepared to explain the unmet need to layman or scientists • Tailor the presentation to the audience • Sophisticated VC or Corporate knows that Diabetes is a problem. Ask them if they want you to skip it. • Evidence that problem is significant • How is problem addressed today • Inadequacies of current options • Investors will want to talk to key opinion leaders as well as community physicians to validate the need

11. Market Opportunity • Know the market size and cite sources • Know the incidence & prevalence in US and ROW • Explain your initial target segment, if a subset • Market growth in past and in future • Who are the stakeholders (patients, physicians) • Treatment locale (inpatient, outpatient, physician’s office) • Investors will be trying to determine if the market is large enough for them to meet their return goals

12. Your Solution / Products • How did you come up with the solution? • Description of the product / solution • How will it be used, where and by whom? • Remember, Investors will have seen many similar products • Differentiate your product / solution • Compare to current and emerging options • Remember, should be superior & ideally lower costs • Evidence that it works • Proof of concept data. The more the better.

13. Competition • Really understand the competition • Gold standard versus your product • Existing options versus your product • What are the barriers to entry? • Upcoming options versus your product? • If you have no competition, you may not have a viable business

14. Regulatory & Reimbursement • What is your regulatory path? • Is your strategy FDA-centric or do you have OUS / CE plan? • Many companies focusing OUS today • Understand how your product will impact patients, physicians, and payers (clinical outcomes, length of stay, time to recovery, procedure times, convenience, safety, ease-of-use, cost) • Investors will be worried about your ability to get reimbursement and how quickly you will get it. They will be wary of plans that require new codes.

15. Intellectual Property • List of IP and status (applications, issued patents, office actions) • Freedom to Operate • Patentability with Broad & Defensible key claims • Any opinions available as to strength of IP. Verbal is OK. • How do you plan to protect future inventions • License agreements and summary of terms • Investors will be thinking of the key assets that will attract your ultimate acquirer and how they will value those assets

16. Development Plan • Existing Pre-Clinical and Clinical Data • Additional Pre-Clinical work required • Clinical studies, # of patients needed for approval • Timeline (e.g. Microsoft Project) and costs • Who will do the work? Inside or Outsourced? • Are there key studies that can kill the product? • Capital efficiency is key, don’t build before you have to • Investors will want to see how you will continually eliminate risk, stop points, versus just the steps required for approval

17. Commercialization Plan • Who will commercialize the technology? • What will acquirer need? • Do you need to go-to-market to prove value? • Internal salesforce or Distributors? • What post-approval marketing studies will you need for adoption, both early-adoption and mainstream • Investors will be looking to gauge how many rounds of funding you will require and if they have sufficient capital to get you there

18. Management Team • Identify Key management, scientists / engineers • Highlight relevant experience • Don’t bring on a CEO without a relevant track record • Interim CEO and other positions are fine • Identify gaps in your expertise and how / when you plan to fill • Board members – investors take boards very seriously. Don’t appoint anyone to your board of directors until you need to. • Investors want to see that you recognize your limitations • Companies almost ALWAYS transition management over time

19. Financial Plan & Capital Needs • Financial model showing revenue projections and expenses • Projections for number of units sold • Projections for headcount over time • Highlight significant milestones that create value • Examples: Clinical studies, product approvals, profitability • Milestones should determine additional funding milestones • Summarize your use of proceeds for each funding • Discuss exit strategy and milestones when you might exit • Don’t provide a valuation model, but do have realistic expectations

20. Improve your Chance of Success • Don’t send your plan cold to investors. Get introductions. • Know your investor before you talk to them. At least review their website and past financings. • Get as much feedback as you can. You should constantly evolve your plan to incorporate your feedback. • Try to get an investor to say “no” as soon as possible. • If / when an investor says “no”, ask for specific feedback. • Don’t try to convince an investor after they say “no”. • Be persistent, but know that the time might just not be right

21. RCT Device Criteria • Start-up investment (typically seed, series A as a first investment with follow-on available) • Large market opportunity, with annual product revenue of more than $100 million • Capital efficient development plan to complete prototyping, preclinical safety and efficacy testing, clinical POC and, when feasible, regulatory approval • IP provides meaningful protection with broad apparatus claims, FTO exists and development continues to build strong IP going forward

22. RCT Device Criteria • Potential corporate partners/acquirers working in the area or have listed it as a strategic target • Regulatory approval path through 510(k) or PMA in the US and CE mark in Europe with reasonable clinical timelines and endpoints • A variety of potential exit alternatives exist, including after preclinical POC or clinical feasibility without the need for the pivotal trial and large venture rounds required to take the product to market or build large sales teams • Team with proven ability to execute

23. RESEARCH CORPORATION TECHNOLOGIES pgrand@rctech.com 310-709-3750