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Applied Materials Confidential
Annette FinsterbuschSenior Investment Director
Applied Ventures, LLC
January 27, 2011
The Second Annual Tech Valley Career Pathway Conference
Applied Materials Confidential2 2
Agenda
Introduction
Why We Invest
The Investment Process - Introduction to the
check
Behind the Scenes: What’s really happening
How Investment Affects Technology Development
How We Measure Success and Deal with Failure
Your Impact
Applied Materials Confidential3
Applied Materials, Inc.Applied Materials, Inc.
The global leader in nano-manufacturing technology™ solutions for the semiconductor, flat panel display and solar PV industries
> Equipment, Parts, Services & Software
> 10B$ in Revenue
> 14,000 employees in 15 countries
Applied Materials Confidential4
From bare silicon wafer…
…to finished product
Applied Materials Confidential5
Applied Black Diamond® II
Applied Reflexion® LK Ecmp
Applied SIP™ EnCoRe II Cu PVD
AppliedAdvantEdge™ Metal Etch
Applied Endura® CVD Al
Applied Centura®
RP EpiApplied Quantum X™ Applied Vantage®
Radiance® Plus RTP
InterconnectInterconnect
Applied Vantage®
RadOx™
Metrology & InspectionMetrology & InspectionApplied UVisionApplied UVision™
Com PlusCom Plus™ OPC Check OPC Check™
Applied Centura® DPN Gate Stack
Applied Producer®
HARP
TransistorTransistor
Who We Are: Leading Edge Technologies for Advanced ICsWho We Are: Leading Edge Technologies for Advanced ICs
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Who We Are: Leading Technology for Solar PV & DisplaysWho We Are: Leading Technology for Solar PV & Displays
Driving 2.5-3.5B$ in PV Revenue in 2010
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Why We Invest: Extending Core Nanomanufacturing CompetenciesWhy We Invest: Extending Core Nanomanufacturing Competencies
Cost per transistor
Cost per area
THEN
Cost per watt
NEXT
Silicon
Display
Adjacent Technologies
FIRST
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Applied Ventures’ Investment ThesisApplied Ventures’ Investment Thesis
Our Target Companies are:
– high-growth, early stage
Our Objectives are:
– both financial and strategic
Our Mission is to:
– profitably invest in companies that provide a window on
technologies that stimulate the growth of applications for
semiconductors, displays, alternative energies and related
products and services
AppliedVenturesthe Venture Fund of APPLIED MATERIALS®
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Original (2005) Original (2005) INVESTMENT FOCUS
• Metrology and inspection • Advanced materials• Display technologies • Process advances for the 32nm node
and beyond • Advanced patterning for ICs,
displays and related applications • Software to enhance manufacturing
capabilities and improve yield • Photonics • Lighting • Data storage • Advanced packaging • Energy conversion and storage• Medical Diagnostics• Water Filtration, Purification, Desalination• Energy Conservation Technologies• Sustainability Technologies
Current 2010-2011 Investment Current 2010-2011 Investment FocusFocus
• Metrology and inspection (Solar)• Advanced materials• Display technologies • Process advances & Equipment
• Lighting • Data storage • Advanced packaging • Energy conversion and storage
• Water Filtration, Purification, Desalination
• Energy Conservation Technologies• Sustainability Technologies
AV Investment FocusAV Investment Focus
Corporate Business Development 02/14/119
CleanTech
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Applied Ventures ProfileApplied Ventures Profile Structure
– LLC, wholly-owned subsidiary of Applied Materials
– 1 VP/GM, 2 Investment Managers, 3 Investment Associates
– 2 Regional Investment Managers: India and China
Fund Size– $50 million allocated for investments annually
– ~$120 million currently under management
Investment Criteria– Financial promise and strategic relevance
– Seed through early stage
Investment Size– $500K to $3M per round
Collaborative Approach– Co-invest with leading institutional investors
Portfolio Oversight– Typically BOD observer seat
Streamlined Approval Process– Monthly investment committee decisions
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Applied Ventures Value PropositionApplied Ventures Value Proposition Benefits to Portfolio Companies
– Access to broad technical and business expertise with global reach
• Maydan Technology Center (300 mm R&D center)
• Global distribution channel
• Deep customer and supplier relationships
– Partnership with the largest manufacturer of semiconductor production equipment and nanomanufacturing technology
– Maximize Applied’s value to portfolio companies through mutually-derived, well-managed projects
– Interface with investment managers with entrepreneurial, VC and corporate operating experience
Benefits to Co-Investors
– Leverage Applied's due diligence capabilities
– Access to streamlined investment processes, which complement the decision-making flexibility of traditional investors
– Collaborate with a consistent co-investor with a long-term, financial view of investing as an integral facet of an overall growth strategy
Applied Materials Confidential12
How Investment Affects Technology DevelopmentHow Investment Affects Technology Development
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Dot-Com Boom
Dot-Com Bust
Emergence of CleanTech;AV Founded
CleanTech Expected to be largest growth
area in VC
VC Investment Trends - Overall
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How Investment Affects Tech DevelopmentHow Investment Affects Tech Development
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• CleanTech is the Fastest growing sector in VC
• CleanTech will be almost 20% of all VC investing in 2010
• CleanTech Deals are now later stage and larger than other areas …
It’s a good place for AV to invest … there are lots of
deals in this space …
CleanTech vs Rest of VCCleanTech vs Rest of VC
Applied Materials Confidential14
The LifeBlood of Venture Capital is the Deal PipelineThe LifeBlood of Venture Capital is the Deal Pipeline
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100%
90%
10%
1%
AV Screens 100 Deals for every 1 in which it invests
Confer-ences & Events
VC Referred
AMAT Referred
Web Searches, News etc.
Applied Materials Confidential15
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AV Lead / Investment DistributionAV Lead / Investment Distribution
INVESTMENTS: $ Invested by Investment SpaceLEADS: Incoming Leads by Investment Space[Colors indicate lead originator]
All SolarNon-Solar / Storage
SSL
Environment/Sustainability
All Solar
Non-Solar / Storage
SSL
Solar is Largest Investment Area
– ~$50M invested in 16 deals
– 24% of All Transactions
CleanTech is Largest Overall Area
– 41% of All Transactions
– $58.8 M
90% of New Leads in Last 6 Months were in CleanTech Spaces
Applied Materials Confidential16
AV / VC Investor Decision ElementsAV / VC Investor Decision Elements
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AV Needs: Alignment to
Corporate Strategy
Inbound:• New Technologies• New Revenue Streams• New Business ModelsOutbound: • New Markets for Existing
Products• New Markets for New
Products• New Business Models
(Distribution, Direct Materials … )
Opportunity:• Large Market >$100M• Rapid Growth >50%/yr• Capable of large profits
>25% Op Margin
IP:• Differentiated• Protected (Patents or Trade
Secrets)• Sustainable
Total Capital Needs:• Total Capital Needs vs
Expected Returns• Capital Burn to Key
MilestonesThe Deal: • Appropriate Rewards for
Shareholders• Appropriate incentives for
founders and employees• Adequate protections to
downside events• Control … who has it ?
How is it shared ?
Team:• Relevant Experience• Attitude and Maturity• Coachable ?• Appropriate for Stage of
Company• Gaps ?• Everyone pulling their
weight ?
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DiligenceDiligence Company Opportunity Team Other
Investors Investment
Space Competition Government
Issues and Incentives
IP Landscape and Freedom to Operate
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Start-Up Company Decision ElementsStart-Up Company Decision Elements
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Investor alignment to
Start-UpStrategy
• $$$• Association with a Fortune
500 company• Strategic Benefits‾ Access to technology and
technical staff‾ Access to AMAT logistics support
and distribution channel‾ Access to AMAT supply base and
commercial leverage‾ Access to AMAT facilities‾ Commercial relationship• JDAs• Sales, Service, Distribution• Management Advice and
Experience
Applied Materials Confidential19
Company Valuation / StagesCompany Valuation / Stages
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The ChasmThe Chasm
Early Stage
Mid or Growth Stage
Late or Mezzanine
Stage
Stages of Company Development & Decline
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So, What Do VCs Look for ?So, What Do VCs Look for ?
1. Large and Rapidly Growing Market Opportunity (~100M$ or > Opp & >20%/yr)
2. Great Leadership and Team (motivated, committed, trustworthy, experienced entrepreneurs …)
3. Unfair/Differentiated Competitive Advantage(Strong IP position, specific knowledge or resources)
4. Straightforward, Achievable Plan to Make Lots of Money(Clear path to money in shortest time)
2. Clear Understanding of Resource Needs and plan to use them appropriately(program management skills)
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Applied Ventures Portfolio CompaniesApplied Ventures Portfolio Companies
Solar Equipment, Services & Software
Energy Storage
Photonics/Optical
Semiconductors,Memory, SensorsDFM, Test, Packaging
Solid State Lighting
Display & Glass, Materials
Sold
Sold
IPO
Closed
Since 2005, AV has:
•Closed over 70 Investments•CleanTech is >60% of our Portfolio•Invested in more than 35 Companies•Invested more than $120M•Returned over $35M in Cash
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The Investment Process – what an entrepreneur seesThe Investment Process – what an entrepreneur sees
The Investment Thesis Deal Flow (on-going)
– Where we look
– How to get connected with the right group
The Screening (1 hour)– Why didn’t the partner talk to me?
– OMG – They called!
The Meeting (Varies)– Who shows up and why
– What’s the take away
The Diligence Period (seemingly forever!) The Terms Negotiation (weeks) Final Diligence (1 month) That first Board meeting…..
Applied Materials Confidential23
What Makes a Great EntrepreneurWhat Makes a Great Entrepreneur Ego complemented by a humble self presentation Passion Creative with an excellent education / knowledge base Tenacious but not hard headed Resourceful “Coach-able” EQ + IQ Thick skinned
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Key Take-Away PointsKey Take-Away Points
Venture Investing is Incredibly Risky!– Most ventures fail
Venture Capitalists have one objective!– Amount and timing of ROI is key.
VCs analyze a variety of factors to make decisions and mitigate risk– Opportunity Size, Deal Size, Technology, Team
Corporate VCs are VCs with a Strategic Element
Your impact is critical to shape the thinking of the next generation of entrepreneurs!
Applied Materials Confidential
Annette FinsterbuschSenior Investment DirectorApplied Ventures, LLC
Office Phone: 408 563-5254Email: [email protected]