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Innovation Summit at NAU September 9, 2012 James Goulka Managing Director Arizona Technology Investor Forum 1

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Net worth of $1 million or more Or Income for each of last 3 years $200,000 pa if single $300,000 pa if married 2

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No liquidity Unproven management Unproven technology Unproven markets Unknown competitors lurking in the bushes No predictability 3

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$20 billion invested in 2010 61,900 deals in 2010 Source: Center for Venture Research, University of New Hampshire 2011 4

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Able to assess and absorb the risk Invests own money Invests brainpower Due diligence on investment Board or Advisor Know-how Invests time Opens contact database 5

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Super Angels (Ron Conway) Domain Magnets (Pat Sullivan, the Crowns) Angel Groups (ATIF) 7

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Can make smaller investments ($25,000) Leverage from multiple brains Leverage from single center Shared due diligence Aggregated capital = better terms Multiple ways to invest Multiple ways to participate Fun 8

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55 Phoenix individual investors Entrepreneurs, Technology Executives, Accountants, Lawyers, Investment Bankers, Consultants 23 investments $6.2 million invested Direct and through ATIF Sidecar Fund I Partner with Desert Angels & NM Angels 9

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Software & SaaS Semiconductors & Sensors New Materials Non-invasive medical devices Capital efficient green tech 10

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The business, not the technology What is the pain point? How acute is it? The customers Who are they How many of them are there How do you get them? Why will they pay for your solution? 11

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Where Arizona Southwest Size: $250,000 - $1,500,000 Stage Prototype or Alpha customer Revenue not required (but nice) 12

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Valuation 13

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2 equal sized investments Target Return for portfolio: 25% p.a. At the end of year 1: 1 fails: complete loss Need 50% p.a. on the other one Critical Problem: Dont know which is which Therefore expect 50% p.a. on all 14

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Achieve 50% returns by explosive growth Not linear growth, eg service businesses Technology powers the growth 3-5 year investment horizon Not the grid, but controllers of the grid Not Vinod Khoslas science projects Not businesses to hand to your children Exit typically sale to large entity 15

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Deal Terms Due diligence Taking care of the team: Option Pool Governance 16

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200 Inquiries 100 Applications 24 Semifinalists 12 Presenters 6 Investments 17

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