Presentation held by Fergal Mullen from Highland Capital Partners, at the Nordic Seed Capital Summit 2011 in Stockholm, 16 May 2011.

1. Prerequisites For International Growth Investments
NORDIC SEED CAPITAL SUMMIT
MAY 2011

2. AGENDA
 HIGHLAND BACKGROUND
 WHAT GROWTH INVESTORS LOOK FOR?
 WHAT SHOULD YOU LOOK FOR?
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3. BACKGROUND
 Formed in 1988
 $3 billion under management & 8 funds
» Backed 230 companies; over 100 IPOs and M&A
 Venture growth & early stage focused investment strategy
» tech | internet | life sciences
 Global presence
» Offices in Boston, Silicon Valley, Geneva, London & Shanghai
 Europe Focus & Strategy
» Venture Growth
» Internet & Digitial Media and Information & Communications Tech
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4. GLOBAL INVESTMENT AMBITION
In Any Geography &
Regardless of Sector…
…We look for extraordinary entrepreneurs… with a burning desire
to succeed… who can inspire others and build their companies from
the garage to the Fortune 500… reinventing themselves and
their companies along the way…
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5. NOTABLE WINS
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6. 6

7. Nasdaq: BFRE
$567,000,000 Nasdaq: ASKJ Nasdaq: AVID $67,200,000 Nasdaq: CKFR
Acquired by Cisco Systems $42,000,000 $56,000,000 Performance-based online $86,4000,000
Broadband VPN solutions Online Search Video editing systems marketing Electronic bill pay systems
$5,400,000,000 $1,100,000,000
Nasdaq: CONR $78,000,000 Nasdaq: LULU Acquired by Terra Acquired by AOL $355,000,000
Acquired by J&J for $1.4B $32,760,000 Networks Advanced mapping Acquired by Tellabs
Drug eluting stents Specialty apparel retailer Global internet network solution Optical access solutions
$411,100,000 Nasdaq: STAR
$278,000,000 NYSE: QIHU Acquired by Apple $126,000,000
Acquired by Apple Chinese-based Internet Mobile advertising Acquired by Staples Acquired by Cisco $2.9B
Low power chips company platform Specialty retailer Infrastructure Products
Nasdaq: SYBS
$49,600,000 $295,000,000 Nasdaq: VPRT Acquired by HP
Acquired by AOL Relational database Acquired by Lucent $120,200,000 Database engine
Online advertising management software Switching equipment Internet-based printing technology
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8. LEVERAGING A GLOBAL PLATFORM
Highland Capital Partners
Reputation & Brand
Portfolio Companies
Network & Knowledge
Back Office & IT
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9. EUROPE STRATEGY
 Venture growth focus
» Growth capital
» Proven business models
» Attractive returns profile
 Focus on Internet & Technology
» Disruptive e-commerce
» Internet advertising technologies & platforms
» Mobile “everything” business models & technologies
» Big data, virtualization, cloud computing
 Geographic focus
» Proactive in: UK, Germany, Nordics, Israel, France, Spain
» Reactive in: Eastern Europe and Russia
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10. HIGHLAND EUROPE PORTFOLIO
» Online eyewear retailer » United Kingdom
» Online photo sharing,
storing and printing » France
» Semiconductor wireless » United Kingdom
infrastructure
» Online private sales club » Spain
» Online shoe retailer » France
» Social games developer » Germany
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11. AGENDA
 HIGHLAND BACKGROUND
 WHAT GROWTH INVESTORS LOOK FOR?
 WHAT SHOULD YOU LOOK FOR?
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12. GROWTH STAGE FILTER
 Team  Market
» “A” Players » Size, Growth, Proximity
» Capital efficient » Competition
» Speed and Agility » Ripe for disruption
» PSD » How big can you be?
 Deal  Product or Service
» Financial model » Unique / Differentiated
» Price & Ownership » Value Prop & Defensible
» Structure » Customers Buying
Compelling Growth Story
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13. TEAM
 Hire A Players and remember A players hire A players, B
players hire Cs
 Balance culture fit and need for diversity of new
backgrounds
 Hire resourceful problem solvers
 Trust your gut, you have spent 30+ years developing it
 Search beyond local geography
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14. MARKET
 We don’t buy the “there’s a gap in the market” line, we want to
know if there is a market in the gap!
 Growth investors generally spend a lot of time validating market
» Size, Growth & Proximity (is company too early to market?)
» Competition
» Ripe for disruption
» How big can you be?
 And they will do this by talking with a lot of your customers and
their own contacts
 Investor has to believe in market potential and that you will be
among the leaders
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15. PRODUCT
 Unique & Differentiated?
» IP is good but does not guarantee success
» Execution, execution, execution
 Defensible?
» IP or Execution play
» First mover
» Economies of scale
» Capital intensity
 Value Proposition
» Must be easy to understand
» Better stand up to scrutiny
 Never perfect…have to be commited to constant evolution
» Don’t be afraid to test and get feedback
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16. FINANCIAL PLAN & DEAL
 1, 3, 5 perspective is very important
» 1 Year budget, 3 Year Plan, 5 Year perspective
» Key metrics and model drivers must be realistic relative to current
performance
» 50% Rule (combination of EBITDA & Growth NOT less than 50%)
 In Internet relatied businesses, customer analytics are crucial
» INTERNET: LTV perspective, Cohort Analysis, Contributon, etc)
» ICT: Bookings, Sales, Growth, Pipeline, Customer Concentration, etc.
 Deal
» Price & structure are very important to growth investors, look for win/win
» Valuation: Profit/Revenue dilemma
» Public market comps and precedent transaction multiples guide disucssions
 Banker or no Banker?
» Totally depends, a good banker can be very helpful, a bad one disasterous
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17. DOs
1. Know what you are talking about
2. Develop a solid pitch deck
3. Do you pass the elevator test?
4. Do you pass the airplane test?
5. Target the right audience
6. Know exactly what you are asking for and why?
7. Have a vision of where you are going?
8. Show apetite for making money in the day-to-day business
9. Articulate your apetite for making money on exit
10. Demonstrate your focus on building a world class business
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18. DO NOT
1. Target growth investors with pre-revenue business
2. Hit the road to fund raise until you are ready
3. Pretend business model is de-risked when it is not
4. Claim that founding team can take the company all the way
5. Show a plan with steeper revenue curves than MS or Google
6. Pitch a financial plan with big discontinuities
7. Postpone answers to questions as you pitch
8. Ask for substantially more or less capital than you really need
9. Pretend you know which one or two companies will buy you
10. BS: no surprises in the due diligence process, tell investor what to expect
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19. THE DEAL….A TYPICAL DEAL SCENARIO
Deal A Deal B
 Raise: €10M  Raise: €10M
 Valuation: €30M Pre-Money  Valuation: €22M Pre-Money
 Liq Pref: 1X, Participating  Liq Pref: 1X
 You sold 25%?  You sold 31.25%?
 €100M Exit  €100M Exit
 VC return: €32.5M  VC return: €31.25M or 31.25%
 You sold 32.5%  So what’s the “effective” Pre-Money
 So what’s the “effective” Pre-Money » €10M / .3125 = €32.00M post
» €10M / .3250 = €30.76M post
 Effective Pre-Money: €20.76M  Effective Pre-Money: €22.00M
 €50M Exit, “effective” pre is €15M  €50M Exit, “effective” pre is €22M
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20. Agenda
 Who We Are
 What growth investors look for
 What you should look for in a growth investor
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21. WHAT SHOULD YOU LOOK FOR?
1. Trust
2. Remember airplane test? …can you hang with these people?
3. Remember elevator test? …..do they really get it?
4. Enthusiastic supporter
5. Knowledgeable
6. Balance of operating and investing experience
7. Relevant network
8. Relevant board experience
9. A cool hand in good times & bad times…reference this
10. Ability to shape or help with exit at right time
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