WHITE LEE LLP Soup to Nuts 2001

WHITE & LEE LLP Soup to Nuts 2001 A Brave New World January 20, 2001 Bruce W. Lichorowic Bruce Lichorowic 1

Soup to Nuts 2001 PACKAGING THE COMPANY AND PREPARING FOR FUNDING What can you expect? Bruce W. Lichorowic Bruce Lichorowic 2

Background…BWL n Focus u n Issues u n Funding, operational, marketing Partners u n Solutions for troubled companies VC’s, Angels, Board, Entrepreneur 20+ years u Turnarounds 3

Funding Environment “So what’s going on? ” n 210 Start-Ups…shut down* u $1. 5 B in venture capital u 60% in Q 4, ’ 01 n Dot com lay-offs…~15, 000 n Investors are nervous * Reuters, 1/17/01 Bruce Lichorowic 4

Smart $ Became Dumb $… n Before Mega-funds u VC’s had time to work with their companies u Be active board members u Make strategic introductions u Contribute to the success Bruce Lichorowic 5

Smart $ Became Dumb $… n After Mega-Funds u VC Partner must invest more $ u Carry more Deals u Sit on more Boards u Spend less time with their Companies Bruce Lichorowic 6

We Live in Interesting Times “If your looking for $” n VC’s Activity u 1 year ago…. 4 -5 financings a week u Today… ~4 -5 financings a month u Taking Care…Current Portfolio n Funds being returned…LLP’s n Institutional Investors…On Hold n Possibility of economic recession n Reminders of early 80’s Bruce Lichorowic 7

What does this all mean? “B 2 B” n Back 2 Basics u Strong…“addressable” market u Strong Technology…”secret sauce” u Strong Team…no OJT u Business model…that makes sense l n Strong business propositon! Rethink Quickly u Bruce Lichorowic Don’t throw everything out! 8

Preparing for Funding…Today 1. Market… 1. 2. Technology u 3. Does it work? Team u 4. Identified the Problem your Fixing ID Right People Business Model u Bruce Lichorowic Holds Water… 9

Early Stages Financing n Need to Identify your Stage 1. Seed 2. Series A 3. Series B 4. Series C Bruce Lichorowic 10

Seed Round 0 -6 months n Market/Marketing u n Technology u n Founders Business Model/Plan u n Whitepaper Team u n Markets Identified, Web Site One pager Executive Summary Fundraising u Bruce Lichorowic Founder/Angels 11

Rethink… Technology 1 0 1 1 00 11 1 0 1 0 0 1 Internet Personalization Technique Dynamic segmentation of on-line users n n n Adaptive response to online users Cooperative Multi-Agent Search “Secret Sauce”… Core Technology Underlying technology behind the products Meet customers needs and applications Bruce Lichorowic 12

Series A 6 -18 months n Market/Marketing u Analyst Approval l n Technology u n VP Engineering, Proof of Concept, Alpha Team u n Development, Marketing Business Model/Plan u Basic Executive Plan l n VP Marketing, Core Message, PR Launch VP Business Development Fundraising u Bruce Lichorowic Lead VC with Existing Angels 13

Rethink… Cash Required Breakeven TOTAL CASH REQUIRED BREAKEVEN Bruce Lichorowic 14

Series B 12 -24 months n Market/Marketing u n Technology u n Beta or FCS Team u n Customer Approval CEO, VP Sales, Marketing Professionals Business Model/Plan u Detail Plan l n Strategic Partnerships Fundraising u Bruce Lichorowic Syndicate of Investors, Lead VC 15

Rethink… Product Roadmap Q 2 2001 Product #1 1. 0 Q 3 2001 Q 4 2001 PRO 1. 0 1 H 2002 2. 0 2 H 2002 PRO 2. 0 Product #2 PRO 1. 0 PRO 2. 0 Product #3 1. 0 Bruce Lichorowic 2. 0 16

Series C 18 -24 months n Market/Marketing u n Technology u n CFO, Audit Firm Business Model/Plan u n FCS with milestone releases Team u n Key Message…”why are customers buying? ” Polished Presentation, Focus Plan, Reference Sites Fundraising u u Bruce Lichorowic Syndicate Investors with VC Lead or Mezzanine if IPO is imminent 17

Rethink… Revenue Sources n n n Licenses Hosting Professional Services Bruce Lichorowic 18

Rethink… Annual Cash Required Bruce Lichorowic 19

Rethink… Cash Detail Bruce Lichorowic 20

Rethink… Marketing Strategy n n n n No Hat-Tricks True sustainable pipeline No big splash Don’t announce before the product is ready Build on yourself Marketing should grow with the company Keep in Balance u Bruce Lichorowic Marketing vs Engineering 21

Rethink…Channel Strategy Channels • Seed Accounts • Early Adopters • Major Accounts Direct Sales Indirect Sales Integrators Business Development Bruce Lichorowic Market Segments • Mid-Market • Vertical Markets Technology Integrators Marketing Partners 22

Rethink…Team n Clear roles and responsibilities n General management experience n Morph… functional skills President Sales Bruce Lichorowic Marketing Product/Service Development Operations Finance & Administration 23

Top 10…Must Haves 1. One Page Business Brief 2. Value Proposition… 10 words 3. Stay 6 -9 months ahead…burn rate 4. Hit your established milestones 5. Get a reference customer site…ASAP 6. Calculate to the month…breakeven 7. Accurately describe…use of funds 8. Hire a respectable management team 9. Bruce Lichorowic Business Integrity* 24

Top 10…Personal Checklist 1. Don’t fall in love with the product or the company 2. Funding is a full-time job 3. Don’t assume VC’s are going to Help 4. Constantly rethink your Plan 5. Watch out…quick fix consultants 6. Check your ego at the door 7. Plan on 3 near-death experiences 8. Always tell yourself the truth 9. Know where the “Exits” are 10. Trust your instincts Bruce Lichorowic 25

Bruce W. Lichorowic Specialist for Distressed Companies Bruce Lichorowic 26