Michael Gale Managing Director, Asia Pacific Gramercy Venture Advisors, Inc'

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• Michael GaleManaging Director, Asia
  PacificGramercy Venture Advisors, Inc.

Playford Capital and SA Enterprise Workshop
breakfast seminar Adelaide - Wed, 18 June 2003
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The Enterprise Workshop

• 1986?
• Team building
• Planning
• Business Model

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Leveraging US Companies

• PC Resellerships
• Distribution
• Macromedia
• Australian software on the side

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Double Impact

• 1993-1996
• Initial focus on investing in Australian
  companies aim to take to US
• Three multimedia companies, dental software
  company, training company, scientific
  instruments, switchless telco reseller

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What we Learnt

• Multimedia companies proved that business model
  is everything and that even though a lot of very
  smart people bet a lot of money on a sector it
  does not prove the business model
• Dotcom, 3G, biotech - bubbles
• But there are also a lot of gems Broderbund,
  Learning Company, Ask Jeeves, Amazon
• Business models need to be very robust
• Time spent up front in validation is a fantastic
  investment
• If it does not get solid customer validation
  abandon it

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What we Learnt cont.

• Dental software company taught us about
  stakeholder consistency and self destructive
  tendencies
• Training company taught us about the need for
  scale versus lifestyle businesses
• Scientific company taught us the true value of
  innovation and re-inforced business model issues
• Switchless reseller demonstrated the powerful
  intersection of business model and a good team

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But above all

• People, people, people
• Being honest realistic about capability
• Navigating obligation and baggage
• Evaluating experience
• Being smart about international
• Generalists versus specialists

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1996-2001

• US start-ups go into overdrive
• Capital onslaught
• Double Impact worked with 100 early stage
  companies
• Majority failed
• All the same lessons but amplified
• Allow for failure

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Classic US cycle

• Entrepreneur spins out of existing success story
• Friends, Family, Fools Credit Cards
• Angels usually personal network former
  employers etc
• Seed investors organized angels, small funds
• Early stage venture capital funds
• Growth stage venture capital funds
• Mezzanine funding (investment banks)
• Exit IPO or trade sale

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Australian comparison

• Entrepreneur spins out of existing success story
• Less existing success stories
• Friends, Family, Fools Credit Cards
• Dramatically less personal wealth and credit,
  less upside
• Angels Seed investors
• Much fewer often from property and other
  conservative sectors
• Early stage venture capital funds
• almost non existent
• Growth stage venture capital funds
• - Over concentration of resources, not enough
  deals
• Mezzanine funding
• - There if needed
• Exit IPO or trade sale
• - Trade buyers off-shore, local market very
  small cap, easy to languish

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Gramercy

• 2001
• US centric deals, later stage or VC driven
• VC activity firming
• Angels returning
• Australian practice focused on cross-over deals

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Cross-over focus

• Early stage companies with compelling technology,
  product business model
• Venture backed companies that are proven in
  home market
• Successful global businesses with wrong structure

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Compelling Early stage companies

• Have to have global application
• Must be a niche that makes sense from Australia
• Very strong business model validation
• Ability to validate in US
• All the right stakeholders

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Venture backed companies

• Real revenue
• Profitable at operating level
• Translatable business model
• Referenceable customers that translate
• Positive VC expectations and commitment
• Management transition acceptable

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Restructures

• Often listed and languishing truly undervalued
• Global success
• Obvious ma strategy
• No need to herd cats

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Thank You
Michael GaleGramercy Venture Advisors,
Inc.mjgale_at_gramercyventures.com