Lucerne, October 16, 2003

1
Whats happening in the world of Venture Capital?

• Lucerne, October 16, 2003

2
Purpose of this presentation

• Background information
• Give our view on the present market
• Implications for entrepreneurs

3
VIs mission

• We support the conversion of technology-based
  ideas into marketable products and services with
  significant growth potential, with the ultimate
  goal of creating first-class companies.
• We invest in seed and early stage. We tend to
  invest chf1-2m in a first round, keeping
  aside significant reserves for following rounds
• We have a long term commitment (evergreen
  fund)
• We contribute with management know-how
  (entrepreneurial background) and networks
  (investors and professional contacts)

4
Strong shareholders base
Shareholders
Strategic Partners
Management Company
Zug, CH CHF 101 m January 2001
partners
ventureincubator
Start-upcompanies
5
Investment focus
Clear geographical focus
Wide sector coverage
Life Sciences MedicalTechnologies
IT Communication Technologies
Automation Micro-technologies
6
Used to be true in good old times (late 90s)

• Company creation with 100k. Founders and FF
  are shareholders
• lt6 months after that, business angels pay for
  some new shares for 100s of kCHF at a value
  of CHF2-5m
• lt6months after that, first VC steps in with
  CHF1-2 for 10-20 of equity
• etc...
• Sometimes all the shareholders ended up being
  lucky and sold at significant premiums to
  industrial buyers or even went for IPOs
• Sometimes industrial partners ended up
  snapping these companies for little money
• Sometimes some other persons ended up making
  good deals

7
Horror stories of of companies created in the
early 2000s

• Same as before for the beginning of the story,
  but
• 24 months after creation, no cash left, only
  selected investors interested, down-round
  organized at the expense of all historical
  shareholders. Often private investors stepping
  in again.
• In other words lots of cries. Only the best
  companies survive. Many bankruptcies and
  liquidations.
• Conflict of interest between historical
  shareholders and management are exacerbated.
• Only investors with long term view and deep
  pockets might end-up having healthy
  portfolios.
• Management negotiates decent deals for
  themselves since they are essential for the
  future of the companies.

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Back to a healthy situation?

• Founders create their company with limited
  cash, but attract experienced talents. The
  company is ready to mature fast.
• Once the business model is in place, the first
  round of investors come into the company.
  Ideally some smart money together with deep
  pockets to follow over time. Small investment
  to see.
• This shareholders group is ready to support
  the company even in rough times as long as
  the end goal is still in sight and reachable
  with reasonable means.
• New investors may be attracted at a later
  stage, depending on the actual cash needs of
  the company. Will not happen at a huge
  premium towards initial investors. Exceptions
  are always possible!
• In case of successful trade sale / IPO,
  founders will make a lot of , since they
  will have significant options to compensate for
  dilution

9
Implications for entrepreneurs

• Think about your company being at the center
  of a web
• Combination of experienced management and
  technical skills
• Value added investors (could very well be
  privates who have been successful in that
  business)
• Deep pocket investors who can follow over time
• In some cases, industrial partners can be very
  useful
• Try to avoid being obsessed by valuation and
  deal conditions. You will end up making
  if you add value to the company. Also, your
  company will go through many rounds before being
  sold!
• Plan ahead it is most likely that you will
  end up spending 2x more and will take 2 years
  more to reach break even. Will your planned
  setup allow for that?

10
Thanks and all the best for your ventures!
Alain Nicod VI Partners AG Metallstrasse
6 CH-6300 Zug Switzerland Phone [phone]
00 Fax [phone] Homepage
www.vipartners.ch Contact alain_at_vipartners.ch