Aegis Capital Group Working with a CAPCO Fund

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Aegis Capital GroupWorking with a CAPCO Fund

• Aruna Viswanathan, Principal
• May 18, 2006

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ABOUT AEGIS

• Aegis Capital Group is an investment firm
  managing private equity and venture capital funds
  focused on U.S. small businesses
• Aegis Texas Venture Fund is a CAPCO fund that
  focuses on early to mid-stage venture capital
  within Texas
• 250,000 to 3,000,000 through Mezzanine Loans
  and Equity Participation in Early Stage businesses

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BACKGROUND ON CAPCO FUNDS

• Several states have implemented Certified Capital
  Company (CAPCO) programs
• Texas implemented the new CAPCO program in 2005
• Funded by Insurance Premium Tax Credits
• Purpose
• to encourage and assist in the creation,
  development, and expansion of Texas qualified
  businesses,
• to expand employment opportunities in Texas,
• to target viable small business enterprises which
  traditionally have had difficulty in attracting
  institutional venture capital
• Other than unique funding, team takes a typical
  VC Firm approach

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AEGIS INVESTMENT CRITERIA

• Open to almost any type of business
• Targeted industries
• Internet, e-commerce
• Communications
• Computer Software
• Additional industries
• Select Healthcare and Biotech
• Business Services
• Distribution and Manufacturing
• Boring deals are fine!

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AEGIS INVESTMENT CRITERIA

• Location Constraints
• Headquartered within Texas or willing to move
  headquarters to Texas
• Principal business operations in Texas or to be
  relocated to Texas
• Potential preference given to businesses located
  within Strategic Investment Areas (i.e. low
  income areas and business development zones)
• Employee Constraints
• Less than 100 employees, At least 80 of
  employees reside in Texas
• At least 80 of payroll is paid to Texas
  residents
• Minimum investment period 2 years

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WHAT WE DONT INVEST IN

• Retail
• Real estate development
• Financial services (banking, insurance, lending),
  and
• Professional services (accounting, legal,
  medical)

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ATTRACTIVE CHARACTERISTICS

• Holy Grail High growth, near term cash flow
  potential
• Company is near an inflection point
• Near final product development (not beta!)
• Ramp up of sales
• Visibility to new customer adoption
• Financials
• Visibility to positive cash flow (can you service
  debt?)
• Still early form financing (instruments can be
  potentially structured to delay interest and
  principal payments)
• Prior Funding?
• Management team, angels, FFF
• Real skin in the game
• Bootstrapped companies

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SAMPLE PORTFOLIO COMPANIES

• The Business Supply Company ("BizSupplies") has
  created a unique technology platform and business
  model that exploits the supply chain of the
  multi-billion office products industry.
  www.bizsupplies.com
• Bynari is a Linux messaging company that offers
  server solutions that scale from Intel platforms
  to IBM mainframes, providing world-class
  reliability for many thousands of users.
  www.bynari.net
• Commerciant is a leading producer of mobile check
  processing and mobile credit card processing
  devices. www.commerciant.com
• UnwiredBuyer develops and delivers real-time,
  customized e-commerce services to mobile phones,
  using Internet Protocol over Voice or "IPoV(tm)"
  based technology. www.unwiredbuyer.com

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CASE STUDY with an HTC Client

• Software company Provides automated image
  analysis and 3D modeling solutions services for
  science/ industry.
• Revenues Customers include NASA, Rice
  University, Hewlett Packard and Seagate
  Technologies. www.smartimtech.com
• Nascent / new market - Nanotechnology
• Software and business services mix
• Texas-based HQ and jobs
• Debt with warrants
• Bootstrapped company with visibility to debt
• service

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OTHER TEXAS CAPCOS

• Often a cooperative investment process
• Aegis may syndicate or participate in syndicates
  with other CAPCOs, non-CAPCO VCs, angels, etc.
• Accent Texas Fund I, LP
• Enhanced Capital Texas Fund LP
• Lonestar CAPCO Fund, LLC
• Republic Holdings Texas LP
• Stonhenge Capital Fund Texas LP
• Texas ACP I, LP
• Waveland NCP Texas Ventures, LP
• Whitecap Texas Opportunity Fund, LP
• Wilshire Texas Partners I, LLC

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HOW DO YOU APPLY

• Have an executive summary (2 pages) and business
  overview completed (PPT or business plan)
• Email to any of the principals
• Scott Crist
• Kevin Dragan
• Aruna Viswanathan
• Email addresses available at www.aegiscapitalgroup
  .com
• If you send something in.be prepared for a
  meeting

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CONTACT US

• HoustonTexas Venture Fund1800 West Loop South,
  Suite 475Houston, TX 77027713.599.1300
• www.aegiscapitalgroup.com