This document provides an overview of entrepreneurship and venture capital in Spain. It discusses the historical barriers to entrepreneurship in Spain, including a lack of recognition and risk-taking culture. Prior to 2000, private funding was focused on private equity with few specialized venture funds. Key drivers of change from 2000-2010 included the development of a skilled professional base, lower infrastructure costs, institutional support for entrepreneurs, and the emergence of specialized venture capital funds and success stories. The current economic environment presents challenges, but opportunities remain for focusing on growth, cost control, and adapting strategies for potential exits. The document also profiles Adara Ventures, an $80 million venture capital fund focused on information and communications technology investments in Spain and Spanish companies with a

1. Entrepreneurship and Venture Capital in Spain NicoGoulet Adara Venture Partners, Madrid, Spain March 1, 2010 European Entrepreneurship &Innovation Program School of Engineering

2. Historical perspective on Venture activities in Spain Drivers of change: 2000-2010 Current environment & implications Adara Ventures March 2010 2 OVERVIEW

3. The entrepreneurial eco-system 3 FRAMEWORK Entrepreneurs & Innovation Venture Funding & Support Success Stories March 2010

4. A HISTORICAL PERSPECTIVE

5. 5 HISTORICAL PERSPECTIVE Barriers to entrepreneurship Recognition Culture of Risk & Reward Support Funding Opportunity Cost March 2010

7. Some public funding efforts

8. No major successes to point to

9. Practically no specialized venture funds

10. Very difficult for entrepreneurs to find financial support beyond the Friends and Family stageMarch 2010

11. 7 HISTORICAL PERSPECTIVE Situation at the turn of the century M March 2010

12. DRIVERS OF CHANGE 2000-2010

13. 9 DRIVERS OF CHANGE Skilled professional base March 2010

14. 10 DRIVERS OF CHANGE Low cost base March 2010

15. 11 DRIVERS OF CHANGE Infrastructure support March 2010

16. 12 DRIVERS OF CHANGE Strong local base of corporate technology “consumers” March 2010

17. 13 DRIVERS OF CHANGE Institutionalized support March 2010

19. Lower infrastructure cost base

20. Commercial (and Exit) possibilities pan-European/Global

22. Strategic support

23. Development support

24. NetworkingMarch 2010

26. High quality professionals

27. Universities with good programs, including technological/technical

28. High patent productivity for Madrid, Barcelona and Basque regions

29. R&D: low cost and globally competitive

30. High quality of life makes it easier to attract outside talent

31. Excellence in software development processes

32. Lower infrastructure cost base

33. Regions are competing to attract investment and companies

34. Effective aid and subsidy programs to support growth and development (CDTI, SEPIDES, PROFIT, …)

35. Technology parks have grown from 6 to 17 over the past years, providing significant start-up support

36. Combined revenue for Spain’s tech parks stands at €5.5b

37. R&D employment at 9000

38. Commercial and Exit possibilities are now pan-European

39. Harmonization enhances the potential for acquisition of regional companies by major European players

40. The European market offers significant growth opportunities to Spain based companies

41. Strong political desire to support innovation and entrepreneurship

42. Strong fiscal incentives to develop

43. Many development and subsidy programs available to fund R&D programsMarch 2010

44. 16 DRIVERS OF CHANGE Getting entrepreneurs what they need to thrive Capital Including follow-on support and commitment - Configuring subsequent funding rounds Investor management Strategic support Critical one time decisions - Product launch configurations - Strategic partnerships - Mergers & acquisitions Development support Commercial development - Finding and engaging blue chip customers Business development - Structuring product development deals - Distribution or project implementation agreements Team - Attracting and structuring the involvement of talented people Networking Relationships with larger VC’s (local and international) Links to blue chip companies in core and adjacent sectors Access to international peer companies March 2010

45. 17 DRIVERS OF CHANGE Emergence of a SW development cluster March 2010

46. 18 DRIVERS OF CHANGE Emergence of specialized Venture Capital fund managers March 2010

47. 19 DRIVERS OF CHANGE Participation of foreign funds in local investments March 2010

48. 20 DRIVERS OF CHANGE Emergence of significant success stories March 2010

49. CURRENT ENVIRONMENT AND IMPLICATIONS

50. 22 CURRENT ENVIRONMENT AND IMPLICATIONS Context Recession, budget cuts, investment plans curtailed Credit crunch Difficulty in raising new funds Very difficult business environment, particularly for smaller, entrepreneurial companies March 2010

52. Continue to pursue healthy growth targets, focusing on high growth and diversified markets

53. Cost control a top priority, constantly reviewing performance and risk/benefit

54. Pursue funding rounds wherever conditions are favorable, but minimize dependence on external sources

55. Adapt your strategy to potential exit scenariosMarch 2010

56. 24 CURRENT ENVIRONMENT AND IMPLICATIONS VC’s perspective Focus on strong growth opportunities and diversified markets No debt, only equity: Manage funding and fundability (Even) longer exit horizon People, people, people… Cash, cash, cash… March 2010

57. ADARA VENTURES

58. 26 ADARA VENTURES Apply traditional VC model to the Spanish eco-system $80Mn first time fund Institutional base of investors Focused on ICT Invest in Spain or Spain related companies, with global footprint Seek to leverage experience and networks to drive growth in portfolio companies 13 investments in total: Software services and platforms: 5 investments Mobile and On-Line services: 3 investments Components and semi-conductors: 3 investments Telecoms equipment: 1 investment 8 investments part of strong syndicates Amadeus (2x), Accel, TVM, GIMV, Active Capital Partners, Baytech, Caja Navarra, La Caixa March 2010

59. ADARA VENTURES Live Portfolio Exits Write-offs 27 As of February 2010 March 2010

60. Growth track ADARA VENTURES Active portfolio revenue Portfolio revenue/employee 28 March 2010

61. 29 ADARA VENTURES Our values Spirit of the Firm An entrepreneurial spirit underlies the philosophy of our firm. Creativity, boldness and commitment are critical to everything we do. Our investors’ interests always come first; then the interest of the entrepreneurs we support. By serving investors and entrepreneurs well, our own success will follow. We measure success through tangible results and performance. Integrity, honesty and fairness guide the way we do business. Our Work Our core activities are principal investing and company-building. We take pride in the professional quality and high standards of our work. We would rather be best than biggest. We manage our work and make decisions in an efficient and pragmatic manner. We strive to anticipate the changing industry environments in which we specialize. We seek to remain innovative and regularly challenge our assumptions. People The value of our firm lies in our people. Our main assets are our reputations, knowledge, and relationships. We believe that teamwork, supported by individual initiative, is the best way to obtain outstanding results. We strive to recognize and harness talent, with a preference for diversity in such talent. We look to develop long-term, win-win collaborative and trusting relationships with our stakeholders. March 2010

62. Thank You