Presentation at New Zealand Venture Capital Association 2008 Annual Conference

1. 7th Annual NZVCA Venture Capital &
Private Equity Conference
Joe Platnick – Director, Pasadena Angels
6 November 2008
© 2008 Joe Platnick / Pasadena Angels Inc.

2. US Climate – The Downside
• Understand American mentality
- Expect only one crash per lifetime
- Blinded by speed and severity of current downturn
- Reaction based more on emotion than pragmatism and review of history
• Likely that much of the noise and current amplification linked
to US election cycle
• Hypercritical of overall market, industry sectors and
companies
• 2001 – Internet, Telecoms and Travel not viable businesses
• 2008 – Financial services getting tarnished, yet some good
companies in the mix
© 2008 Joe Platnick / Pasadena Angels Inc.

3. US Climate - The Positive
• Had more crises than we care to remember and survived
- Japanese banks
- Emerging markets
- US S&L crisis – 10 years and 2000 banks out of business
- 2001-02 market collapse
• 2002-07: Internet #2 & Travel and Hospitality #3
• We understand the challenges and are addressing them -
when action taken, markets quickly improved
• Turnaround plan being implemented almost as fast as
markets collapsed
• Most of 2005-07 sub-prime already written off; may take
only another six months to write off remaining loans
• PE is here for the long haul
© 2008 Joe Platnick / Pasadena Angels Inc.

4. Key Areas to Focus On
• Stay Stable, Steady and Rational
• Be pragmatic & understand the rules of the game have
changed
• Consistency and professionalism matter a lot & especially
when times are tough
• Entrepreneurs will remember this and it will positively or
negatively impact long-term relationships & good will
• History in US of good entrepreneurs not working with
investors based on behavior in past market downturns
© 2008 Joe Platnick / Pasadena Angels Inc.

5. What this Means for Entrepreneurs/Investors
• Financing process will take longer
• Bar raised (VC Darwinism) and only the best will get funded
and survive
• Valuations will be lower
- Investors nervous and more conservative
- Comparable valuations have fallen significantly
- Impact on results & chance of revenue / cash flow shortfall
• Beware of the US bottom feeders
• Adapt quickly
• Live lean and remember Cash is King
• Better to be "Last Man Standing" in your market
• May need longer runway in NZ and should consider self-
funded alternatives
© 2008 Joe Platnick / Pasadena Angels Inc.

6. What US Investors Look For
• A great story to tell (Not to be confused with story telling)
• Returns are key
• Strong IP
• Strong management team – Presently or in the future
• Prototype or proof of concept with customer validation
• Comprehensive understanding of target customer(s) and
local sales process
• The ‘Plan’ behind the Plan
• Low burn rate for long runway
• Short path to profitability and break even
• Scalable business
• Lucrative exit strategy
• Company, assets & CEO must be domiciled in US
© 2008 Joe Platnick / Pasadena Angels Inc.

7. Working with VC Firms
• Understand economics of VC fund
• Recognize what they can and can’t do
• What do you want from the VC
• Are they open minded about working with foreign
companies (not all of them are)
• Angel groups and incubators can help initiate contacts
© 2008 Joe Platnick / Pasadena Angels Inc.

8. US Angel Overview
• Accustomed to providing both human and financial capital
• Confirm that group is open minded about foreign companies
• Make sure it has appropriate market/domain focus
• Should be located in intellectual/market hub
• Focus on making the best initial impression & capture
attention immediately with high-impact story
• Put together a compelling “summary of the summary”
• Get a champion within the group
• Start small, achieve one success and use that as
springboard
• Personal introductions are more effective
© 2008 Joe Platnick / Pasadena Angels Inc.

9. Transitional Challenges
• US angels & VCs driven by returns
• Need to think Big ($50-100m)
• Recognize that Americans are great marketers
• US market requires greater emphasis (money, personnel,
research, etc.) on sales and marketing
• Have sufficient horsepower or look for ways to get it
• Understand local customer and validate that product or
innovation is a good fit
• Don’t underestimate competition – US market frequently
has more
• Position company for scalability – organization, technology
platform, etc.
© 2008 Joe Platnick / Pasadena Angels Inc.

10. Transitional Challenges (Con’t)
• Don’t assume that product will meet the needs of US
customers based on local success
• Prior to initial development, research US product
requirements
• Transition to US will probably require more money than
you’ve forecasted
- Product development
- Company Formation
- Sales & Marketing
- Customer uptake
• Networks are key
© 2008 Joe Platnick / Pasadena Angels Inc.

11. Alternatives
• If initial efforts are not successful, consider other self-funded
alternatives
- Indirect channels – Reseller, OEM, distributor
- Sales/Support subsidiary
- Serve markets remotely
- Build critical mass and then return to US
© 2008 Joe Platnick / Pasadena Angels Inc.

12. Deal Syndication - Benefits
• Increased resources to achieve minimum close
• Access to more and larger deals
• More favorable terms
• VC’s interest aligned with Angels’
• Lower risk
• Less dilution
• More human capital
• Shorter time to exit
© 2008 Joe Platnick / Pasadena Angels Inc.

13. Deal Syndication - Issues
• Deals already negotiated by another entity
• Short time to closing
• Deal "champion" heavily involved with the company or
acts as a go-between
• Terms not equal for all investors
• Less control over company & investment
© 2008 Joe Platnick / Pasadena Angels Inc.

14. Resources
Angel Capital Association
www.AngelCapitalAssociation.org
© 2008 Joe Platnick / Pasadena Angels Inc.

15. Contact
Pasadena Angels Website
www.PasadenaAngels.com
Pasadena Angels Blog
www.AskTheAngelsBlog.com
Joe Platnick
jplatnick@pasadenaangels.com
© 2008 Joe Platnick / Pasadena Angels Inc.