A Market Overview and the Industrial Models behind Ariadne’s Investments

1. A Market Overview and the Industrial Models behind Ariadne’s Investments Presented by Julie Meyer November 2010

2. What I’m Going to Talk About • Who is Ariadne Capital? • Key Thinkers Who Are Framing This Next Age • Technology and Financing Trends • Predictions for 2015 • Entrepreneur Country

3. About Ariadne Capital Founded in London in December 2000 to build the global leading firms of the 21st century London-based investment and advisory firm has spun out a fund management business and Entrepreneur Country Entrepreneurs Backing Entrepreneurs The Anti-VC VC Backed by 57 leading global entrepreneurs including the founders of BetFair, Sporting Bet, Easynet, WorldPay, SES Astra and Hotmail Strong track record helping corporates to identify and transact with game-changing start-ups: Ariadne Capital has backed winners:

4. What Trends Did We Spot Early in our/Ariadne’s First Ten Years? The Consumerisation of Technology through Skype [free calls on the web] – August 2003 Peer to Peer Activity Enabled by Web through BeTheDealer/Casino Village [world’s first Peer to Peer Gaming] in December 2001 Pay Per Click through Espotting [first PPC business model] in 2002 Mobile Banking through Monitise – in November 2004 “Voice” as a new category of communications was carrier ready and ready to be delivered as a managed service through SpinVox– in 2006

5. Consumerisation of Technology • Ariadne advised Skype on business development activity in 2003 and 2004 • The consumer's adoption of services is driving everything, reversing how new products and services used to come to market through the enterprise.

6. How Will the Digital World Change Our Lives in the Next Ten Years? • Individual Capitalism, Entrepreneurship and the Internet are activating the citizenry in a way that “Big Business” never could • Hotmail in the 1990’s started the de-coupling of the individual to any one device • Expectations of on-demand information will increase due to Twitter • There is a profound “Network-orientation” to business, and “Ecosystem Economics” will prevail

7. Individual Capitalism is the Force for the 21st Century “Capitalism was about empowered authority which didn’t necessarily activate the citizenry; the Internet stands that on its head, and shifts the power to the Individual – making Individual Capitalism the force of the 21st Century”.

8. Clay ShirkyHow ‘Cognitive Surplus’ will change the world • The Great Spare Time Revolution • Television Time Has Been Redirected • The Joy of Doing Something For Its Own Stake • Wikipedia – 100 million hours of human activity

9. Raymond Kurzweil The Singularity is Near • Technology operates exponentially while our minds operate linearly • At a certain point, we have to leverage technology or artificial intelligence to continue to model or predict the future

10. Carlotta Perez Theory of Technological Disruption and Adoption

11. Five Great Surges of Development in 240 Years

12. Technological Revolutions • 1999 - David wants to kill Goliath

13. The Economy & Social Institutions Respond • 2010 -David and Goliath collaborate

14. The Deal is Always Done at the Beginning The Funding is not the Goal; the Positive Architecture is Chose your Financiers with Care Don’t confuse the 3 Levels of Power in a Firm: Shareholder Don’t share founder’s equity with lots of people Board CEO and FD at most from the management team Management Raise funding to achieve a specific milestone not for a time period Some Thoughts on Financing Well

15. There are 5 Stages of Company Development Concept Product Validation Scale Sustainability/Exit Establish Lean Operating Model from Day 1 Keep Fixed Costs very Low Technology is standardised and componentised in 2010 Applications are moving to the cloud Free market of opensource Creating a Positive Architecture

16. An Idea is a Marble

17. A Company is a Basketball

18. The 5 stages of company growth - Concept • Funded by Friends and Family • £25 K to get up and running • Insight into a behaviour

19. The 5 stages of company growth - Product • Open Beta • Securing Feedback from Target Audience • Funded by Private Investors @ £500 K for ~ 33% of firm

20. The 5 stages of company growth – Business Model Validation • Building Market Traction and proving that people buy what you sell • Funded by early stage VC’s and private investors at £750 K to £1.5 million for 33% of the firm • B2B businesses are B2C2B businesses; prove market demand with consumer uptake, and then use channels to grow

21. The 5 stages of company growth – Scale • Series B and C round up to a fully funded business at ~£5 million • Company scales through Partnerships with carriers, media portals, retail chains etc

22. The 5 stages of company growth – Sustainability and/or Exit • Company becomes sustainable – either consolidates or gets consolidated • Cash flow positive business

23. Ecosystem Economics • Those companies who understand their role in their ecosystem and who are able to organize the business model for the ecosystem will win. • Ecosystem Economics means that everyone in "the transaction" has to win. • Technology is not the point; business model is the game-changer.

24. Google and Ecosystem Economics • Google says that they organise the world’s information • They actually organise the economics of the world’s information • I, as a consumer of their search, am not given any economic upside in the search transaction. • They have built a multi-billion pound business using – albeit anonymously – my personal data – aggregated with that of others, but releasing none of the economic value to me • Their biggest Achilles Heel is if someone in the search space where to cut a different set of economics for the consumer

25. How do you launch a global business? By making it in everybody’s interest for you to succeed

26. Mobile Money will be a massive market ‘‘ The number of mobile subscribers who use their phones for mobile banking will exceed 400m globally by 2013, according to a new in depth study by Juniper Research. This equates to double the number of users this year.  Juniper Research, July 2010 'The number of people using their mobile phones to make payments is set to grow from 70.2 million in 2009 to 108.6 million this year, a 54.5% rise.  Gartner, June 2010 'New types of SMS mobile banking alerts will help to treble the volume of mobile banking messages to almost 90 billion per annum by 2015, equating to one message every two days for every mobile banking user. Juniper Research, August 2010 ‘‘

27. Mobile Money ‘Wiring Diagram’: the Monitise network approach Cards Processor • Payments • Domestic • International Mobile TopUp Enabler • 3rd Party • Providers • Sharedealing • Insurance Mobile Operators • National • Services • Transit • Utility Use of standard Interfaces Shopping & Loyalty • Other eg • CRM • Database Core Banking Wealth Bank Platforms • Bank branded • Text and App • Differentiated, Segmented, Interactive Propositions • Account Management, Payment, Shopping • All customers (not just internet bankers) • In-built 2FA • Managed Service – Minimise internal IT effort • Leverage Existing Platforms & Outsource Mobile ‘hassles’ • Innovate propositions through outsourced 3rd Party Connectivity • Collaborative & global platform connectivity • Future-proofed

28. Monitise have a Global Footprint due to Ecosystem Economics Monitise Europe Monitise Americas Monitise Asia Pacific Monitise India • JV with FIS to tackle world’s largest consumer markets • Launched 2008 • Over 200 financial institutions signed up • Launched in 2006 • UK as flagship home market before international roll out • Significant customer growth in 2010 • >55% of UK retail banking market coverage • Available through all mobile networks • Recent JV formed with First Eastern • Showcase launch planned for Hong Kong as springboard into China • New JV formed with Visa Inc. Monitise Africa • Development underway supported by grant funding (Africa Enterprise Challenge Fund)

29. Monitise has enabled the banking world Not Disrupted It Global opportunity Global opportunity Global opportunity Global opportunity Banking & payments touch the lives of billions of consumers worldwide Blue chip business partners Blue chip business partners Blue chip business partners Blue chip business partners Adopted by major UK and other financial institutions Wide platform applicability Wide platform applicability Any phone, any network Via SMS, Java, Brew, Browser, iPhone, Blackberry, Android Broad range of services From balance enquiry to instant payment Account management, payments, mCommerce

30. Gaming Invades Our Life

31. The Smart Companies are Embracing Social • Social games have massive audiences • They help you acquire customers earlier, cheaper and faster while still monetising them • There are huge cross sell opportunities

32. Social Networks Fantasy Sports Online Games Television

33. Sportsbox • Swush.com develop, license and operate Fantasy Manager games • The largest company of its kind in Scandinavia • Current B2B distribution partners include: • Viasat, DR (Danish Broadcast Corp) • BT (2nd largest Danish tabloid) • Blich (Swiss newspaper) • TV2 Norway • Kurier (Austrian newpaper) • Creating a pan-European brand, Sportsbox, to provide media brands with: • immediate player liquidity, • greater virality and • greater sponsorship and revenue options • Platform offers football, cycling, Formula One, golf, ice hockey etc.

34. The Next Battleground • Can Google effectively challenge Facebook? • Is Google just about Utility – Search, Email and Video, or will they be able to build effective social technology?

35. Gaming has gone mainstream • Google has bought Slide (for $182m) and SocialDeck in the social gaming space in the last 2 months. • The Dena/ngMoco acquisition is rumoured to be at over $400m:  • Virtual Goods - a primary monetisation model for most social games - have increasingly overtaken advertising revenues, on the iPhone at least.

36. Gaming has gone mainstream • Micropayment Engines • Fortuno, Zong, Boku and Flexion, as well as established companies like PayPal, are all vying to enable micropayments on other mobile platforms, whatever your carrier. • Google recently paid $70m for Social Gold (Jambool) - micro-payments coupled with the ability to run virtual currency and goods trading in social games: • Betfair revolutionised traditional bookie-2-punter gambling by creating an online peer-2-peer 'social' gambling experience.

37. Mobile devices are more than phones – they are a new breed of interaction • The explosion of mobile tablet devices combined with their social interactivity are enabling a new user behaviour • Privacy in context (e.g. FourSquare and location) • Activating behaviour and friends across devices • Mobile wallet and micro transactions • Social platforms are embracing mobile as an extension of their ecosystem • Facebook, LinkedIn, MySpace strong mobile applications

38. What Is A Mobile Today? • Mobile is no longer simply ‘a cell phone’ but a portable, always on, IP device that happens to handle calls sometimes: Mobile is your wallet (Monitise, PayPal) Mobile is your diary (Outlook, iCal) Mobile is your contact list (iContact, Outlook) Mobile is your social network (Facebook, LinkedIn, Phone, SMS, email) Mobile is your entertainment on the move (video, music, games, social)

39. THEN SLOW LATENCY WALLED GARDEN MOBILE PLATFORMS CHARGES TOO HIGH DON’T DOWNLOAD So, What Has Changed Mobile? • NOW • SUPERFAST 3G, 4G, Wi-Fi • BROADBAND LIKE ACCESS • OPEN INTERNET • HTML5 STANDARDISATION • UNLIMITED DATA ACCESS • DOWNLOAD VIA APP STORES

40. Mobile Internet > Desktop Internet

41. Mobile Web Is Bigger Than App Stores • The mobile web is beyond apps • The walled garden has fallen • Source: Taptu, February 2010 65%Mobile web 29% iPhone apps 5% Android apps <1% Blackberry apps <1% Nokia apps

42. Transition From App Store To Web Entertainment >>> Services App Store Mobile Web Source: Taptu, February 2010

43. The World of the Entrepreneur • Nick Ogden, the founder of WorldPay and VoiceCommerce Group • most proud of: "Never missing payroll" • As Candace Johnson, the founder of SES Astra always says • "Never give up, never accept no, and never ever go away – even when they want you to"

44. Follow the Entrepreneur • He/she has the market insight • He/she is the value creator • He/she is the hero

45. Where is Entrepreneur Country? It is where Breakthrough Moments Triumph Over Near Death Experiences....

46. What is Entrepreneur Country? Entrepreneur Country is a community of entrepreneurs at www.entrepreneurcountry.net Fortnightly Digest News, Views and Issues from Entrepreneur Country Biannual Forum Upcoming Forum scheduled in Feb 2011 Online www.entrepreneurcountry.net

47. Predictions for the European Entrepreneurial Community by 2015 • Europe will have its own Mark Zuckerberg • ‘Entrepreneurs Backing Entrepreneurs’ will become the dominant model for the financing of entrepreneurship • The Supernova Exits of the new Europe will spread like a rash; the majority of under 30’s will not want to work for anyone else

48. Predictions for the European Entrepreneurial Community by 2015 • Economics will be in the driver seat, and Politics will recognise it is “in service” to Economic Forces • Ecosystem Economics will be the new Industrial Model; • Who owns the Economic Value of your personal information will be the key battleground • The Business of Doing Good will be established as a Business; Entrepreneurs will lead the way

49. Thank you If you would like this presentation or to get in contact, send me an email on julie@ariadnecapital.com www.ariadnecapital.com