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Aug, 2009

Kickstart Seed Fund: igniting innovation Kickstart Seed fund Overview Gavin Christensen, Managing Director, Kickstart Seed Fund. Aug, 2009. Agenda. High-Level Overview Kickstart Seed Fund The Opportunity Fund Strategy Fund Structure. High-level concept. 3.

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Aug, 2009

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  1. Kickstart Seed Fund:igniting innovationKickstart Seed fundOverviewGavin Christensen, Managing Director, Kickstart Seed Fund Aug, 2009

  2. Agenda • High-Level Overview • Kickstart Seed Fund • The Opportunity • Fund Strategy • Fund Structure

  3. High-level concept 3 • The Mountain West is a innovative and entrepreneurial region with tremendous potential • The Kickstart Seed Fund is a unique seed fund that can help catalyze entrepreneurship in the region through: • Aligning key ecosystem participants • Supplying seed capital • Providing investment leadership • Educating all participants • Facilitating access to follow-on capital and strategic partnerships • By accomplishing this, Kickstart Seed Fund will create outsized strategic and financial rewards for all participants

  4. vSpring Overview Strong Partner is critical to success Key role in community Trusted agent Long history of exits Third Fund Manages front and back end Economics don’t work well Venture Capital is sitting at Table

  5. Traditional Funding Continuum ANGELS, FOUNDERS & SEED FUNDS VENTURE CAPITAL – GROWTH EQUITY PE - PUBLIC MARKETS OPPORTUNITY DEVELOPMENT SEED/START-UP FUNDING DEVELOPMENT FUNDING EXPANSION FUNDING CONTINUED GROWTH Sweat $500K-5M $5M-20M >$20M $50K-500K MENTORING NEEDS DECREASE VALUATIONS INCREASE BUSINESS RISKS DECREASE

  6. Opportunity

  7. Rocky Mountain Innovation • Regional innovation clusters in Management Software, Internet and Communications, and Life Sciences • 15,000 technology companies,1 300 public technology companies2 • Over $16B in total R&D spending3 • Well-funded research universities in region Source: 1. US Economic Census, 2002 2. Credit Risk Monitor Website (www.crmz.com) 3. AAAS Survey, 2005 (www.aaas.com)

  8. Startup creation from universities Since 2004, schools in UT, AZ and NM are creating startups at record levels Startups created from licensed university technology by year Source: AUTM

  9. Top start up creation universities In 2006, University of Utah was 2rd in the nation in startups created from licensed technology Startups created from licensed university technology Source: AUTM

  10. The Case for University Spin-Outs • 1. More likely to have large outcomes • Go public at 114x the rate of other startups 2. Less likely to fail Rate of Going Public Failure Rate .07% Source: National Council Of Entrepreneurial Tech Transfer

  11. History of success for University spinouts…

  12. Kickstart Seed Fund R&D relationships 15-20 Seed Companies 5-10 VC-backed Startups Fund I ~ $10MM of seed capital

  13. Post- Bubble Seed Capital Source: Venture Source, NASVF

  14. Seed Capital hasn’t recovered

  15. Regional Gap in Seed Funding Investments in UT and NM since 2003 Source: Venture Source, Utah Angels

  16. Bridging the Technology Commercialization Gap R&D Institutions Mission Commercial Sector Full-Scale Commercialization Business Development Basic Research Applied R&D • Early-Stage Capital • Market Insight • Human Capital

  17. Kickstart Ecosystem Alignment Capital, value add, syndication Kauffman Foundation Deal flow, outsourced R&D, executive involvement & education Technology transfer, student opportunities, economic development Deal flow, economic alignment, coinvestment and follow-on rights Deal flow, “clean” deals

  18. Kickstart – Aligning Utah’s Ecosystem Financial Investors

  19. University Alignment

  20. Value to the students • Kickstart Seed Fund Class • vSpring/ Kickstart Seed Fund has partnered with BYU/ Nathan Furr to create a innovative new class to prepare students to actively participate with the fund in due diligence/ working with seed-stage companies • Internships • vSpring/ Kickstart Seed Fund operates a summer intern program of 25+ students. Including three international internships this year. • Entrepreneurship • KSF actively sponsors and supports every business plan competition • Create an information marketplace that actively connects the right talent and technology in our network

  21. Fund Strategy

  22. Kauffman Study: Mitigating Risk Strategic Choices • Due diligence: venture capital-style due diligence pays off • Experience: engaging individual with direct industry experience • Participation: High participation is interacting with the company 1 or 2 times per month, Low is 1-2 times per year Average Return Impact • High1 due diligence: 5.9X • Low due diligence: 1.1X • High experience vs. low experience nearly 2X improvement: • High participation: 3.7X • Low participation: 1.3X 1HIgh due diligence was defined as > 20 hours spent Source: Kauffman Study: Returns to Angel Investors in Groups, 2007

  23. Potential Portfolio Composition

  24. Deal Types

  25. Fund Structure

  26. The Fund Structure GP LPs that invest > $1 MM Investment Committee LPs that invest > $.5 MM Managing Member Non Managing Member Kickstart, LLC Investors (LPs) ROIC Invested Capital Carry Kickstart L.P. Management Fee Portfolio Investments

  27. Next Steps • Expansion • Model has wide applicability in multiple regions • A local sport • Alignment first, collaboration second • Tying this to a new model for commercialization • Exploring right model for addressing multiple regions 27

  28. Thank You Gavin Christensen Managing Director, Kickstart Seed Fund gavin@vspring.com

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