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AOL Time Warner Ventures

AOL Time Warner Ventures. Presentation to Federal Reserve Conference May 3, 2002 Ronald H. Peele, Vice President. Presentation Agenda. Investing Themes Driving Strategic Value Lessons Learned Summary. I. Investing Themes.

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AOL Time Warner Ventures

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  1. AOL Time Warner Ventures Presentation to Federal Reserve Conference May 3, 2002 Ronald H. Peele, Vice President

  2. Presentation Agenda • Investing Themes • Driving Strategic Value • Lessons Learned • Summary

  3. I. Investing Themes

  4. The Ventures group has targeted its investments in areas strategic to AOLTW. • Convergence • Devices • Home Networking • Integrated Services • VoIP/Voice Commerce • Ubiquity • AOL Anywhere • Wireless • Other Access Devices • Interactive Multi- • Media Platforms • Broadband • VOD/PVR/iTV • Content Digitization/ • Delivery • Streaming • DRM/ DAM/ MAM AOLTW Ventures • Personalization • and Productivity • Search • Community • Operating Efficiencies • Network Infrastructure • Enterprise Software • Security and Storage • Billing Systems

  5. The Ventures group has refined its strategic investing themes through an ongoing screening process. AOLTWOperating Businesses AOLTW Strategy Group International VC’s CorporateInvestors US VC’s Industry Players AOLTWVentures Investment Cmte. Office of CTO Strategic Investing Themes

  6. II. Driving Strategic Value

  7. AOLTW Ventures drives strategic value from investments in a number of ways. • Screen and introduce innovative companies to AOLTW. • Secure funding to stabilize and strengthen prospective partners. • Monitor industry developments and transfer information to AOLTW. • Facilitate and champion technology trials. • Steer or prioritize research or product direction. • Position AOLTW for favorable operating deals. • Preserve flexibility in business relationships with prospective partners.

  8. III. Lessons Learned

  9. AOLTW Ventures constantly monitors the market, gathers intelligence, and identifies lessons learned. • Internal Constituencies • Formal presentations to operating groups. • Identified key contacts and established feedback mechanisms. • External Constituencies • Met with fund investment managers and agreed upon feedback mechanisms. • Presentations and meetings to other VC Funds. • Existing Portfolio Investments • Constantly reassess successes and failures. • Periodic review with corporate finance group.

  10. Corporate Investing Lessons Learned – External Relationships • Institutional VC’s are hesitant to work with corporate investors who are slow to make decisions and secretive about their investing rationale. • Approval process is nimble, streamlined, timely, and does not require sign-off from an operating division. • Unlike Institutional VC’s who are driven purely by financial performance, corporate investors are often perceived to demonstrate unfocused investing criteria. • AOLTW Ventures’ investment focus is re-enforced through our investing discipline and consistent message to the market. • The strategic value of many corporate investors is diminished by an absence of post-investment support. • AOLTW Ventures works diligently with management, other investors, and operating divisions to derive value and maximize the companies’ attractiveness to AOLTW after an investment is funded.

  11. Corporate Investing Lessons Learned – Internal Relationships • Corporate investing groups can often be perceived as a threat to operating divisions. • AOLTW Ventures is positioned to be complementary to operating divisions, succeeding only when they succeed and demonstrating a good record of value creation. • Communication among operating divisions and corporate investing groups is often diminished or lacking altogether. • AOLTW Ventures actively engages divisions to refine its understanding of their priorities and strategic directions and works with appropriate AOLTW functional and operating groups to facilitate mutual information flow. • Corporate investing groups can impose an undue burden on operating divisions, disrupting their ability to accomplish necessary operating goals. • While AOLTW Ventures maintains an active dialogue with operating groups, we are “easy to work with,” interacting only when appropriate and necessary, and providing cross-divisional intelligence to operating groups.

  12. Summary • Tuned into AOLTW’s strategies and market trends. • Actively investing in companies that improve our competitive positioning and business prospects. • Practicing disciplined and proactive portfolio management to mine and manage strategic value from portfolio companies. • Applying lessons learned every step of the way. • As a corporate investor with rich resources (i.e., great brands and wide subscriber base), a crisp investing strategy, and an experienced team, AOLTW Ventures is well-positioned to capitalize on current venture investment opportunities.

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