www.rsgf.co.uk

InfoLab

Mark WyattWednesday 5th December 2007

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EV – fund management organisation

Institutional funds – investing for return

Technology three funds - £34 million investing in technology

RisingStars Growth Fund I RisingStars Growth Fund II SYIF Pilot Seedcorn Fund

Private Equity Coalfields Enterprise Fund - £10m

MBOs, expansion capital former English coalfield regions but focus on Yorkshire, North East and East Midlands

3rd most active VC investor in the UK *

* Source: Ernst & Young Venture Capital Insights Report 2004-2005 and 2005-2006

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Venture Capital – Early Stage Technology Approach

What do we do? provide start up and early stage seed capital to high growth technology businesses – sector agnostic predominantly in the North of England investment range £50k to £1.5m taking proof of concept investments to AIM listings, Series A rounds and trade sales

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Technology team

Julian Viggars (39) Head of Technology Investment

Previously Investment Director, latterly NXD BioProjects Plc and Barclays Ventures

At BioProjects – responsible for 2 largest investments, both start-ups. 1 sold recently for up to $100m. 1 listed on AIM – current value c.£40m

BioProjects investors at IPO 1.5x cash

4 years at EV

Edward French (39) Investment Director

Previously MD of Bradford University commercialisation company – 7 spin outs formed

Previously Chairman of UNICO – UK University spin-out association

13 early stage pre-revenue technology deals for RSGF

5 years at EV

Dr Mark Rahn (36) Investment Manager

PhD and MBA from Manchester Business School

Freelance consultant to the early stage tech and seed VC industries – NESTA, NStar and University of Manchester

Joined EV in 2006

Dr Mark Wyatt (35) Investment Director

Formerly at Merlin BioSciences

9 RSGF deals, IPO of Plant Impact plc

Sectors: medtech (pharma) and environmental

4 years at EV

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Why use venture capital?

Advantages

– Money to grow the business more quickly

– New contacts and management help

– New networks

– New business insight

Disadvantages

– Investors look for a high rate of return

– Requires giving up a stake in the business

– High levels of information required

– Control and rewards shared

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Networks – key to achieving competitive advantage

Investment banks

FinancialAdvisors

ResearchInstitutes

European& US links

AccountantsGrant funders

SMEs

MajorCompanies

Conferences

ANGEL INVESTORSANGEL INVESTORS

TECH. TRANSFERTECH. TRANSFEROFFICERSOFFICERS

PORTFOLIO COMPANIESPORTFOLIO COMPANIES

ENTREPRENEURSENTREPRENEURS

INDUSTRYINDUSTRYORGANISATIONSORGANISATIONS

LPsLPs

NXDsNXDs

VCsVCs

RSGF / INVESTMENTSRSGF / INVESTMENTS

IDEASIDEAS

CEOsCEOs

CONSULTANTSCONSULTANTS

REGIONALREGIONALVC’sVC’s

COMPETITORSCOMPETITORS

COLLABORATORSCOLLABORATORS

LAWYERSLAWYERS

TECHNICALTECHNICALADVISORSADVISORS

PATENT PATENT AGENTSAGENTS

FinancialInvestors

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What is a fundable project?

• It is not as simple as “I’ve invented a super technology”

• It is not a business plan with 200 pages of technical detail

• It is about the creation of a business opportunity that will give a

fair return to all existing and future stakeholders

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Typical early stage technology VC operating model

Investment Criteria

• Differential value

• IPR - protectable position

• Clear exit potential

• Large market / unmet need

• Milestones

• People

• Prior knowledge and network

• Valuation & funding strategy

Investment Principles

• Tranched Investments

• Lead Investor / Syndication

• Clean Starts / early stage

• Business building

• Right to Appoint NXDs

• Exit and Cash Focus

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Sectors of Interest

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Regional investors - invest locally, but think globally

Next Device Acquired by USA business Experience of bus. dev. in Korea

Peckforton Indian partners

Acal CEO based in Japan USA based NXDs

Plant Impact USA / European / Middle East

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Wadaro – starting point

Strong founders, been involved in one successful VC backed business before – Magic4

Founder investing alongside VCs, demonstrating belief in the business, sharing risk and upside

Extremely well organised for a start up – clear milestones

Required funds to develop technology

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Wadaro – now

RSGF II and NWBIS (YFM) invested

Sector NXD on Board

Partnering discussion ongoing

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Chromatide – starting point

Creative technical founder with industrial background and credible technical reference points

Low level service turnover, and one royalty bearing development contract

Interesting technology that required investment Scaleable IP protection

Numerous market opportunities, but no clear commercial strategy

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Chromatide – now

Recruited non-executive chairman and SAB Refined strategy with expert consultants First investment: brought in knowledgeable co-investor

(Malcolm Stewart at Liverpool Ventures) Identified potential CEO Entered into commercial agreement with Eka Chemicals,

part of Akzo Expanded technical resource and secured GRAND award

to further explore platform technology Development work underway, commercial interest

already identified

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Not all VCs are the same

• Do your homework

• Look them up in the BVCA directory

• Check out what they have been investing in on

their website

• Call them to pre-qualify interest

• Focus your efforts on those that look like they

invest in opportunities that resemble yours

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Pitching to VCs

• Not all VCs require a plan, but they do require thought out and

well present propositions

• Keep it simple and clear

• Remember, VCs need an exit, so how will you provide one

• Demonstrate you know how to reduce the risks in the venture

• Demonstrate openness, and think about how you answer

questions

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RSGF II – outlook

Significant experience to date with RSGF I

Commitment to tranched investment model

Plans to achieve earlier syndication Chromatide with MSIF, Wadaro with NWBIS (YFM) two more syndicated deals in legals

Focus on investee team building and evolution

Build balanced portfolio

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Questions?