AN INVESTORS PERSPECTIVE ON PREPARING FOR WBT

JANUARY 2009

AGENDA FOR TODAYS PRESENTATION

Quick

overview of In-Q-Tel investment environment for early-stage enterprises

Todays

Opportunities Making

the most of the WBT experience

DELIVERING A SUPPLY CHAIN OF TECHNOLOGY INNOVATION

MISSION: Identify, adapt, and deliver innovative technologies to support the Central Intelligence Agency and the broader U.S. Intelligence Community. Quick Facts

Launched January 1999 Private, Non-Profit, Independent organization CIA initial and principal customer NGA, DIA, additional IC customers now engaged Operate as a Strategic Investor for the IC 75 active companies in the portfolio 49 technology adoptions 131 technology pilots
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IQT TECH PRACTICE AREAS OF INTEREST

COMMUNICATIONS & INFRASTRUCTURE: Data services and capabilities Information lifecycle management Systems support for facilities Connectivity and communications Computing architectures

APPLICATION SOFTWARE & ANALYTICS: Software applications for enterprise, departmental, and individual
users

Software-based analytics to automate and support human analysis Tools to exploit text-, multimedia-, and geospatial-based data
regardless of language and format

Knowledge management and data visualization Modeling, simulation, and digital media Collaboration

DIGITAL IDENTITY & SECURITY: Identity management Access control Risk analysis capabilities System design and analysis tools Policy definition and management

BIO, NANO, & CHEMICAL TECHNOLOGIES: The extraction and characterization of trace materials from the
environment

The characterization of unknown bulk materials The on-site determination of individual human traits Point-of-care medical technologies outside of a laboratory or clinical
environment

EMBEDDED SYSTEMS & POWER: Power generation, transmission, and storage Power management, conservation and conversion RF, electronic, optic, power and other components Sensor networks and embedded communications Embedded sensing, computing, and communicating platforms Embedded communications components, protocols, and software Basic energy and component materials, science,and technology Rapid design, prototyping and low rate production

Tracking and/or authentication of both individuals and objects The enablement of new capabilities from advances in material
science

THE VENTURE CAPITAL MARKET TODAY

Investment activity during the first three quarters of 2008 was fairly strong
o $22.6 billion invested in 2,930 deals o Ahead of 2007 in terms of dollars invested, although fewer deals

The fourth quarter was radically different

o Investment down more than 25% from Q4 2007 o VCs moved extremely quickly to alter investment strategies Focus on capital preservation, reserves for existing portfolio companies, and portfolio triage Strategies to balance portfolio holdings Precipitous drop in valuations

Opportunities for financial exits are at historic lows

o 6 venture-backed IPOs in 2008 lowest total since 1977 o Two quarters with zero IPOs o 260 venture-backed exits in 2008 (vs. 360 in 2007) lowest since 1999
Source: Allegis Capital
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EARLY-STAGE OPPORTUNITIES

For seed and early-stage ventures, todays market conditions can be a double-edged sword Bright spots
o Many investors (the ones who remain nimble) are moving back into early-stage as part of diversification; the percentage of $ going to seed and early-stage investments will rise o Clean Tech remains a hot area (albeit ripe for a correction); investment is up 400% since 2005, to $8.4 billion in 2008 o Early-stage returns highest of any class over 10+ year period o Frequently heard quote of late: The best companies get started in downturns Fewer competitors More early-stage capital sources Lower salaries and less competition for talented employees

EARLY-STAGE OPPORTUNITIES

For seed and early-stage ventures, todays market conditions can be a double-edged sword (continued) Challenges
o Valuations will be significantly lower than in the recent past o Only the best opportunities will make it through the screen fewer checks will be cut, and they will be smaller (i.e., seed and earlystage investment will make up a bigger piece of a smaller pie) MUST paint the vision for a business, not just a really interesting technology Even greater focus on team, strategy, and ability to execute

Bottom line: Early-stage is a good place to be right now if you have something truly compelling.

CAPITALIZING ON THE WBT EXPERIENCE

Diverse group of attendees that can assist an early-stage venture in different ways
o o o o o o Financial investors Corporate/strategic investors Potential partners Technology transfer officers and other sources of IP Economic development officials Potential employees

Some high-level presentation thoughts

o Present the venture story, not just the technology story o Be clear on the ask what are you looking for? o Presentation is a means of garnering interest/follow-on conversations o Have follow-up collateral ready available better than perfect

Network, network, network booths, meals, receptions, etc.

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Congratulations on your selection, and enjoy WBT

Tom Gillespie Investment Team In-Q-Tel 703-248-3026 tgillespie@iqt.org