Asper Group LLC The George Washington University GW

Asper Group LLC The George Washington University GW Innovation Center Applied Investment Analysis: Venture Capital GW Venture Capital Student Investment Fund Early-stage Investing: Really … Are You Crazy Discussion Session March 8, 2018 David Asper: Asper Group LLC

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team … Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion …. Asper Group LLC 2

Asper Group LLC Introductions … An Exercise ■ Take a piece of paper (does anyone have paper any more? ) … in portrait orientation, fold in half along east-west/ horizontal (this is also an intelligence test). Start on the top half. . . • Write 3 -4 areas of your expertise/competence developed through studies, experience • Rotate along east-west axis … to the back … i. e. , the bottom half of the page • Write 3 -4 factors/qualities/criteria that you believe are most critical in achieving a winning/successful startup (technology, market knowledge/awareness, timing/market readiness, uniqueness/differentiation …) ■ Discussion…. open the page/fold, lay flat • To what extent do the factors on the bottom of the page relate to your core areas of expertise on the top? • Should the two lists align. . . partially, fully? • How important is such alignment in assessing your chances, direction (as an entrepreneur)…. your investment thesis, portfolio strategy (as an investor)? • If important, but observing some gaps, what can done to address …? Source: Fund, Bret (Professor, University of Colorado Leeds School of Business) and Caruso, Dan (Co-Founder/CEO, Zayo Group) 2014. Opening Lecture: MBAX 6150 – Entrepreneurship and the VC/PE Process. Asper Group LLC 3

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team. . . Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion. . . Asper Group LLC 4

Asper Group LLC Observations … startups, entrepreneurs, early-stage investing ■ Most all startup ideas are neither commercially viable … nor, investible propositions Find the need, the user…”if you just build it…they may not come” Understand probabilities … “don’t risk what you can’t live without” (as investor) ■ Commercially viable, investible startup ideas are almost impossible to identify, sort Observe, develop, launch …. ”demo’s, UX …. worth a 1, 000 charts/pictures” Diligence, yes … “but avoid the excel stuff… go ‘see’!” (as investor) ■ Investible startups (almost) never develop as conceived, developed, or launched Observe, develop/launch (MVP) …. evaluate, redesign/pivot…relaunch…repeat! Never …”run into a room with no door(s)” … have an axis, points of leverage ■ Most of us adjust/stop too late. . . it’s not the solution …it’s the need/UX, stupid! Never, never … lose objectivity, ability to re-set …”let your eyes water-up” Uncertainty, Risk … unavoidable in early-stage venture … experiment and get smart pre-seed/seed investors: the “dry-eyed, objective adults in the room” Asper Group LLC 5

Asper Group LLC Observations … startups, entrepreneurs, early-stage investing ■ Keep it simple… it is a creative, problem-solving mindset • Customers/users (lots of them!) with a need, problem • A solution that customers want and will pay for • Solutions and innovations that drive repeated purchases …retention, acquisition ■ Must get comfortable with rejection. . . both as a venture team and as an investor ■ As entrepreneurs … absent getting/hearing a clear “no” (from customers, investors), we assume the answer is some form of “yes” • Listen … don’t pass up a chance to learn something important • Rejection … is an important lesson, masquerading as disappointment • Re-evaluate, redesign …pivot • Repeat …repeat Startup launch (and venture investing) is a social, collaborative process … a “contact sport”: listen, see, talk … interact …ADAPT! (repeat!) Asper Group LLC 6

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team … Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion. . Asper Group LLC 7

Asper Group LLC Investment thesis …portfolio, dimensions ■ “We seek early-stage venture developments addressing e-commerce and marketplace platforms, mobile, and technology-enabled content businesses…. especially those exploiting large data set, analytics, AI, and image recognition technologies. ” ■ “Interesting sectors are retail, consumer products, financial services, telecom, high tech, life sciences/health-wellness…in U. S. and trans-Atlantic/Pacific contexts” ■ “Pre-seed, seed investments in $50 -500 k range …. participations in growth-phase rounds when in advisory/governance roles” ■ “Investment criteria… • Strong, passionate entrepreneurial team …. significant content, intangibles, cultural awareness, creative mindset • Right market timing … readiness • Bright-line differentiation • Clear market development/revenue roadmaps, ramp-scale options, adjacencies • Strong cash flow, margin economics • Avenues for managing upside/downside risks. ” Source: Asper Group LLC 8

Asper Group LLC Portfolio … Asper Group Bold, Italics: Investment Positions UX Dominant (content, economics, convenience, intuitive…) Ooot Energy Obsess Hawthorne Markets Pre. Revenue Long Blockchain [Exited 12/17; 1. 6 x] Go. Parrot Traction, Ramping Geno. Style Tipsi Lighting for Impact Cap. Linked Shortest Track Technology Dominant 150 ELM + GWU Venture Fund (mobile, AI, data…) Asper Group LLC 9

Asper Group LLC Portfolio focus, balance, alignment … a dilemma well worth engaging Does a contrarian view emerge…. ? Specialized, Domain Focused Broad, Diversified Performance • Technology • Sector • Geography…. ? ? Breadth/Scope Do higher levels of portfolio breadth, diversification add (or subtract) value …and at what cost and under what conditions? Asper Group LLC 10

Asper Group LLC For early-stage investing … diversification brings differentiated value if pursued, managed under right conditions Cannot be simply … “spray and pray” Why May Work Necessary Conditions • High-uncertainty context • Meaningful axis(es) of leverage/diversification … related areas of knowledge stocks – Technology: data analytics, image recognition, AI. . . – Sector: retailing/channels, financial services, …. • Leveraging knowledge/content resources … not tangible assets (less fungible) • Brings flexibility and adaptability to manage risks … respond to challenges, updated problem definitions • Coordination/transaction costs of sharing/leveraging can be minimized • Ability to scale, network … through coinvesting, syndication • Presence of significant, efficient problemsolving process(es) and capabilities • Entrepreneurial and investment culture that attracts, retains talent for growth, continuous innovation In face of significant uncertainty (early-stage), ability to be flexible, adapt to alternative paths, adjacencies … is accretive to portfolio performance Source: Matusik, S. F. and Fitza, M. A. 2011. Diversification in the Venture Capital Industry: Leveraging Knowledge under Uncertainty. Strategic Management Journal, 33: 407 - 426. Asper Group LLC 11

Asper Group LLC Portfolio considerations … beyond balance, alignment ■ Size of early-stage deals, investments. . . ~$50 k – $2 m • Pre-seed, seed series … often, first “outside” money • Must manage exposure – Pre-revenue traction – Product/solution in alpha, beta – Low pre-money valuations • Achieve meaningful position (~25 -30%) …but, not “majority” • Maintain significant “skin-in-the-game” for founders/entrepreneurs ■ Timing is (almost) everything …especially re market readiness, need evolution • Great ideas have their time … pay attention to the marketplace, adoption, and supporting trends/dynamics, technologies • Being “too early” can be costly … cash burn, development churn, no traction … rejection • Being “too late” is costly … mover advantage and pricing power are gone Asper Group LLC 12

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team. . . Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion. . . Asper Group LLC 13

Asper Group LLC Startup team …. investible characteristics ■ “Great businesses are built by passionate entrepreneurs who have an exceptional understanding of the customer and the marketplace …and an idea” ■ “We look for both high levels of creative commitment and content … and, work best with entrepreneurs in a highly collaborative manner … in a shoulder-toshoulder environment offering an open problem-solving process. ” ■ “We must mutually determine the presence of real opportunities to add substantial value through pre-see/seed investments and in advisory relationships, in follow-on investing and fund raising, and in governance roles. ” Source: Asper Group LLC 14

Asper Group LLC Entrepreneurs, teams … perspectives ■ Commitment to creative culture, mindset …. accompanied by content • Have significant customer/domain exposure, insights, need awareness … and ideas/solutions with utility across many users and related apps/user networks (adjacencies) • Have clear view on sources of value and worth … multiple avenues to revenue • Accept idea/product challenges (yes, failures) … learn, react/recover quickly • Do not tolerate execution failures (idea/product challenges are inevitable) … deliver promises ■ Core team designs/makes the pitch …and, seals the deal • Founders are the key to the credibility of the venture … passion, insight, content, commitment, ability to collect a diverse team, manage talent • Critical competencies must be controlled … present across the core team – Deep expertise … in disciplines that count – Startup experience (successes, some failures ok) – Recognition by important “others” • Be able to execute …who is directing, managing operations Launching a startup is an inherently social, collaborative process … a “contact sport”: listen, see, talk … interact …ADAPT! (repeat!) Asper Group LLC 15

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team … Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion. . . Asper Group LLC 16

Asper Group LLC Governance … keep entrepreneurs’ heads, hearts (and skin) in the game … and trust, but verify ■ In committing, investing seed money … resist temptation to go for early control (in economic terms) • Many rounds yet remain (in success cases) … • Keep Founder’s in the game … leave with meaningful share of the venture • And, need to accommodate a motivating options pool • Create space for subsequent-round investors … dilution, and want entrepreneurs to be significant share holders entering next round(s) • Investing ~$350 -450 k, with a $1. 5 m PMV … yields a 20 -25% position ■ Trust, but verify. . . go for a value-add role/collaboration(advisory, information rights) and guardrails (board seat) • Get a strong, well-stocked (high content, in relevant stuff) advisory board (small) • Go for a board seat, leaving majority of common (Founder) with majority (say, two) in first round ■ Other Series Seed terms should provide usual …liquidation preference, voting rights, information rights, participation, future rights Think beyond current round …and, steer (a bit) from the back seat. Relate, influence based on content, not holdings! Asper Group LLC 17

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned… ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team … Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion. . . Asper Group LLC 18

Asper Group LLC Early-stage Venture: Tipsi ■ The Investor View … Buckle Your Seatbelts • Tipsi Case: A Diner/Restaurant App…. or, a White-Labeled Retail Commerce Platform – Launch 2012 …. An App – Enter Asper Group in Nov 2014 …Wow, look what we were thinking! – Mar 2018 …. 3. 5 pivots later…better! ■ Investment thesis, criteria …evaluation ■ The Evolution Asper Group LLC 19

Asper Group LLC Investor view …. Tipsi, then and now November 2014 March 2018 • A “Wine Data” company • ”Full-Stack Digital Commerce” service • Massive data base / content on (~all) wines for customers …. . in the palm of their hand, free • “Exhaustive” beverage database/content …beer/wine/spirits; automated and integrated into legacy technology • Rev model focused on restaurants …. inventory system, Tipsi branded web/app/tablet-based customer wine lists, remote sommeliers • 3 k restaurants, LTM 15 k (NYC) downloads …restaurant beta product • Metrics • Fully-enabled modern and custom web, mobile, apps, loyalty to power pickup, delivery, shipping, etc. • Retailer-focused rev model … complete digital end-to-end OS: managing integration, operation and development for clients. ü Monthly Rev: $0 • Serving 5 of top 30 US retailers … strong pipe ü Cash Burn: ~$60 k monthly • Metrics ü Monthly Rev: $40 K+ (20%+ Mo. M) ü 1 -3 months from break-even ü Cash Burn: ~$65 k monthly Source: Asper Group LLC 20

Asper Group LLC Investment criteria …Tipsi perspectives Tipsi Diligence …. Summary ■ Strong, passionate entrepreneurial team …. significant content, intangibles Data/tech guys, entrepreneurial instincts, team-oriented …no wine, retailing content? ■ Right market timing … readiness Favorable wine (beer) growth/retail dynamics; demographics, tech/mobile developments ■ Bright-line differentiation Little innovation in wine/beer retailing… competitors focus on info, on-line stuff ■ Clear market development/revenue roadmaps, ramp-scale options, adjacencies Multiple revenue sources…. brands, retailers, restaurants, intermediaries …no traction? ■ Strong cash flow, margin economics potential Low data acquisition, services delivery costs … where’s the revenue? ■ Avenues for managing upside/downside risks Main pivot axis is data/info …lots of user segments (buyers? ) Source: Asper Group LLC; Diligence notes during October-December 2014 period. Asper Group LLC 21

Asper Group LLC Tipsi evolution Bold, Italics: Investment Positions UX Dominant (content, economics, convenience, intuitive…) Ooot Energy Obsess Hawthorne Markets Pre. Revenue Long Blockchain [Exited 12/17; 1. 6 x] Go. Parrot Traction, Ramping Geno. Style Tipsi Lighting for Impact Cap. Linked Shortest Track Technology Dominant 150 ELM + GWU Venture Fund (mobile, AI, data…) Asper Group LLC 22

Asper Group LLC Tipsi … Investment history, recent developments! ■ Tipsi-Asper Group investment history… • Nov ’ 14 – Seed, CN • May ’ 15 – Bridge, CN • Feb ’ 16 – Seed Plus, CN • Nov ’ 16 – Series A Preferred • Oct’ ’ 17 – Preferred Series 1 A Powering 5 of top 30 US beverage retailers. . . Spec’s Goody Brown Derby ■ April/May ’ 18 -- Estimated “break-even” point Lukas Superstores Montgomery County …and strong pipeline of new 2018 clients! Asper Group LLC 23

Asper Group LLC Discussion Agenda ■ Introductions … ■ Some Lessons Learned …. ■ Portfolio Dimensions … What are Angels Thinking, Doing? ■ Startup Team … Experience, Domain Expertise … Attitude/Characteristics? ■ Governance … Whose Heads in the Game? ■ Early-stage Case: Wine-Wiz (aka “Tipsi”) ■ Concluding Discussion … Asper Group LLC 24

Asper Group LLC Appendix: Tipsi Evolution Asper Group LLC 25

PROBLEM The Original Problem Wouldn’t it be nice to be able to buy wine at a restaurant or store and know I was getting something I liked / a good deal? The Idea Let’s make an app for that…. . (hey, it was 2012) Wine-Wiz was born. . www. gettipsi. com | info@gettipsi. com Asper Group LLC 26

1 ST PIVOT The (First) Pivot Key Take Away: The idea may have some legs, but have a TON more to do to garner institutional investor interest New Strategy: Build out the MVP app and raise more money Need To: Raise “Outside” Money. . . Friends & Family? Build Our Own Database Develop Monetization Partnerships www. gettipsi. com | info@gettipsi. com Asper Group LLC 27

2 nd PIVOT The (Next) Pivot Key Take Away: Operating consumer apps makes it hard to make money! What is Tipsi really good at doing? What is the customer / industry need? How do get PAID? New Strategy: We are going to create a restaurant based digital inventory and wine list system for desktop, mobile, and tablet diner use. Need To: Raise MORE Money. . . Angels ✔ x Promote Database…Pretty Good…But Nobody Knows Improve the Traditionally Poor Restaurant Dining Wine Experience www. gettipsi. com | info@gettipsi. com Asper Group LLC 28

3 rd PIVOT Another Pivot Key Take Away: Pivot (again) to wine merchant retail as restaurant space is too crowded, solution too niche…restaurants don’t spend $. Beverage retail is less crowded…and has a burning platform…. Big-Box Competition New Strategy: Re-work the inventory system and app and calibrate for the retail setting while adding digital payments to actually enable product sales. We Need To: Need MORE Money… Product Database Is REALLY Good…Yet Mostly Unrecognized Team Is Pretty Good Less Competition, More Client Interest www. gettipsi. com | info@gettipsi. com Asper Group LLC 29

4 th PIVOT The (Slight) Pivot Key Take Away: A slight pivot…met dozens of retailers and they are asking for “custom” branded version of app. . . and website. . . and content. New Strategy: Build custom content and enterprise software for beverage retailers. …. finally, hit the “cool-stuff” seam and find revenue source. Keep using referrals and FOMO to sign up new customers. Execute well for existing clients. We Need To: Able Raise Money…. Finally Product Database Is Enterprise Worthy Good Early Customers and Bigger Ones In The Pipeline The More Will Build For Customers, The Stickier They Become www. gettipsi. com | info@gettipsi. com Asper Group LLC 30

UP NEXT What’s On the Horizon for Tipsi Possible Acquisition Scenarios : In the next 3 -5 years (that makes 8 – 10 years in total) Niche Acquisition • Acquired for service / product • Valued on operating metrics Industry Acquisition • Acquired for market position • Valued based on actionable industry data Retail Acquisition • Acquired for technology / data platform • Value based on future potential www. gettipsi. com | info@gettipsi. com Asper Group LLC 31