SPARRING PARTNERS CAPITAL Stanford University Data Mining and

SPARRING PARTNERS CAPITAL Stanford University Data Mining and E-Business 31 October 2020

INTRODUCTION Sparring Partners § WARREN H SPAR § 20+ Years on Wall Street: Capital Markets & Corporate Finance § Partner at Lehman Brothers § Managing Director at Bankers Trust/Alex Brown/Deutsche Bank § Experience with a variety of industries including Software, Marketing Services, Financial Services, and Business Services § Closed over $100 billion dollars worth of transactions § M. B. A. from University of Chicago § SPARRING PARTNERS § Boutique investment bank with special focus on advising privately-held growth companies in the software & technology-enabled businesses sectors § Licensed broker-dealer; Member FINRA / SIPC § Sell-Side Advisory: Strong access to senior management of leading global strategic buyers § Equity Capital Raising: Well-connected to the top venture capital and private equity firms in the U. S. § Debt Capital Raising: Strong relationships with global debt lenders, traditional and non-traditional § Private Equity Fundraising: Relationships with U. S. endowments, foundations, pension funds, family offices, and advisors/consultants 2

Sparring Partners VC Misses – Bessemer Venture Partners’ Anti-Portfolio e. Bay "Stamps? Coins? Comic books? You've GOT to be kidding, " thought Cowan. "Nobrainer pass. ” Apple Computer BVP had the opportunity to invest in pre-IPO secondary stock in Apple at a $60 M valuation. BVP's Neill Brownstein called it "outrageously expensive. " Google Cowan’s college friend rented her garage to Sergey and Larry for their first year. In 1999 and 2000 she tried to introduce Cowan to “these two really smart Stanford students writing a search engine”. Students? A new search engine? In the most important moment ever for Bessemer’s anti-portfolio, Cowan asked her, “How can I get out of this house without going anywhere near your garage? ” Intel BVP's Pete Bancroft never quite settled on terms with Bob Noyce, who instead took venture financing from a guy named Arthur Rock Intuit Along with every venture capitalist on Sand Hill Road, Neill Brownstein turned down Intuit founder Scott Cook. Scott managed to scrape together only $225 K from friends, including HBS classmate and Sierra Ventures founder Peter Wendell, who personally invested $25 K to get Scott off his back. Paypal David Cowan passed on the Series A round. Rookie team, regulatory nightmare, and, 4 years later, a $1. 5 billion acquisition by e. Bay. 3

Sparring Partners Don’t Get Discouraged! 4

Sparring Partners Most Popular Websites: August 2001 vs. August 2007 Ranked By Monthly Attention 5

Sparring Partners On The Internet, There Are No Entrenched Companies! 6

Sparring Partners e. Bay Pierre wanted to allow his wife to sell Pez dispensers online Yahoo David & Jerry built a directory of the Internet for their personal use Google Larry & Sergey started Google as a Stanford Ph. D research project craigslist Craig’s List Craig’s list was a list of fun parties and events for him and his friends to attend 7

Sparring Partners The Biggest Ideas Are Often Born Out Of Ordinary Needs! 8

Sparring Partners I VENTURE CAPITAL MARKET 9

I VENTURE CAPITAL MARKET Sparring Partners VENTURE CAPITAL INVESTMENTS LAST TEN YEARS Source: Pricewaterhouse. Coopers/National Venture Capital Association Money. Tree™ Report, Data: Thomson Financial 10

I VENTURE CAPITAL MARKET Sparring Partners VENTURE CAPITAL INVESTMENTS BY QUARTERS Source: Pricewaterhouse. Coopers/National Venture Capital Association Money. Tree™ Report, Data: Thomson Financial 11

I VENTURE CAPITAL MARKET Sparring Partners PRE-MONEY VALUATIONS LAST TEN YEARS LAST TWELVE QUARTERS Source: Dow Jones Venture. Source and Thomson Financial, PWC, NVCA 12

I VENTURE CAPITAL MARKET Sparring Partners RISK / REWARD PROFILE High Risk Angel Investors Early-Stage Firms Modest Returns High Returns Growth Equity Private Equity Low Risk 13

I VENTURE CAPITAL MARKET Sparring Partners What Makes a Good Business Model § Total Addressable Market (>$1 billion) § Conversion / Adoption Rates § Network / Viral Effect (Bloomberg, Facebook) § Revenue Model § Predictability of Revenue (Recurring vs. Non-Recurring) § Profitability § EBITDA Margin § Growth Rates § 10% per year or per month? § Concentration of Client base § Depth of Management Team § Proprietary Technology / Barriers to Entry 14

I VENTURE CAPITAL MARKET Sparring Partners Ideas for New Companies Think “In-the-Box” § Mimic Ideas from Overseas § Auction Sites § Ringtones § Improve on Existing Technology / Idea § Apply One Technology to Another Industry § GPS Think “Out-of-the-Box” § Create a Whole New Market § Social Networks § Cleantech § What Do You Think? 15

I VENTURE CAPITAL MARKET Sparring Partners Starting Your Own Company The Earliest Capital is the Most Expensive! § Beg your friend and family for money § Don’t pay yourself § Beg your developer friends to build the software for you § Give sweat equity to whomever you need in the early stages of the company § Penny pinch on everything – you most likely don’t need a CFO, nice offices, etc. Just get the product out of the door! 16

I VENTURE CAPITAL MARKET Sparring Partners Using A Knowledgeable Banker § Use a banker with domain expertise § Avoids conflicts with potential investors § Creates a perception of professionalism and investor demand § Running a sale process increases valuations and will result in better transaction terms § Bankers have strong relationships § Bankers have valuable insights into markets § Bankers can offer “out-of-the-box” thoughts on potential investors 17

I VENTURE CAPITAL MARKET Sparring Partners The Capital Raise Process STAGE I Develop Marketing Materials STAGE II Contact Institutions STAGE III Meetings & Conference Calls STAGE IV Review Term Sheets STAGE V Due Diligence & Closing § Executive Summary § Power. Point Presentation § Financial Model § Contact Potential Strategic/Private Equity Investors § Distribute Executive Summary § Schedule Conference Calls/Meetings § Engage in Conference Calls/Meetings § Initial Due Diligence § Review Term Sheets § Negotiation Process § Select Acquirer/Investor § Complete Due Diligence § Documentation § Close and fund 18

I VENTURE CAPITAL MARKET Sparring Partners Important Transaction Terms § Pre-Money Valuation + Investment = Post-Money Valuation § Participating vs. Non-Participating Preferred § Liquidation Preference § Anti-Dilution Provisions § Pay-to-Play 19

Sparring Partners II Case Studies 20

II CASE STUDIES – COMPANY A Sparring Partners SUBSCRIPTION GROWTH 21

II CASE STUDIES – COMPANY A Sparring Partners SUBSCRIBER GROWTH BY EDITION 22

II CASE STUDIES – COMPANY A Sparring Partners CHURN 23

II CASE STUDIES – COMPANY B Sparring Partners MEMBER GROWTH 24

II CASE STUDIES – COMPANY B Sparring Partners PAID SUBSCRIBER GROWTH 25

SELECTED PAST CLIENTS Sparring Partners 26

SELECTED PAST CLIENTS Sparring Partners 27

Sparring Partners For further information, please contact: Warren Sparring Partners Capital 420 Lexington Ave, Suite 2458 New York, NY 10170 warren@sparringpartners. com Tel: 212 -490 -6525 28