Applied Materials Confidential

Annette FinsterbuschSenior Investment Director

Applied Ventures, LLC

January 27, 2011

The Second Annual Tech Valley Career Pathway Conference

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Agenda

Introduction

Why We Invest

The Investment Process - Introduction to the

check

Behind the Scenes: What’s really happening

How Investment Affects Technology Development

How We Measure Success and Deal with Failure

Your Impact

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Applied Materials, Inc.Applied Materials, Inc.

The global leader in nano-manufacturing technology™ solutions for the semiconductor, flat panel display and solar PV industries

> Equipment, Parts, Services & Software

> 10B$ in Revenue

> 14,000 employees in 15 countries

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From bare silicon wafer…

…to finished product

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Applied Black Diamond® II

Applied Reflexion® LK Ecmp

Applied SIP™ EnCoRe II Cu PVD

AppliedAdvantEdge™ Metal Etch

Applied Endura® CVD Al

Applied Centura®

RP EpiApplied Quantum X™ Applied Vantage®

Radiance® Plus RTP

InterconnectInterconnect

Applied Vantage®

RadOx™

Metrology & InspectionMetrology & InspectionApplied UVisionApplied UVision™

Com PlusCom Plus™ OPC Check OPC Check™

Applied Centura® DPN Gate Stack

Applied Producer®

HARP

TransistorTransistor

Who We Are: Leading Edge Technologies for Advanced ICsWho We Are: Leading Edge Technologies for Advanced ICs

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Who We Are: Leading Technology for Solar PV & DisplaysWho We Are: Leading Technology for Solar PV & Displays

Driving 2.5-3.5B$ in PV Revenue in 2010

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Why We Invest: Extending Core Nanomanufacturing CompetenciesWhy We Invest: Extending Core Nanomanufacturing Competencies

Cost per transistor

Cost per area

THEN

Cost per watt

NEXT

Silicon

Display

Adjacent Technologies

FIRST

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Applied Ventures’ Investment ThesisApplied Ventures’ Investment Thesis

Our Target Companies are:

– high-growth, early stage

Our Objectives are:

– both financial and strategic

Our Mission is to:

– profitably invest in companies that provide a window on

technologies that stimulate the growth of applications for

semiconductors, displays, alternative energies and related

products and services

AppliedVenturesthe Venture Fund of APPLIED MATERIALS®

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Original (2005) Original (2005) INVESTMENT FOCUS

• Metrology and inspection • Advanced materials• Display technologies • Process advances for the 32nm node

and beyond • Advanced patterning for ICs,

displays and related applications • Software to enhance manufacturing

capabilities and improve yield • Photonics • Lighting • Data storage • Advanced packaging • Energy conversion and storage• Medical Diagnostics• Water Filtration, Purification, Desalination• Energy Conservation Technologies• Sustainability Technologies

Current 2010-2011 Investment Current 2010-2011 Investment FocusFocus

• Metrology and inspection (Solar)• Advanced materials• Display technologies • Process advances & Equipment

• Lighting • Data storage • Advanced packaging • Energy conversion and storage

• Water Filtration, Purification, Desalination

• Energy Conservation Technologies• Sustainability Technologies

AV Investment FocusAV Investment Focus

Corporate Business Development 02/14/119

CleanTech

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Applied Ventures ProfileApplied Ventures Profile Structure

– LLC, wholly-owned subsidiary of Applied Materials

– 1 VP/GM, 2 Investment Managers, 3 Investment Associates

– 2 Regional Investment Managers: India and China

Fund Size– $50 million allocated for investments annually

– ~$120 million currently under management

Investment Criteria– Financial promise and strategic relevance

– Seed through early stage

Investment Size– $500K to $3M per round

Collaborative Approach– Co-invest with leading institutional investors

Portfolio Oversight– Typically BOD observer seat

Streamlined Approval Process– Monthly investment committee decisions

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Applied Ventures Value PropositionApplied Ventures Value Proposition Benefits to Portfolio Companies

– Access to broad technical and business expertise with global reach

• Maydan Technology Center (300 mm R&D center)

• Global distribution channel

• Deep customer and supplier relationships

– Partnership with the largest manufacturer of semiconductor production equipment and nanomanufacturing technology

– Maximize Applied’s value to portfolio companies through mutually-derived, well-managed projects

– Interface with investment managers with entrepreneurial, VC and corporate operating experience

Benefits to Co-Investors

– Leverage Applied's due diligence capabilities

– Access to streamlined investment processes, which complement the decision-making flexibility of traditional investors

– Collaborate with a consistent co-investor with a long-term, financial view of investing as an integral facet of an overall growth strategy

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How Investment Affects Technology DevelopmentHow Investment Affects Technology Development

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Dot-Com Boom

Dot-Com Bust

Emergence of CleanTech;AV Founded

CleanTech Expected to be largest growth

area in VC

VC Investment Trends - Overall

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How Investment Affects Tech DevelopmentHow Investment Affects Tech Development

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• CleanTech is the Fastest growing sector in VC

• CleanTech will be almost 20% of all VC investing in 2010

• CleanTech Deals are now later stage and larger than other areas …

It’s a good place for AV to invest … there are lots of

deals in this space …

CleanTech vs Rest of VCCleanTech vs Rest of VC

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The LifeBlood of Venture Capital is the Deal PipelineThe LifeBlood of Venture Capital is the Deal Pipeline

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100%

90%

10%

1%

AV Screens 100 Deals for every 1 in which it invests

Confer-ences & Events

VC Referred

AMAT Referred

Web Searches, News etc.

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AV Lead / Investment DistributionAV Lead / Investment Distribution

INVESTMENTS: $ Invested by Investment SpaceLEADS: Incoming Leads by Investment Space[Colors indicate lead originator]

All SolarNon-Solar / Storage

SSL

Environment/Sustainability

All Solar

Non-Solar / Storage

SSL

Solar is Largest Investment Area

– ~$50M invested in 16 deals

– 24% of All Transactions

CleanTech is Largest Overall Area

– 41% of All Transactions

– $58.8 M

90% of New Leads in Last 6 Months were in CleanTech Spaces

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AV / VC Investor Decision ElementsAV / VC Investor Decision Elements

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AV Needs: Alignment to

Corporate Strategy

Inbound:• New Technologies• New Revenue Streams• New Business ModelsOutbound: • New Markets for Existing

Products• New Markets for New

Products• New Business Models

(Distribution, Direct Materials … )

Opportunity:• Large Market >$100M• Rapid Growth >50%/yr• Capable of large profits

>25% Op Margin

IP:• Differentiated• Protected (Patents or Trade

Secrets)• Sustainable

Total Capital Needs:• Total Capital Needs vs

Expected Returns• Capital Burn to Key

MilestonesThe Deal: • Appropriate Rewards for

Shareholders• Appropriate incentives for

founders and employees• Adequate protections to

downside events• Control … who has it ?

How is it shared ?

Team:• Relevant Experience• Attitude and Maturity• Coachable ?• Appropriate for Stage of

Company• Gaps ?• Everyone pulling their

weight ?

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DiligenceDiligence Company Opportunity Team Other

Investors Investment

Space Competition Government

Issues and Incentives

IP Landscape and Freedom to Operate

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Start-Up Company Decision ElementsStart-Up Company Decision Elements

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Investor alignment to

Start-UpStrategy

• $$$• Association with a Fortune

500 company• Strategic Benefits‾ Access to technology and

technical staff‾ Access to AMAT logistics support

and distribution channel‾ Access to AMAT supply base and

commercial leverage‾ Access to AMAT facilities‾ Commercial relationship• JDAs• Sales, Service, Distribution• Management Advice and

Experience

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Company Valuation / StagesCompany Valuation / Stages

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The ChasmThe Chasm

Early Stage

Mid or Growth Stage

Late or Mezzanine

Stage

Stages of Company Development & Decline

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So, What Do VCs Look for ?So, What Do VCs Look for ?

1. Large and Rapidly Growing Market Opportunity (~100M$ or > Opp & >20%/yr)

2. Great Leadership and Team (motivated, committed, trustworthy, experienced entrepreneurs …)

3. Unfair/Differentiated Competitive Advantage(Strong IP position, specific knowledge or resources)

4. Straightforward, Achievable Plan to Make Lots of Money(Clear path to money in shortest time)

2. Clear Understanding of Resource Needs and plan to use them appropriately(program management skills)

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Applied Ventures Portfolio CompaniesApplied Ventures Portfolio Companies

Solar Equipment, Services & Software

Energy Storage

Photonics/Optical

Semiconductors,Memory, SensorsDFM, Test, Packaging

Solid State Lighting

Display & Glass, Materials

Sold

Sold

IPO

Closed

Since 2005, AV has:

•Closed over 70 Investments•CleanTech is >60% of our Portfolio•Invested in more than 35 Companies•Invested more than $120M•Returned over $35M in Cash

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The Investment Process – what an entrepreneur seesThe Investment Process – what an entrepreneur sees

The Investment Thesis Deal Flow (on-going)

– Where we look

– How to get connected with the right group

The Screening (1 hour)– Why didn’t the partner talk to me?

– OMG – They called!

The Meeting (Varies)– Who shows up and why

– What’s the take away

The Diligence Period (seemingly forever!) The Terms Negotiation (weeks) Final Diligence (1 month) That first Board meeting…..

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What Makes a Great EntrepreneurWhat Makes a Great Entrepreneur Ego complemented by a humble self presentation Passion Creative with an excellent education / knowledge base Tenacious but not hard headed Resourceful “Coach-able” EQ + IQ Thick skinned

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Key Take-Away PointsKey Take-Away Points

Venture Investing is Incredibly Risky!– Most ventures fail

Venture Capitalists have one objective!– Amount and timing of ROI is key.

VCs analyze a variety of factors to make decisions and mitigate risk– Opportunity Size, Deal Size, Technology, Team

Corporate VCs are VCs with a Strategic Element

Your impact is critical to shape the thinking of the next generation of entrepreneurs!

Applied Materials Confidential

Annette FinsterbuschSenior Investment DirectorApplied Ventures, LLC

Office Phone: 408 563-5254Email: annette_finsterbusch@amat.com