1. US Seed Stage Valuation Trends DublinApril 18, 2012 BILL PAYNE

2. Bill Payne is an active angel investor, board member, and advisor to entrepreneurs.He assisted in founding four angel groups: the Frontier Angel Fund (2005), TechCoast Angels (San Diego 2000), Vegas Valley Angels (2003) and Aztec VentureNetwork (1999).For three decades, Bill Payne has successfully founded or invested in over 50 start-up companies. He served as an Entrepreneur-in-Residence to the KauffmanFoundation for twelve years. While there, he directed the development of thePower of Angel Investing education series for entrepreneurs and angel investors.He has served as lead instructor for over 100 seminars in seven countries.In 2009, Bill was named the Hans Severiens Award winner as the outstanding angelinvestor in America. 3. AGENDAImpact of Valuation on ReturnsImportance of comparables but scarcity of dataData from VCsAngel group surveysInferences from surveysMethods for Valuation of Pre-revenue StartupsCopyright BillPayne.com 2012 4. Stage of Development: Seed/Startup Valuation increases with maturity Valuation at the earliest stage is most difficult Focus of this work: Pre-revenue companies Product or prototype can be shown to customers Some customer validation is available Revenues zero or less than $0.5 million annually Earliest stage most angels would invest All data reported here is for pre-revenue ventures 5. Valuation Impacts ReturnsTerminal Value Year n ROI Year n = (Valuation at Exit)(Cash-On-Cash) Post-Money Valuation (Valuation at Investment) Assume No Dilution 6. Pre-money Valuation of VC Deals$89.6 $90Median Premoney Valuation ($M) $60 $36.5$40.0 $34.0 $30 $19.7$13.8 $6.7$7.3 $2.6 $2.1$01998199920002001 20022003200420052006 2007 2008 1H09 Later Stage Second RoundFirst Round Seed Round Source: Dow Jones VentureSource 7. Angel Data on Valuation (before 2010) 8. Survey of Angel Groups (Summer 2010) Contacted leaders of 15 angel groups Asked for average pre-money valuation of recentpre-revenue deals Asked for recent trends in valuation Collected and reported data (13 of 15 reporting) 9. 2010 Angel Valuation Survey(Pre-money Valuation of Pre-revenue Companies)Pre-moneyANGEL GROUPValuation*Tech Coast AngelsSouthern California$1.25Phenomenelle Angels Madison, WI $1.30New York Angels New York City $1.30Frontier Angel FundNorthwest Montana$1.40DC Dinner ClubsWashington DC Metro$1.50Vancouver AngelsVancouver, BC $1.50Midwest Groups (Okabe) Chicago region $1.50RAIN Funds Midwest region $1.65Ohio TechAngels Columbus, OH$1.75Band of AngelsSilicon Valley$1.75Life Science Angels Silicon Valley$2.00Alliance of AngelsSeattle $2.10CommonAngelsBoston$2.70 MEAN $1.67 MEDIAN $1.50 * in Millions of DollarsFrom: Bill Payne, August 2010 10. Alert This data is statistically insignificant All conclusions are solely those of the author 11. Valuation Trends in 2010 Market at the earliest stage was soft Many groups doing some deals at