WHITE

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WHITE LEE LLP Soup to Nuts 2001 The End
Game in a Down Market May 19, 2001

• Bruce W. Lichorowic

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Soup to Nuts 2001 Shopping the Company without
a BankerWhat can you expect?

• Bruce W. Lichorowic

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BackgroundBWL

• Focus
• Solutions for troubled companies
• Issues
• Funding, operational, marketing
• Partner
• VCs, Angels, LPs, Board, Entrepreneur
• 20 years
• Turnarounds

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The Environment So whats going on?

• Last Year
• Q1, 114 Acquisitions
• Venture-back deals44.9B
• This year
• ?
• Dot comShutting down
• Investors are nervous
• IPOs5, 01
• Merge or be Acquired?

Source Reuters, 4/9/01
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Deciding

• Who decides to sell.?
• Board
• Investors
• Shareholders
• Founders
• Bankers

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Getting Ready

• Once the decision is made
• Prospecting
• Pre-Deal
• Deal
• Post-Deal

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Prospecting

• Business Development
• 1st calls toexisting Partners
• Tell them your intentions
• Set up a meeting
• InvestorsVCs
• Look into their existing Portfolio companies
• Checking other VCs with similar technology
• Board
• Active board members

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Prospecting

• Sales Team
• Call key customers interested
• Delicate call
• Key Shareholder
• Inform shareholder of intent to sell

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Prospecting

• MessageKey
• Deliver a common sense story
• Intend to sell the company
• Give period of time
• Whyfunding, Investors
• Tell how you help their future
• Be confident
• Show leadership

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Prospecting

• Process
• Smooth and Continuous
• Stay in contact
• Dont drop any prospect until they say
• No Thanks
• Who leads the deal
• CEO with Business Development.small company
• Operating/Unit Manager.larger company
• Timing
• Key..Dont rush

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Profile your Company 0-6 months

• Market/Marketing
• Markets Identified, Web Site
• Technology
• Whitepaper
• Team
• Founders
• Business Model/Plan
• One pager Executive Summary
• Fundraising
• Founder/Angels

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Profile your Company 6-18 months

• Market/Marketing
• Analyst Approval
• VP Marketing, Core Message, PR Launch
• Technology
• VP Engineering, Proof of Concept, Alpha
• Team
• Development, Marketing
• Business Model/Plan
• Basic Executive Plan
• VP Business Development
• Fundraising
• Lead VC with Existing Angels

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Profile your Company 12-24 months

• Market/Marketing
• Customer Approval
• Technology
• Beta or FCS
• Team
• CEO, VP Sales, Marketing Professionals
• Business Model/Plan
• Detail Plan
• Strategic Partnerships
• Fundraising
• Syndicate of Investors, Lead VC

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Profile your Company 18-24 months

• Market/Marketing
• Key Message why customer buy?
• Technology
• FCS with milestone releases
• Team
• CFO, Audit Firm
• Business Model/Plan
• Polished Presentation, Focus Plan, Reference
  Sites
• Fundraising
• Syndicate Investors with VC Lead or
• Mezzanine if IPO is imminent

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Pre-DealLOI Stage

• More deals lost at this stage
• ManagementThinks its over
• General relax attitude
• Forget take careCurrent Customers
• Personnel
• Feeling of uncertainty
• Critical that you keep key employees

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Pre-DealLOI Stage

• Diligence Stage
• Business modelthat makes sense
• Strong business propositon
• Revenue model, pipeline
• Technical
• IP reviewed, architecture
• Show the secret sauce
• Key personnel intros

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Pre-DealLOI Stage
Internet Personalization Technique
Adaptive response to on-line users
Dynamic segmentation of on-line users
Cooperative Multi-Agent Search

• Secret Sauce Core Technology
• Underlying technology behind the products
• Meet customers needs and applications

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Pre-DealLOI Stage

• Diligence Stage
• Identified Market
• Customer
• Market size
• What problems are your fixing?
• Review backgrounds
• Founders
• Sales, Marketing, Engineering

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Pre-DealLOI Stage
TOTAL CASH REQUIRED
BREAKEVEN
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Pre-DealLOI StageProduct Road Map
Q2 2001 Q3 2001 Q4 2001
1H2002 2H 2002
Product 1
PRO 1.0
PRO 2.0
1.0
2.0
Product 2
PRO 1.0
PRO 2.0
1.0
Product 3
1.0
2.0
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Pre-DealLOI Stage

• Financial Review
• CashBurn rate
• SalesPipeline
• Budgetsby Department
• Balance Sheet, PL

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Pre-DealLOI Stage
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Pre-DealLOI Stage
Channels
Market Segments
Direct Sales

• Seed Accounts
• Early Adopters
• Major Accounts

Integrators
Indirect Sales

• Mid-Market
• Vertical Markets

Business Development
Technology Integrators Marketing Partners
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Pre-DealLOI Stage

• Licenses
• Hosting
• Professional Services

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The Deal

• Valuation in todays Market
• Thriving BusinessProfitable
• ½ to ¼ of the last round of funding
• Multiplier of trailing revenues
• BusinessOut of Cash
• Sell the asset or IP
• Software Companyneed the engineers
• Hardware Companyneed the engineers
• Cents on the

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The Deal

• Heat of the deal
• Simplicity is key
• ID what needs to accomplished
• View whats reasonable
• Build a robust model
• Employees
• Double Trigger
• Change of Control
• Change of Job Function

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Post Deal

• Integration Mode
• Set short term attainable goals
• Watch costs
• Settle disputes quickly
• Form one culture
• Merger
• Technology, people, cultures systems

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Top 10Must Haves

• One Page Business Brief
• Value Proposition10 words
• True sustainable pipeline
• Find out what theyre looking for
• Dont announce products in the LOI stage
• Get a reference customer ASAP
• Calculate to the monthbreakeven
• Accurately describeuse of funds
• Understand their Business model
• Business Integrity

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Top 10Personal Checklist

• Keep your cool
• Selling the company is a full-time job
• Dont assume VCs are going to Help
• Constantly rethink your strategy
• Watch outsinking ships
• Check your ego at the door
• Plan on 2-3 rounds of negotiations
• Always tell yourself the truth
• Know where the Exits are
• Trust your instincts

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Bruce W. Lichorowic
Specialist for Distressed Companies