424 24 Village Ventures ral partner of Village Ventures, shifted in Jn June 8, 2004, Matt Harris, managing gene age Ve the pando seat ofthe gt fom iets to Boise, Idaho (see Exhibit 24.1 for map) veehandwritten notes and tried to gather his thoughts Seer ead se a ‘Mark Solon, the managing general partner of Highway 12 Ventures, « $27 million Idaho-based venture fund and an affiliate ie Village Ventures network. Solon and Highway 12. were preparing to reat teh and targeted for at least $75 million and wanted to renegotiate the terms of their partner. ship with Village Ventures. sep 2000, Village Ventures cofounders Matt Harris and Bo Peabody had set out to create a network of early-stage venture funds focused on emerging technology centers substantially outside traditional U.S. venture markets. Their firm partnered with funds in regions that were removed from such longtime venture capital (VC) centers as Boston and Silicon Valley yet offered abundant intellectual capital, low costs of doing business, and high quality of life. In exchange for providing its affiliate funds with the benefits of scale and scope—everything from back-office support to introductions to potential coinvestors and help with due diligence—Village Ventures could access a sourcing network thet found deals that were often uncontested and available at consid- erably more attractive valuations than those of more mainstream venture markets, By the summer of 2004, the Village Ventures network spanned the United States and included thirteen partner funds and over $240 million in committed capital (see Exhibit 24.2 for a list of affiliated funds). Since August 2000 when Harris and Solon had first agreed to partner, Highway 12 Ventures had emerged as one of the most promising funds within the Village Ventures network. Harris and Solon continued to sue rath eke pereael icoaship and deep professional respect, and both felt that oti. All the same, Haris bnew that Selon wht ee ey eeoneh eel sbi renegotiate the terms of the partnership, At ete Fao aiderle levers . as the fut innovative busi- ness model on which Harris had staked his professional spun innovate bs1p Collection, hip: fwwwlbuteras edu/mapsunitedstatesunited_states_pol02,jpg, and bp//www Shoteasedufmapvanied_statesmassachusents,90 jpg, accessed February 20, 2006. Soure: University of Texas Ma THE FOUNDERS The concept for Village Ventures originated at Willams College in western Massachu- setts whore Harris and Peabody met as freshmen in 1990. Both were ambitious and competitive; they enjoyed one anothers company and felt that each offered different but complementary strengths Haris recalled, “Bo was always wired as an entrepreneur, He has this intuitive sense of how people work, how they'll behave, what they'l ike. On top of that, he’s chunamatic and an incredible salesman. At Williams, it didn’t take him long to find his talling” In the spring of 1981, Peabody and another student approached their econom- ies professor with an idea to create an online guide to the real world for their contem- poraries. Over the nest si yeas, Peabody the other student, and their professor Feanded and built their online guide, which they called Tripod, into one of the most trafficked destinations on the Internet. - By contrast, Hares pursued amore traditional career path after graduation by joining the Boston office of Bain & Company. Abont his roommate of three years, Peabody said. Matt has an incredible natural gift for rigorous analysis and structured thinking, Throughout school, he made a big contribution to Tripod— building Snancial models and questioning our assumptions. But when Tepe, see Bo Peabody, Lucky or Smart? Secret toon Entrepreneur 1. Formore on Bo Peabody a D House, 200). Life (New York, NY: RandomVILLAGE VENTURESSraduation roth The Founders » 427 ation rolled aroun rmuich credit. at ghey uth. “fledgling” would have given our startup too surround himsel with te} Matt wanted to have some structure and to soe he best Him (© eam a branded eduegty and ershtest. It made complete sense for Ate ion in business, Bain Capital, the § Meanwhile, Will equity operation, sity employees, making ar based Tripod, with Peabody as its leader, had grown to same time, Williams Ceegn mPortant new employer in Berkshire County. At the revitalize the local cconp se td orginized a committee to examine how it eould help industrial firms Intent wich had struggled following the exodus of several major vited him to join the Tee qed eetbody’s success as an entrepreneur, the committee in- fea eats ‘cussion. Out of the subsequent meetings emerged an idea to : rould attract technology and other high growth bust comn : ept gained traction, three wealthy Williams alumni a aed a million fo seed a fund that would eventually become The Berkshires ree eaktars (BCD. Peabody knew just the person to runt fe : a 1996, Peabody explained the idea for BCI to Harris and asked if his Tiend would be interested in interviewing for a position there. Harris did not hesitate He recalled: than a ye; i 7 ims private sat Bain & Company, Harris accepted an offer from First, there was the community development aspect. There was no doubt that the region needed help. I was drawn to the idea of tapping my skill set to run a profit-oriented enterprise that would also have a positive impact on the community. And second, I was the first to acknowledge that no one was about to throw me the keys to Bain Capital anytime soon. ‘The environment at a top-tier investment firm just doesn't lend itself to personal leadership. 1 saw this as my opportunity to build something great The Berkshires Capital Investors: Developing the Model In January 1997, Harris returned to Williamstown and met with the backers of BCI, who offered him the opportunity to launch the region’ first and only early-stage ven- ture fund (refer to Exhibit 24.1 to see Williamstown in relation to Boston). The com- e Id begin the fund-raising process at once, with Harris to complete it and rit ot ea responsi ater that pring Looking back, Haris flected: ald have to remain absolutely rigorous in my knew from ST ely aspen say vel shad lavestnfenk exter foeus on Prolt f competition, the market offered the promise of propriet- With virtually mo oe deably more attractive valuations than could be found ary deal flow at cod mand Tike the fact that I was going tobe the anywhere ea Of course, that was based on my belief that investors in sn town. only player™ not going to drive three hours out to the Berkshires to do Boston were -stage investing ; cartysuge™ Harris invested the $5 million fund in twelve early-stage Over the next v0 rane from telecommunications infrastructure to digital video ies in industries ranging entualy attracted more than $200 million in subse- yortfolio: ned cemly 300 new jobs in Berkshire County, Eight compa- ts and created nr stage investment in Tripod proved particularly A fired by Lys in early 1998 for nearly $60 million w y ‘companies in editing, BCI’ p quent investment see were sold for a profit rewarding after the companyABS + Chapter 24: Village Ventures cevionsly abo his Fat ty late 1999, tho, Harris fl exe to hk toe Wilamstow, 1 ne only had rise an eg investing “ ns million fing tnt had also cccruited two general partners whe Po a ta shes, Wh a ape th iy of a sal clo a joyed the autonomy and status of running his own fit ripe of VC norms. Although he enjoyed his work and felt satisfied i h sbeoes within the local community, Harris felt that, once again, he needed to focus om his career. He ad. mitted, “The vibe was one of sacrifice.” Meanwhile, a three: hour drive east, the Vo ‘community was awash in unprecedented volumes sl ‘cash, and. lores more establishe,! funds offered lucrative and attractive opportunities for someone with his experience, In November 1999, Harris met wah Peabody and laid out many of his frustrations with his work at BCI. As the firm had grown, more of Harris's time had become con. sumed with addressing limited partners’ concerns over everything from industry trends to tax forms. At the same time, because of BCI's regional focus, Harris was forced to scrutinize investments across a range of industries in which he had little or no experi- ence. Little of his expertise, once gained, seemed transferable from one investment to the next, In short, the business model for a $16 million fund simply did not seem scal- able, despite the strong initial returns. ‘Yet Harris continued to find something compelling about providing VC to second- tier markets. BCT's story and subsequent success had generated significant media cov. ‘erage, which had triggered a steady stream of inquiries from other colleges and univer. sities across the country interested in organizing their own funds to stimulate local ‘development and capitalize on internal research centers. At that time, Harris could oaly offer advice to the callers and felt that he might be passing up an extraordinary oppor- tunity. At least from such anecdotal evidence, there appeared to be substantial demand for VC investment in smaller cities, and more importantly, none of the traditional firms seemed interested in pursuing it Harris and Peabody decided upon a strategy. Harris would leave the management ‘of BCL to his successors no later than January 2000. However, before returning to Bos- ton and mainstream VC, he would first investigate the potential opportunity in second: tier markets. He resolved to approach this task strictly from a profit-making perspective: if a viable business plan with an upside comparable to conventional VC failed to emerge, hhe would drop the idea and return to Boston. If Harris found a sufficiently interesting, ‘opportunity, Peabody agreed to leave Lycos and join his friend in the new venture. Investigating the Opportunity Harris believed that by identifying and quantifying the characteristics of market which VC had flourished, he could then develop a framework with which to assess the potential of previously untapped markets. The initial results looked promising (see Exhibit 24.3 for data on markets), Harris found that 77 percent of venture capital was invested in markets that represented only 17 percent of the population and 25 percent of graduate degrees. Investors in these markets encountered valuations 50 percent higher than those in alternative markets. Similarly, traditional markets had 470 percent higher turnover of employees. Harris was also intrigued by his exit find ings: because companies in neglected markets received less investment, on avo their ext multiples, whether throu porea 2h initial public offering (IPO) or acquisition, were higher than those for companies in the top ten markets. In acquisitions, the prem averaged 13 percent, while that for IPOs was 62 percent, despite a lower postofler value (see Exhibit 244 for detailed findings).The Founders + 429 MIBIT 24.3

As of January 2000, 'y hoped to realize the potential future 3 Fora lepton ofthe relevant ty fms, ce Jo ot regulatory and accounting cons Than ie i tty ape wr Baines School Piishing, 2000 Innovation,” HBS Case No. 20004EXHIBIT 24,7 a == ICG —3—cMGi Source: Data from Compustat, accessed March 6,2006. and CMGI had market capitalizations exceeding $30 billion (see Exhibit 24.7 for data). In addition to these possible exit opportunities, the company’s original investors looked to Village Ventures as an ongoing source of proprietary deal flow. The Village Ventures model called for the formation of a network of early-stage alfiliate funds located in small cities and college towns throughout the United States. The partner funds offered a local presence in each target market that was critical both to sourcing deals and to providing the hands-on support essential for managing early- stage investments. Village Ventures would maintain contact with these funds through its own regional managers and coinvest small amounts of capital with the partner funds inva deals early rounds, with the option to continue participation in later rounds. While Village Ventures would receive a portion of each affiiate’s carry, the ‘bulk of the model's economics depended upon’ Village ‘Ventures’ ability to identify the network's best later .¢ deals for its most substantial investments. = “The primary challenge to ianplementing such a model lay in overcoming the bar- iets tuctuntered by previous early-stage VC fands that had tried to operate out Fee renin tnarets Harts and Peabody envisioned Village Ventures providing part: muuinstre ah the necessary benefits of sale and scope by offering the fllowing vel end a national brand, Yadvidelafliate funds woud initially ee a ae rat {20 alin in capital, ustally from local sources such ao el, cllege endowments, dint vet A national hy adn te Village Vetus network woul substantial accel brand and afadon ang procs some case, Vilage Ventre erate and Fat 5 lion a8 debi cotaertent fund to “jump ret an afte Access to domain ind talent. One of Hartis's greatest evant hd en the need fo gers woul ene on he management commits of lage Ventures 2a er eranetwork collaboration, tn this way, individual oa eo sncess to the industry expertise, personal contacts, and wider funds wool ctv othe nie nation ne work434 + Chapter 24: Village Ventures eee ara EXHIBIT 24.8 ee PROFESSIONAL SERVICE: SE g numerous administrative, vey. « ies of seale by centralizing numerous a vest st ese cece “lows the ene and energy of partner fund managers to be focus e investing in and guiding companies. Legal and Accounting ledgeable about fund-specific matters, work in accounting professionals, knowledgea he coy autioa ens to treamline processes and ensure legal and Fanci regulatory compliance, Financial Systems ‘ and aici t's pa Village Ventures provides deal management services, financial reporting, and access to a suite of pre cquiy-teehing ssiwarereesrom, These tools help partner fund managers coordinate investor relations efficiently Brand Identit : The Vilage Ventures national brand suport the lca partners, We create a ‘compelling brand foreach partner fund, which i often based on unique characteristics of the region yet consatet with Village Ventures’ image and identity. Business I fund managers gain access to Narthex®, our proprietary intranetextranet, which facilitates in formation flow, acquisition of industry intelligence, and utiliza lights: VC cont tion of network resources. High. tact database for deal sourcing and collaboration Community of Peers os Nea shops are held for fund managers to network and participate in tain a cones, Narthex®,ourintranetfestranet, allows for regular exchange and erine ene and contacts Sure: Village Ventures Web site (www villageventures.com), accessed April 2005. Planned to achieve significant economies of scale by pooling the back-office funcrione of ts partner funds, The rn a0 ‘cholo Se Esibit 248 for ofering)° Pomtollo companies ona fo bs i ig Pinies prior to the establishment of » parmer fund : a bariciae ae ky of furmp-starting fund-raising in an attentive ane. 8 vide Village Ventures with a core hla fo Rit the fag in the ie holding in ler essed tenes 2 Hal tone sto Village Ventures adopted a d sb Y which it built out the network of ninders placed greatest emphasis” BCI, (© relocate to the Williamston, area, n° Companies urvalyA New Model: Village Ventures + 435 * Local partners. + of relationships the ers atibuted BCY's early success to Haris’s network ather than tanta Massachusetts and his deep knowledge of Williamstown. Harris and Peabo ny tase Ventures general partners into attractive mark ‘eabodly felt it was enti dial with strong local networiet eS cai oars affiliate funds run by individ) Highway 12 Ventures lage Ventures’ Boise-based ered into the mene oe the Process by which early afiliates were onganized and ush- network. Harris's interest in establish in Boi 1 interest in establishing a presence in Boise dated back to his earliest efforts to identify the most ane markets for V The data on Boise is compelling. Micron started there and is still based there, Hewlett-Packard’ highly profitable and innova Imaging Division is there. Six current or f the cost of living a stream venture centers. Furthermore, i’s an entrepreneurial town ... ple start companies there, though in the past they've often had to make due with angel funding or had to move the companies to California to raise real ' got shock value ... people from the East Coast find it ab- surd at first, and that gives us a chance to explain the model, mn June 2000, Harris met Mark Solon, the cofounder of a boutique private equity firm in Massachusetts, who had mentioned to a mutual friend that he was planning to move to Boise. Solon recalled: ind doing business is much lower than in more main- The idea of moving to Boise was not to start a VC fund but to give our kids the best upbringing we could imagine. My wife had grown up there, and we were both drawn to the outdoor life and intoxicated with the idea of actually living in Boise full time. When I came ont in April [2000] to do some networking, I was struck by the sheer number of high-tech folks I met given the sinall size of the town. Shortly thereafter, the idea was born Of continuing my work in the private equity field following our relocation to Idaho. , Jon met Jim Hawkins, a native and lifelong resident of Ida- During Aero Bat nade repels as an entrepreneur and 10 years as the to wit a ar o's Department of Commerce. When Solon pitched the concept of an director of 14ah cid, Hawkins immediately found the idea compelling and recognized Tdaho-based VC Fatt to stimulate local economic development, By May, the tent rea ats first meeting with Solon, Harris recalled: a jon was like this guy, [trust him, and 1 can work with him My initia rome aship guy. VC fs in large part about selling and managing Mark's a relation bonds with people, and that optimizes him for raising customers. Mark en nto great deals, I was already sold on Boise, and the capital and ie Tadd the Toca credibility that Bo and to highly connection wil valued.436 + Chapter 24 eine EXHIBIT 24.9 _ a EI WAY 12 HIGHLIGHTS OF THE ORIGINAL TERMS OF HIGHV VENTURE FUND t oe VENTURE SS : rex general partner responsible for fund in Ma vi oe eement Caer cf Highway 12. All investment of the management team. mragement fe woukd be allocated entirely t oral fund Investment Approval— the West and the Southwest, would join t esis for the fand would require a fall consensus Fee—The 2.5 percent annual m: ey ramagement tear salaries, rent, travel, and soon. _ Say Promode Thom the fund's successfl investments would be equally divided Into thirds among Solon, Hawkins, and Village Ventures Ceimnestment_Village Ventures woud commit its own capital to fund 18 percent of Highway cin eet nts The terms would allow Village Ventures to make additional investments ontop of this amount but not a greater percentage Services—Web ste design, IT services and support, accounting, and tax services would be provided to Highyay 12 at no cost by the Professional Services Group of Village Ventures. ‘Noncompete—The memorandum bound Highway 12, Village Ventures, and the individual anager to anoncompete agreement. Ths stipulated that should the agreement be prematurely breached, the party in violation would be prohibited for a period of eighteen months from fund- raising or venture investing within the state of Idaho. Source: Village Ventures. Solon commented: Matt was the primary reason that I decided to partner with Village Ven- tures He was stl in his late 20s when Imet him and svue imped with his depth and clarity of thought. I vividly remember that he was able to clear articulate his vision of what Village Ventures would become in great letail. Not even halfway through that meeting, I knew that Matt was some- one that I could realy enjoy working with in a close partnership, Several months later, Village Ve ths later, Village Ventures and Highway 12 signed a private placement ern kSescribod the terms of Highway 12's, Tdaho Fund r ‘sce Bah 249 ses Er change fr 6.6 points of carr, Vilage Ventures provided the sen~ office with a CFO and a general counsel, as well as additional id. After quickly $10 icky raising © area, fund-raising stalled until the Idaho nd. With momentum reestab-—_ ANew Model: Village Ventures + 437 EXHIBIT 24.19 WAY 80 Mark Solon, Cofounder and Managing Partner Mark by rings eighteen years off ment team of Highway 12 Vor ntl management and investing experience to the manage cy on ey 12 Ventures In 1808 er antic Capa Group. «private viding seed- and early, Mssachusetis. ACG focused is actits ob too primary areas: pro- ial consulting for local grace ® eatity funding to companies worldwide, and delivering fnan- Aitection, ACG made ee nen and companies in the former Soviet Union, Under Marks retail distribution. and aed anoge MeStments in the manufacturing high-technology, production, “ Jn andeal estate industries, Mark ia graduate of Lehigh Universi Jim Hawkins, Cofounder and Managing Partner @ eae pee relent of ao, {im carer is unique, spanning employment in banking, nance, musiness, and public policy. Jim has been appointed to senior positions by three. ferent Ilo governors, From 1957101086, hesered ar necor ote he Deparnent of dre lit’ Career began inthe banking industry where he rose tothe positon of vce Prpident oftrust operations at First Security Bank. After ths, he ventured into the entrepreneu tap rece ope ne led he aecuston of te Statewide Auto Supply chain. Jim grew le company significantly and successfully managed its me ‘with a Fortune 500 company. Jim JSa.graduateof the Univesity of Maho 8s merser with a Fortune 5° company. Mike Mers, General Partner Prior to joining Highway 12 Ventures, Mike was a general partner at BRM Capital, a private equity frm with more than $350 million in capital under management. While at BRM, Mike was ‘one of four partners and led the firm’s Communications investment team. Before BRM, Mike spent two years as a Senior Manager of Strategic Equity Investments at Intel Capital, as well as a decade at Hewlett-Packard. Mike is als the founder of Mers Financial Advisors a financial plan- ning and wealth management frm. Mike received an MBA ta International Business from Bristol University where he was an Intemational Rotary Scholar. His undergraduate degree is from Boise State University Phil Reed, General Partner Phil has led distinguished carcer in the technology industry since cofounding IMSAU/Com- puterLand (NASDAQ. CLND) in 1975 and BusinessLand (NYSE: BL) in 1982, IMSAI, one of the earliest manufacturers of Intel 8000-series microcomputers, became ComputerLand the first lind largest dedicated distribution channel for personal computers. Pil subsequently created a tnarket entry and differentiation strategy for USTelecenter, a value-added reseller of telecommu- ications systems, fo suecessfully obtain multiple rounds of venture financing. In 1092, he be- cute President and CEO of SkyStar Aircraft Corporation, « manufacturer ofthe popular KitFox Be In 1099, Pil cofounded Duckets Comporation, an Interactive Marketing Applications seetues Provider (ASP). Phil also served 2s Chairman for both Centegy Corporation, a venture- Faled supply-chain stare company. and Mountain West Capital Group, «direct acces tral deepen neq Milita grauteof Harvard Calley. Source: Highway 12 Ventures. PO The Model Evolves had signed up ten management teams around the Ye signed vp ten management teams around the coun- By eniy 200 Voge vent fands. The Bras model ad received considerable atten. try and closed hve press, and in February 2001, Haris and Peabody closed « tion a Ue 4£ 830 milion led by Janus Capital with participation by all of the firm's second rot original investors. to-continue the rapid expansion of the partner fund network, The tea ‘ne stil had lts of opportunity and part of me was chomping at Harris recalled,438 + Chapter 24: Village Ventures a EXHIBIT 24.11 MO ADJUSTED PRICE PER SHARE OF CMGI AND ICG, MARCH 2009 TO MARCH 200: ee 120 7 ) 80 oLA 40 MwA 20 aw \ oN Sects eeeectenenne] Sg s PP PLE PE PES OES ICG —-— CMG $ per Share, Adjusted Source: Data from Compustat, acessed March 6, 2006. the bit to grow, the board kept decision making and worki adding more funds.” He el t me focused on the fact that optimizing our investment ing hard on the portfolio was ultimately more important than ‘aborated, “Just as important as our new funds had been ourBy mid-2003, Village v, ee ee ployees two years before iy cmttmes had evolved from a maximum of almost forty em- partners supported bye geo Nore streamlined core team of eight experienced general nal services tall oe esa of twelve, including associates and support and professio- Years of operation eset 24.12 for biographical information). Moreover, several pects oftheir invests nthe’ Village Ventures and its network to formalize many Me fund ted ene Process (see Exhibit 24.13 for the investment process). Affili- ceo Proprietary relationships with local institutional deal sources. process manual hi r meeti ad bea Seoul with the affiliates, and a standard due diligence meetings were held at seen throughout the network. National fund managers’ and collaboration, Poe tions around the country twice a year to promot colle Village Ventures’ propri 1 funds also began to interact on a daily basis using Narthex®, formation shai ; ipticl 5 intranet/extranet, which facilitated information flow, in- ration sharing, and utilization of network resources. ighway 12's investment process demonstrated the approach, Solon explained: est ue firms have their meetings on Monday morning, Village has theirs on Monday afternoon so the regional partners can sit in on the morning meetings of their partner funds. Matt [Warta] in Denver attends our meet- ing personally about once a month; otherwise he’s on the phone with us. He also covers funds in Arizona and New Mexico. ‘The process is pretty straightforward. When we find a deal worth looking. at, we appoint a lead partner and a wingman. After two weeks of due dili- gence, we write up a flash that outlines further work, and Warta and the ead will bring it up in the Village Ventures meeting and spend five minutes on it. This provides us with ideas of areas to investigate, experts to contact, and the like, It always helps us focus. All through the diligence process, EXHIBIT 24.12 VILLAGE VENTURES MANAGEMENT BIOGRAPHIES under and Managing Partner consultant at Bain & Company, Boston. In 1995, he signed er pan Capel, Harris's mos notable transactions eed A erate of a credit-reporting agency, and the $90 million hase and is left Bain Capital in 1997 to become the found- ‘Capital Investors, a venture capital fund chartered to or of TP re County Under Hares’ leadership, BO fst fund of $5 rest in. COMPanies Companies, with seven successful exits to date. The BCI organization, mill crate has gone on to rase an. aditional $60 million. Harris graduated Villas 8 non ams College in 1994 ,, Cofounder and Laonenaeel ‘peurial abilities are Bo founded Trip Matt Harris, Cofo Harris began his care ‘of The Berkshires eral Partner ized in the business world and beyond. While stil he ral dewelaer of we-sed prsonal ident, ded Tr to Lycos in 1968 for $58 million. Bo then became a college and mmunities Tripod pcos ‘Which was sold to Spain's Terra Networks for oa nt of Network State op cofounded Streetmall (now called Waterfront Media). 1 est RadioVondoo and in 2004 he cofounde Full "Ay entrepreneurs called Lucky or Smart?, which was ded tly wrote 2 bOOk foro Poy grated from Williams College in 1994, (Continues) Managing Ger ‘widely recog! od, Inc., one o L440 + Chapter 24: Village Ventures “anaes \T BIOGRAPHIES VILLAGE VENTURES MANAGEMENT BIOGR =i Michael Barach, General Partner enture Partner, where he Wasa partner fra Nice ined Vilage Ventures fom Besser Venture Furnes, where Hevea partes can 1994 to 1998. Michael also served as president an $115 lion funding or he come, inte run eaeancead sel pblicellerng Micha ade a BA to Ae in three rounds of financing and an initial pul Kappa. He received his juris doc. os summa cum laude and Phi Beta Kappa. H ved his ju tart fom Hard ee etl aon MBA fo Harvard Buses Seal, hee fee uated as a Baker Scholar, Sean Marsh, General Partner +a Masachoss Sepang Yr TSC Egy ue La Mast rte Sait fe ome Spec utero te Fa Lee Compa Ate ee ent, Sean vas one of three partners who managed over $29 mi lystage sepia eae tne of me worked inthe Investen ang Group at Prudential Securities. Sean graduated from Bowdoin College Economics, Jane Martin, General Partner mien Joining Village Ventures, Jane was Acting Chief Executive Officer at Wisdom Tools, In. {company that she spun out of Indiana University. Since returning to Bloomington, Jane has been involved in varus pro bono investment eounseling and fund-raising activities, many in ax Pecistion with Indiana University. She has also invested in several local start-ups and venture finals, Before her return to Indiana, Jane was a General Partner en Venture Partners, alead- Feature capital frm in Silicon Valley. Jane isa CFA and holds aS in, marketing and finance from Indiana University Matt Warta, General Partner rior to Joining Village Ventures, Mat was vce president of co rate development and finance ma peerCrop-com, In. where he vas instrumental the do *pment of the company’s initial business plan and securing of over $25 mllonn financing, Before this, Matt was a vce preident at Moch Ventures, Ine, where he led investment rn companies such as VerticalNet, Inc. Univer, 8a director at Koch Capital Serv. Bob joined ‘Village Ventures in May 2000 and is res, msible for the le; al affairs of Village Ven- tures and its network of funds, including fund develo ment, loterfund relationship, investments, ‘ures, Bob was Group Counsel at A pecs ier en eas Progen ob ae Express Bob was ee practice with the New York law finn of Breed, Abbott & Morgan, Bob, Braduated magna cum ‘eude from Williams College in 1973 ‘and ‘cum laude from the ity of Mig lia from the University o Sore Messi Chief Operating Officer and General Partner ie senior administrative Partner of the firm, Steve overse ns teve oversees t IT, wd sonmunicatns ‘stem ofthe company and ite clients, Por fa a iene ti dent of it cece Bak {oo Banknorth Massactusetts) Stora loge his Bank Sor Sinica eset ea iH ale Positions with BankBoston and Key sated more Man 2000 businesses and provide oat received his Bachelor of Sema i : cert ee one Bi Source: Village Ventures WeeIW EXWIBIT 24.13 VILLAGE VENTURES INVESTMENT PROCESS Investment Origination and Investment Investment Monitoring Selection Execution and Development Investment Realization Key Differentiutors «Emerging US. tech-center + National scale diligence + Access to leading corporate + Extensive relationships with focus resources (customers, partners for business devel- numerous corporate buyers; « Partnership with institutional ©*Pe"s, ete) opment and intermediaries deal sources + Relationships with leading + Broad resources for recruit- + Deep M&A and IPO national venture firms for ing experience + Leading local provider of early-stage capital WVillage Ventures’ Role + Screen at biweekly partner ‘meeting with Partner Funds «+ Assess “national” caliber + Identify and access network experts to assess deal syndication + Broad pricing and terms Inowledge « Axticulate diligence plan and focus areas «+ Provide access to WW network for expert resources + Colead syndication efforts + Vote on investment ‘+ National scale makes VV + Relationships with national relevant to many buyers venture firms for next round «+ Facilitate access to corporate + Provide introductions to partners buyers and intermediaries + Colead recruiting + Work with CEOs to strate- s Access to VCs for later 8 optimum sale process rounds + Board seat in later rounds + Primary deal originator + Lead organizer of entrepre- neurial conferences among others in the market + First cut of diligence [Partner Funds’ Role + Execute primary diligence + Colead syndication efforts + Vote on investment + Board member in early + Help management interface round with intermediaries and + Colead recruiting buyers + Trusted local partner for * Lecco tai for ‘management ‘Source; Village Ventures442 + Chapter 24: Village Ventures 1 progress, so ther he Village Ventures group on the Progr T course, Ah ‘Warta reports Into tae ne the way, not abrupt changes o| Alter a series of touch points along the fe an in-depth investment recom. 7 ta ‘t sree wourpaners and the Village Neste gro. ne lead wall be on the me for the Vilage ene om! butthee, ima maybe fifteen minutes ca _ a hese are six very smart people who haven't Fe een ee 0 and the deal. Thanks to their questions and ob, allen in love with the CE servations, we've probably avoided doing some bad deals. the Village Ventures network had successfully closed thirteen partnr fone nel ripen general partners presided oa network of §249 milion in commited capt In a Janay fimvide correspondence, Harris announce “For VC generally and Village Ventures specifically the worst is, in fact, over. As an pated, 2003 saw our focus shift from being a fund-raising entity to an investing ent The infrastructure had been built and the team assembled. The pace of investment actsty soon quickened. Indeed, PricewaterhouseCoopers named Village Ventures the sixth-most-active early-stage VC firm in the nation during the second quarter of 2004: Highway 12 Ventures in 2004 By June 2004, Highway 12 had invested almost $7 million in eight early-stage portfolio companies and expected to close a ninth new deal and a follow-up investment in the next few months. Coinvestors had contributed close to $70 million to these firms (see Exhibit 24.14), Solon reflected on his firm's progress to date: Highway 12 has evolved from a novelty into a firm that is building a reputation for providing value to its portfolio companies, far in excess of just capital. Of course, we're also located in the heart of the fastest growing region in America. Three ofthe five fastest growing states in the country are in our fo- cus area—Idaho, Utah, and Colorado. Being one of the few sources of institu. tional capital available for early-stage ‘companies in the region results in a eit supply-demand imbalance for us and traly attractive Pricing for our and a venture partner an for advisory board mem! 4 PrcestrhoueCoope, Thomson Ventre Econ ii Money Suey,” June 2004, p.4 tpi National Venture Capital . Reportpat March 120g. re, Srometersurveys.com/docs/O4Q2MoneyTree443, giGWAY 12 VENTURES ACTIVE Gog — = ——— ce —— imp nal HOLDINGS ~ . Investment ate Sold ee Investment Orval Total Equi Febog tact TRL, ald or Multiple of one! ee nal meet _ Mbt Valie__vet ora 3 nag 8 aio ‘2 % company 4 May 03, = wes 7 +e company 5 May 03 jee = as ts ny 6 Jun- ae al “ cm (we ee i Company 7 Apr-04 jam eo “300 i Company 8 Jan-00 Jancon 608 608, L ne ; 573 tual Portfolio Gross of Management Fees & Carry i. i 6,796 $6,622 oat - ‘Top Quartile Median Lower Teas Espert IRR for 2000 Vintage Year Funds 2 = — Venture Expert IRR for 2001 Vintage Year Funds vq “oon oe ua 08% 108% “213% Scere: Highway 12 and Village Ventures, an Sere High BF and Thomson Financial Venture Economics, ww. venturexpert.com, accessed EXHIBIT 24.15 HIGHWAY 12 FUND I & Il ADVISORY BOARDS Fund I Advisory Board «Joe Daltoso—Former Chairman & CEO, Micron Electronics (formerly MUEL:NASDAQ) 1 ajay DesatSenor Vie Presiden, Merril Lynch, Chicago 2 Kent Ivanoff—Executive Vice President, Capital One (COF:NYSE) aoa _-Gonerl Parner Free Tecoloy Ventures; Former Senior Vie ae Real ‘Networks (RNWE: NASDAQ) «s Kurt Liebich—President, Trus Joist. ‘Weyerhaeuser Company (WY:NYSE) Holmes Lunat—CEO. Kestrel former CEO, Portsmith; cofounder, Extended S ): NASDAQ) . ns ON ichael—Former Chairman & CEO, Albertson’ (ABS:NYSE) + Gary Micha & CEO, Sumner Garden Geter: omer CEO and Walt Minnie foit International Fame "T}CONASDAQ) Pres den of laform &Soation Marketing, ntl ONT NASDAQ) dest rece chairman Tatended Systems (XTND:NASDAQ retired Senior VP & Ray Smelek— ON ard (HPNYSE) GM, Hewlett packard enor VP& Gecenil Maing John Stedman444 + Chapter 24: Village Ventures 24.15 (CONTINUED) EXHIBIT £15 (CONT - HIGHWAY 12 FUND I & 1 ADV [Franck Socio Senior VP & C10, Delta Dents a ee P egional Vice P sont, Quest (QNYSE): member, San ead “ ois 1g, Micron Technology (MU:N’ Tr former Senior VP & CIO, «Barbara Wilson— res Francisco Federal Reserve «Rafe Vandenberg—Director of Marketin Fund 1 dor Bard AUB gas Development, Micron See ca TUNISED "oxi o vutive Chairman, Office Max Incorporated (O% + George Hara Ext csc Corporstion (BCCNYSE) jefferson Jewell—Cl founder, Blackfin Technology Ce et nation Stns, Miron Technology (MUNYSE) « Jeff Moeser—CEO & founder, Dedicated Devices; former Executive Vice President A184 CTO. Micron Electronics (formerly MUEENASDAQ) + Bob O'Connor_Partner, Wilson Sonsini Goodrich & Rosati, Salt Lake City, Utah «+ Dr. Cheryl Schrader—Dean of Engineering, Boise State University Source: Highway 12 Venture. ‘Samer: Hy 12ers Solon considered the upcoming negotiation with Harris: ‘The back-office support and such—we can hire that. We have to consider the value we're receiving from Village Ventures in proportion to the economies we share with them, Back when we started, we needed the anthentication. Without their contacts, potential coinvestors would have said, “We're getting into bed with a complete unknown for five years? You're kidding,” But now we're going out with an exit that returned 18 percent of our fund, which pla- ces us in the top quartile for 2001 vintage funds. With a larger fund and more bitory, we hve mnoe visbity and more of a track record, The question is them and what are we willing to pay for it THE NEGOTIATION 0th ta ‘omen mh final approach, Harris finished reviewing his notes and tured was sched cet oth Pe ane Ventures Fund 1. Upon his return from Boise, he fund-raising time lines forthe $195 a ue rato the vies vas Bact fund they hoped to close in 2008. mmmaiy| for sy ae the documents and stopped to iio the active portfolio nary toons in the utd! (see Exhibits 24.16a through 24.16e) eeThe Negotiation + 445 —= VENTURES FUNDIPROFILED eal Flow & investment 3,000 Companies, 48 Investments = 1.5% of Deal Flow Telecom Software Hrd a Business Sve. BOthor Investments By Syndicate Position Source: Village Ventures. EXHIBIT 24.16b ILLAGE VENTURES FUND I PERFORMANCE ANALYSIS, 2000— vi investment FMVa EE 446 + Chapter 24: Village Ventures EXHIBIT 24.16c Services 1 Software I Healtheare IT 1 Software 2 Software 3 Consumer 1 Software 4 Software 5 Communications 1 LifeSci 1 Software 6 Other 1 Consumer 2 Software 7 Software 8 LifeSci 2 Lifesei3 Consumer’ Communications 2 Healthcare IT 2 LifeSei 4 Software 9 Software 10 Software LL LifeSei 5 Healtheare IT3 Software 12 Other 2 LifeSei 6 Medical Dev 1 Software 13 Services 2 Consumer 4 Healthcare IT 4 Communications 3 Healtheare IT'5 Software 14 Healthcare IT 6 Initia Date of Investment ‘May-00 Jun-00 Aug00 Sep-00 0ct-00 Oct-00 Oct-00 2t.00 Nov-00 Nov-00 Dec-00 Dec-00 Mar-01 Jun-O1 julor Oct-01 Jan02 Feb-02 Feb-02 Apr Apr-02 May-02 Jun-02 Juloe Juloz Dec.02 Jan. 08, Jan-03 Mar-03 Apr-03 Apr-08 May-03 May-03 Jon.03 Jul-a3 Jubos Jul-o3 VILLAGE VENTURES FUND 1 ACTI IVE CORE HOLD Date Sold or Valued Jun Jon Jun. Jun Jun-04 Jun-04 Mar-02 Mar-2 Jon-04 Jon-04 Jun-04 Jon-o4 Jon-04 Dec-01 Jon-04 Jon-04 Jun-04 Jon 04 Jun-04 Jun-04 Jun-04 Jon-04 Jn-04 Total Investment ($0005) (3,643) (3.750) (L701) (746) (67) (505) (233) (83) (1,673), (357) (452) (500) 1.4s2) (39) (332) (445) au) (225) (132) (399) (38) (82) (243) (190) (600) (48) (57) as) (73) (83) (189) (305) (130) (493) (10) (134) (331) orMkt, Multiple of Valuation Value ($000s)__Investment Basis 2711 07x A - 0.0% Fn 2,001 12x A 2,081 28x A 48 07x A - 00x A - 0.0% Fa - 0.0% Fa saz 05x A 27 07% i 452 10x c = 0.0% Fn 6,222 43x 4 - 00x Fn 382 10x c 260 0.6x A 214 10x c 225 10x A 85 06x Fa 399 1.0x c 6 12x A i 10x A 243 10x c 190 Lox c 600 c 143 é 106 é 13 < 2 c 83 ¢ 192 q = c 156 q 493 ‘ 10 ic a c 331 ‘ c‘The Negotiation * 447 Joust 24-160 (CONTINUED) _ {ulAGE VENTURES FUND I ACTIVE CORE HOLDINGS Initial Date of ‘ ‘Total Equity Realized syxame _Investaent,—DateS9ldor —Imestment or Mi, Multiple of Valuation er cations 4 Aug-03 “ (20009) —-Value(8000s) __Inwestment_ Basis eS a Jon 08 ase) 86 10x € ane sep js ey 236 10x a sy one Jun-04 (208) 204 10 c wel Deets Jon-04 (199) 199 1.0% ic si teal Janos (168) 187 Lax A usa a Jun-04 (04) 108 1.0% © Communications 5 Apr-O4 Jun-04 (as) 1 wie cC Software 17 a — Jun-04 (ass) 188 1.0% c Management Fee as na (3,225) fa nia & Carry” 7 WPF Total Net 46 Investments $(04,831) $21,698 osx of Fee & Carry: * WeF Total Gross 46 Investments $(21,606) $21,698, 1.0x of Fee & Carry ‘Source: Village Ventures. es: Annual Management Fee Assumption: 2.00%. "Management fee is assumed to be industry standard 2 percent per annum; ‘etual WPF fees are need based and will typically be les. Valuation Key: A = Last-round valuation, B = Cash or securities distributed, C = Valued at cost, Fn = Footnote Footnotes: Services 2: Out of business. Soforare 3: Investment writen to er0—falled to raise additions funding, Software 4: Investment written to: zero—failed to raise additional funding, ees Valuation vriten down rerling fom lgging nancial performance and inability of company to attract outside capital. bother 1 Retura fom this investment curently expected t Be 27> Software 6: Out of business.