LEGAL DISCLAIMER

The information contained in this presentation is provided solely for informational purposes and does not constitute an offer or solicitation of investment in any Brightspark or OurCrowd limited partnership related to any companies. Anything contained in this presentation should not be construed as creating a presumption by you, Brightspark or OurCrowd that you are an accredited investor. We make no representation or warranty, express or implied, with respect to any data provided to you regarding any information provided by the companies on its web site or in this presentation, and will not be liable in any way to you or to any other person for any inaccuracy, error or omission of any company data.

Please be aware that investments in early stage companies contains a high level of risk and you should consider this prior to making any investment decisions.

Learn more:

www.brightspark.com/risk

www.ourcrowd.com/disclaimer

INDIVIDUALS ARE INVESTING IN CANADIAN STARTUPS

The weather is cold, but the market is hot!

INVESTING SERIOUSLY IN STARTUPS

Build your network and reputation – let the deals come to you

Build deal flow

Determine your investment strategyThesis, Pace, Focus

Learn from other people’s mistakes

Educate yourself

WHAT’S IN A TERM SHEET?

Money + Control

Non-legally binding Confidential Drafted by the lead investor New term sheet every round of financing, but the first term sheet sets the

grounds for future funding

CONQUERING THE TERM SHEET

Price / Valuation

Two things impact valuation: stock option pools and warrants

Entrepreneur math VS investor math

$______ per share (the Original Purchase Price). The Original Purchase Price represents a fully-diluted pre-money valuation of $ __ million and a fully-diluted post money valuation of $__ million. For purposes of the above calculation and any other reference to fully-diluted in this term sheet, fully-diluted assumes the conversion of all outstanding preferred stock of the Company, the exercise of all authorized and currently existing stock options and warrants of the Company, and the increase of the Company’s existing option pool by [ ] shares prior to this financing.

VALUATION

How do you determine a fair valuation?

Market comparables Previous rounds Traction Team Competition for the deal Ownership amounts / percentages to motivate founders and management Analysis of what a “win” gets you upon an exit

CONQUERING THE TERM SHEET

Liquidation preference – two scenarios

Important terms:

• Liquidity event• Actual preference• Participation: full participation, capped participation, non-participation

WIN LOSE

If the company sells for X timesinvestment

If the company sells as a “fire sale”, investors want to ensure you get your

money back before the people who have “sweat equity” or founder shares.

CONQUERING THE TERM SHEET

Liquidation preference example:

Priority for a cumulative dividend of X% per annum, compounded annually (the “Preferred Return”), payable only in case of a liquidation event pursuant to which the Preferred Shares are not being converted.

Upon occurrence of a liquidation event, holders of Preferred Shares shall be entitled to the greater of:

the as-converted to Common Share amount; andReceive payment in preference to any other junior securities, from the assets of the company available for distribution, of an amount equal to original issue price of such Preferred Share plus the Preferred Return plus all declared but unpaid dividends.

CONQUERING THE TERM SHEET

Operating the company

You want to ensure that the company will be well managed, that there are appropriate “checks and balances” in place, that shareholders rights are protected.

Board of Directors

• Usually a balance of investor, company, founder and outsider representation• Chosen by mutual consent of the board OR voted upon on the basis on

proportional share ownership on a common-as-converted basis

Ask yourself

Do you want board representation, control, observer rights?

CONQUERING THE TERM SHEET

Protective Provisions

Rights that investors have on certain actions by the company. They do not eliminate the ability to do certain things, they simply require consent of the investor.

What entrepreneurs want VS what investors want

Often negotiated:

• Raising of the debt threshold• Minimum threshold of pref shares outstanding for the protective provisions

to apply

CONQUERING THE TERM SHEET

Anti-Dilution

Used to protect investors in the event a company issues equity at a lower valuation then in previous financing rounds.

Important terms:

• Weighted average anti-dilution• Ratchet-based anti-dilution

Anti-dilution math:

NCP = OCP * ((CSO + CSP) / (CSO + CSAP))

CONQUERING THE TERM SHEET

Pay-to-play

In a pay-to-play provision, an investor must keep “paying” (participating pro ratably in future financings) in order to keep “playing”(not have his preferred stock converted to common stock) in the company.

Much less common than 10 years ago.

CONQUERING THE TERM SHEET

Drag-Along Agreement

Tag along (or “co-sales”)

The [holders of the Common Stock] or [Founders] and Series A Preferred shall enter into a drag-along agreement whereby if a majority of the holders of Series A Preferred agree to a sale or liquidation of the Company, the holders of the remaining Series A Preferred and Common Stock shall consent to and raise no objections to such sale.”

All Parties grant each other the right (as for the Founders; after the expiration of any lock-up period, see above) to participate in any sale of the Company’s share capital in the same proportion and on the same terms and conditions as offered to the selling Party.

INVESTOR RIGHTS

Redemption rights

Redemption rights are principally designed to protect investors from a situation where, after a period of time, their portfolio company is just moving “sideways” and, accordingly, is not an attractive acquisition target or IPO candidate.

In that case, the company could be required to repurchase their shares back.

Unless prohibited by law governing distributions to stockholders, the Series A Preferred shall be redeemable at the option of holders of at least [__ ]% of the Series A Preferred commencing any time after the [fifth] anniversary of the Closing, at a price equal to the Original Purchase Price [plus all accrued but unpaid dividends]. Redemption shall occur in [three] equal annual portions. Upon a redemption request from the holders of the required percentage of the Series A Preferred, all Series A Preferred shares shall be redeemed [(except for any Series A holders who affirmatively opt-out)].”

INVESTOR RIGHTS

Pro-Rata Participation Right

The right to continue to participate in future rounds so that you can maintain your ownership.

VERY important to investors. Why?

Because you want to “double down on your winners”. So, you want the company to be OBLIGED to let you invest more if you want to in future financings.

Diligence

Defines:

• Satisfaction of the Lead Investor with the results of its due diligence investigations• Final legal agreements• Consents• Who pays legal fees (Capped?)• Exclusivity• No shop• Evidence that all current officers, employees and consultants have entered into the

Company’s standard form proprietary information and inventions agreement, and an appropriate employment or consulting agreement, satisfactory to the Lead Investor

CONQUERING THE TERM SHEET

CONQUERING THE TERM SHEET

Shareholders agreement

Defines:

- Pref share permission needed to create new shares, pay dividends, create new class of shares

- Change size of board- Indebtedness larger than $X- Granting any security or indebtedness- Changing the nature of the business- Anything out of ordinary course of the business- How much are execs paid?

TERM SHEET: OTHER TERMS

Other terms that you should know:

• Dividends• Conversion• Precedent to financing• Vesting• Information and registration rights• Rights of first refusal• Voting rights and employee pool• Restrictions of sales, proprietary inventions• Founders activities• IPO shares purchase• No Shop Agreement• Indemnification and assignment

NEGOTIATION

Entrepreneurs want to:

• Build a successful business• Raise enough capital to bring their vision to life • Keep as much control over the company as possible• Share the risk and reward with investors

Investor’s point of view

• Maximize IRR• Wise spending of money• Not to get diluted• Exit• Reputation

PICKING WINNERS

Due Diligence can take anywhere from 20 minutes (Dragon’s Den) to a few months (Brightspark/OurCrowd)

PICKING WINNERSCritical Factor Fatal Flaw

Product Adoption No evidence potential customers are likely to adopt

Route to market No clear channel to market

Product development status Much more research and development required

Market potential Market size too small

Protectability No barrier to entry for competitors

Customer engagement Features do not match market need

Relevant experience No relevant entrepreneurial/business experience in the team

Financial model No clear path to profitability

Canadian Innovation Centre – Critical factors for the initial screening stage

VEHICLES FOR INDIVIDUAL INVESTORS

BRIGHTSPARK VENTURES

PROVEN EXPERTISE & UNPARALLELED NETWORK

20+ years of VC experience, 30+ tech, software & entrepreneur experience Delrina was the grandfather of the tech industry in Canada Many of the best VCs and successful CEOs in Canada “seed” out of Brightspark Repeat entrepreneurs gravitate to us – If there are great deals out there, we see them first! Dealflow is approx. 5-7 deals a year – We seek quality over quantity 80% of our work happens after a deal is closed, growing companies

We curate the 1-2% best deals from high-growth

potential early stage tech companies

Brightspark-managed fund set up per deal and invests in every deal, manages due diligence, co-investments,

and overall portfolio

Accredited Investors gain insider access to the best

deals and invest on a per deal basis alongside top institutions

and funds

BRIGHTSPARK’S INVESTMENT THESIS

Team

Stage

Market

Price

OURCROWDHighly selective deal flow: OurCrowd’s team of investment professionals sees 150-200 new opportunities every month, meets 20-30 management teams and, after an in depth due diligence process, selects on average 2-3 to invest in. Access to internal investment rounds: Our team leverages its extensive network to proactively identify and pursue companies we want to invest in, gaining access to investment rounds that are closed to other new investors.

Full transparency: OurCrowd invests its own capital alongside our investors in every investment, at the same terms we negotiate with the company.

OURCROWD’S INVESTMENT THESIS

Unicorn?

Team

Market

Value Prop

Traction

Sponsorship

Valuation

BEST PRACTICES

Invest in what you know

Invest alongside experienced investors

Post-investment involvement

Investor etiquette

Diversify your portfolio

PORTFOLIO MANAGEMENT TIPS

Keep your investment size consistent

Double-down on winners in follow-up rounds

Diversify – invest across many sectors

Build a big portfolio

Figure out how much you can afford before deciding how much to invest

Be patient

Only invest money you can afford to lose

ASKING THE RIGHT QUESTIONS

Questions you should ask:

• Yourself

• The company you’re considering investing in

• Your co-investors

Q&A

Q&A