Through the Labyrinth

Presented by Julie Meyer for CIO Connect

London, UK5 March 2008

AGENDA FOR THIS MORNINGThe CIO in 2008

Who is Ariadne? Who was Ariadne? Follow the Entrepreneur What did we learn from Skype M&A as the new R&D The role of the CIO/CTO in a Start-up Key Lessons Learned Critical Success Factors Game Changers

The Ariadne Capital StoryBuilt by Entrepreneurs for Entrepreneurs

Founded in December 2000 to create a new model for financing entrepreneurship in Europe

My background Founded First Tuesday [largest network of entrepreneurs

which launched Internet generation in Europe] – sold for $50m to Jerusalem Global

VC experience with NewMediaInvestors [now Spark Ventures]

Raised more than $200 m for start-ups and advised more than 100 companies over 10 years

Ariadne’s initial funding was secured from 45 founding investors who are leading entrepreneurs – founders of BetFair, lastminute.com, SES Astra, Hotmail, WorldPay

Team of 12 We’ve backed [advised] some significant game-changers in our

history so far: Skype Espotting

ARIADNE CAPITALWhat’s in a Name?

Ariadne was the Greek princess who helped Theseus get through the labyrinth with the golden thread

That’s what we do with our companies – we help them navigate and negotiate their labyrinth

FOLLOW THE ENTREPRENEUR‘The credit belongs to the man

who is actually in the arena’

“It is not the critic who counts, not the man who points out how the strong man stumbled or how the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes short again and again, who knows the great enthusiasm, the great venture and spends himself in a worthy cause, who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat.”  - Theodore Roosevelt

ENABLING BUSINESS 2.0What did we learn from SKYPE?

New Products and Services gain traction through Consumer Adoption first and then get picked up in the Enterprise

Smart entrepreneurs segment their potential customer base and their addressable market by characteristics other than geography; ie early adopters of broadband, high mobile penetration etc

People are living more and more of their lives online Giving people a more frictionless, efficient way to

communicate matters. Initial free services establish consumer behavior and

then can lead to a business model Great marketing trumps great technology

“Assume Innovation Occurs Elsewhere”

-BILL JOYCo-Founder Sun Microsystems

“Innovation is Difficult to Sell”

- ISAAC NEWTONPhysicist & Mathematician

WHAT WILL THE FUTURE BRING Entrepreneurship as Engine of

Growth The next wave of large European-founded companies will be built by serial European entrepreneurs

Cycle of innovation is increasing and shortening Globalisation is softening the edges of economic

cycles Start-ups will be acquired earlier and remain more

autonomous inside firms EMAP/WGSN Yahoo/Answers.com NewsCorp/MySpace Last.fm/CBS

ROI for M&A will be recalculated and rethought

THE OPPORTUNITY FOR LEADERSHIPEntrepreneurship, Internet and Capitalism

Capitalism was about empowered authority which didn’t necessarily activate the citizenry; the Internet stands that on its head, and shifts the power to the Individual – making Individual Capitalism the force of the 21st Century - Iqbal Quadir, one of the founders of

Grameen Phone

WHAT ENTREPRENEURS DO INSIDE COMPANIES

They Get Out and Create a Market Storm

Entrepreneurs, if they're good, have the best insight into how particular markets are developing. They are in the "eye of the storm," dealing every day with how markets are dynamically evolving.

Entrepreneurs also think differently. They see things that others don't. They feel compelled to make stuff happen, often simply because they see something that doesn't exist yet—and should.

Sometimes that blind faith leads to catastrophe, but more often, entrepreneurial insights eventually turn into step changes in how industries operate.

IS M&A THE NEW R&D?probably

If a large company acquires an entrepreneur's insight and innovation, it has the opportunity to get ahead of rivals and own the step change.

Time and time again we have seen that the benefits of market disruption and dislocation accrue to the first few players who embrace it.

Put another way, if a market disrupter is acquired by the entity he or she has the most potential to disrupt—and the acquirer embraces, rather than smothers, the disruption—it can be extremely value-enhancing.

Especially compared with the alternative.

What is needed in this world of fast innovation

by the CIO and his/her team?

The Knowledge of how to manage risk in working with and deploying applications from companies who may not have £5 m on their balance sheet

The Ability to explain the “enabling” side of the business for the CEO so that it isn’t a black hole Strategy without technology cannot be world-class The CIO interprets the company’s strategy with technology

– a technology architect – just as the CFO interprets the company’s strategy from a financial point of view – the financial architect

The Reach into Best Practices so that the CEO knows they are not reinventing the wheel

The Ability to build community in a changing organisation

Morse as Strategic WeaponManaging Risk

Mid-size Systems Integrator Previously Known for being a Sun Reseller Work well with Hyper-growth companies Partnership of Entrepreneurs

Key Lessons Learned

From Business 1.0/2.0

Lesson OneEcosystem Business Models win

Technology being used to redistribute the economics of content industries

Not so different to the Screen Writers Guild Strike in Hollywood

Why Monitise will be the mobile banking solution for the next generation – they take care of all parties in the transaction

Lesson TwoWe’re in an Attention Economy

This is why Curation Matters And why subscription services may play a

role But most likely content will be free, and

contextual advertising will be the business model

Acute Transparency trumps anything else Now Public

You have to work with people’s interest so align your business model to consumer behavior not protecting old industries

Lesson ThreeLong Tail of Social Media is Long

No shortage of bandwidth Explosion of new economies of production Community and UGC based content being

interwoven in our lives, ranging from music to videos

Social networking and microblogging sites will jockey for your attention

Mobile Advertising will continue to struggle; go/slow approach due to tiny, low-resolution screens of mass-market handsets and operators’ fear of alienating subscribers

Contextual Advertising makes the Long Tail of Social Media viable

Lesson FourSME as a Channel to Market and a

Market The consumerisation of technology which hit a peak with SKYPE,

yields the B2C2B Go to Market Strategy trend Managed Services dominate; SaaS is not just a buzz word

Critical Success Factor for SpinVox The move to hosted applications for the majority of

organisations now seems to be a case of “when” and not “if” The SME's day has finally come

SaaS will have the greatest impact on companies and vendors alike in the SME space

SME has always been tough for the IT and telco industries Advent of relevant, inexpensive, easy to use business

applications that work with very little IT knowledge or support cost will result in the computerisation of the SME

SME IT spend is expected to be up 8 to 10% over the coming years

Critical Success Factors

For Business 2.0/3.0

CRITICAL SUCCESS FACTOR 1: Be as Unreasonable About Success as an

Entrepreneur

Entrepreneurs have a view of the market and/or a consumer behavior, which drives them to bring an innovation to life.

Like becoming a Parent, if they knew what it would REALLY entail, they would think twice.

That leads them to be paranoid, and feel that they are in a race against time.

Which makes them learn how to: Act with Imperfect Information Never assume they control time Never give up – tied to their identity Expect Success

CRITICAL SUCCESS FACTOR 2: You Know More Than You Think You Do

Don’t just trust your instincts but listen, hone and refine your instincts

Determine what your “Unfair Advantage” is and Do More Of That

FACTOR 3: INVEST IN THE SUCCESS OF OTHERS

Today’s World is an Ecosystem

The Businesses with Business Models which enhance and grow the ecosystem will win

Abundance Mentality

Focus on being a Net Contributor to the System rather than a Net Taker, and what you find is that your Sphere of Influence over the System increases

Focus on Long-Term Relationships

FACTOR 4: BE RADICALLY OPEN TO THE WORLD

Bill Joy, the former CTO and guru from Sun Microsystems, “assume innovation occurs elsewhere”.

Build reliable means to continually pull in what’s relevant and potentially threatening to your business “We have to be in many places and get signals

sooner,” Henning Kagerman, SAP CEO in the WSJ “We’re not in the dialogue” – Nokia Senior

Executive Small things can indicate that large change is

about to happen

FACTOR 5: EXACT ACCOUNTABILITY

Management is the search for accountability. Who is doing what, by when, why, and how, and most importantly, what happens if they don’t?

The best entrepreneurs and executives are both leaders and good managers.

There are no bad Lieutenants, Sergeants, Captains – there are only bad Generals

Trust is Efficient – Trust but Verify Economies who trust spontaneously develop

and progress more rapidly – Francis Fukuyama

FACTOR 6 – CREATE THE CONDITIONS OF TRUST

SO THAT GREAT THINGS CAN HAPPEN Trust is efficient; leadership is about: creating the conditions of trust, and the

combination of building counter-cyclically, paying attention to small change which

indicates that large structural change is about to happen,

seeking out inefficient markets, and investing in the success of others, leads to businesses that are both valuable and

sustainable.

Game Changers

I. Mobile Broadband is real

Momail and Monitise

Themes from Mobile World Congress The themes from MWC were definitely

that mobile broadband is here at last and that email and location based services are to the big drivers (as well as simplicity) in the handset.

So if you’re in the mass market for your own personal tech like me, and a big fan of cost-effective plans, you’ll approve of Momail's mission – free mobile email.

The addressable market is the hundreds of millions of phones in the world

What is Momail?

Momail is a unique mobile email solution affordable

• free, low priced easy-to-use

• no client• auto configuration• auto collect of emails from other accounts

lean • optimizes attachments• drastically reduces data chargesworks with any connected mobile device!

About Momail

Founded in 2005− Head office in Limhamn, Sweden− First product beta released in July 2006

Funded by venture and private capital Patent pending technology

– Mobile Message Optimization and Protection Engine (MMOPE)

– Developed for mobile email, mobile communication and more

Initial focus on consumer mobile email − Additional releases will include ehancements to ease the

delivery of digital media to mobile devices

Momail: The time is now Launched in Europé Q3 2007

− Scandinavia, UK, Germany and Poland now live

− Additional European and Asian countries to follow throughout 2008

Momail supports 80% of mobile handsets available in the global market− Momail functions on over 1000 models, no

other mobile email provider comes close

User statistics prove Momail meets an untapped consumer demand Overall registrations growing by 1500 /

week Over 40% of registered users become active Average of over 90% data saved by Momail

customers

Why Partner with Momail?

Current Market Conditions− Mobile handset penetration greatly outstrips PC penetration

in Asia − Asia will account for 60% of new mobile subscriber growth

in the next five years*− Momail provides email capabilities to users who do not have

PCs

Increasing data usage beginning to clog 3G networks− Momail’s patent pending technology minimizes the data

traffic by up to 99%, thus both reducing data load on operator networks and increasing speed

*Global Insight report, 19 April 2007

SpinVox

Voice to Screen

SpinVox does one thing - really well

Convert any voice message into meaningful textExperience - reliable, fast, high quality

Vision & mission

MissionSimple revolution: enable all existing messaging products with voiceMake everyday communication simpler and more effectiveLead the 3rd most important form of communication

MissionSimple revolution: enable all existing messaging products with voiceMake everyday communication simpler and more effectiveLead the 3rd most important form of communication

TomorrowMass market range of Voice-to-Screen™Messaging for web, Carrier, VoIP & cable channels

TomorrowMass market range of Voice-to-Screen™Messaging for web, Carrier, VoIP & cable channels

Any Voice – Any Message – Anywhere

TodayEnable SpinVox Voicemail within global carriersBranded standard for Voicemail-to-Text service

TodayEnable SpinVox Voicemail within global carriersBranded standard for Voicemail-to-Text service

VisionImagine a world where messaging is as simple, natural and intuitive as

speaking your message…

or glancing at your phone’s screen

…to read voice messages you’ve received

VisionImagine a world where messaging is as simple, natural and intuitive as

speaking your message…

or glancing at your phone’s screen

…to read voice messages you’ve received

SpinVoxVital Statistics and History

2003 : Founders hit upon idea VMCS designed - patents filed - SpinVox incorporated

2005 : UK Nationwide Retail >100k subscribers, 80%+ retention, brand & marketing success

2006 : Carrier contract Investment in Carrier Grade Platform, Management Team and N.Am

expansion Multi-lingual, multi-market Vendor partnerships

2007 : ‘Land-grab’ strategy bites 12 Carrier contracts : 100m base : £200m contracted revenue : 100%

market share 4 languages + 4 continents $100m (£50m) funding

2008 : Scale 26 Carrier contracts 6 languages + 5 continents 3 new products, 5 new markets/channels

2010 : 100m users, £250m annual revenue

Worldwide footprint

2008 - 26 DealsTier 1

LatAm, AsiaPacLanguage

New : Italian, Portuguese 3 new products

Unified Communications Speak-a-Message Social Networks

• 2007 - 12 deals• 10 Deployments• En, Sp, Fr, Ge• N.America, Europe,

S.Africa, Australia

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Spinvox Offices

THANK YOUjulie@ariadnecapital.com