Vanderbilt Engineering Presentation

For: Dr. Paul King

Background

Early days: Small time-Mississippi Public Schools

Education: Engineering-MSU/MBA-FloridaNASA-launch operations, shuttle experiments (1979-1991)Medical device company founder-Endius, Inc. Boston, MA

Spine/Ortho market (1991-1998)13 Electro-chemical and surgical device patents

Venture Capital-Harbert Management Corp. (1999-2004) Discovery Healthcare LLC, President (2004- present)

Boards: Alabama I/T Assoc. - Chairman B’ham Venture Club -

President B’ham Entrepreneurial Center

TechBirmingham Awarix Corp (wireless spin

out)Publication: Launch Fever March, 03

Who am I?Try to figure out early on if you are an entrepreneur, large cap corporate, small cap corporate, small business owner, artist, civil servant or teacher.

“All good things come to him who waits...”

Civil Servant

Entrepreneur

Small Cap Corporate

Starts with an idea

and a prototype

“Fastest growing private spine company.”

“The leader in endoscopic spinal

fusion.”WSJ 10/02

The dogs finally ate the dog food.

SuggestionsIt is OK to be confused.Don’t take yourself too serious. What do you really want to do and what are your strengths.Success is more an issue of trial and error.Don’t let others put you in a box.Cultural fit is crucial. Location, Location..You are only as good as your network.

Follow your Passion.(If you don’t have one, find one.)

Try to get as close to your dream as possible.

Be all you can be.Never let your past define or direct your future.

Reality

The company’s value is:20% Seasoned management20% Market and timing20% Ability to work as a team 20% Pure stupid blind luck15% Marketing expertise5% The Technology (yet a vital part)

The Basic Requirements(for a Wall Street/Venture Capital type company)

Total market size: $900MM-$2BYour share minimum: $50MM-$100MMFull time, committed principles.Seasoned (“done one”) management preferred.Solves big problems ideally in IT or Life Sciences.Can build long term relationships with VC.Able to evolve and change. Deal can exit in 4-7 years.

If you answered No to most of these you can still grow a company and sell it for real money.

Seven reasons VCs Turn Down Biotech Ventures:

Poor ManagementUndifferentiated TechnologySmall MarketsUnrealistic Valuation ExpectationsDoesn’t Fit Investment CriteriaNo one willing to quit her/his day job once they get funding.Founder doesn’t listen

Personal SatisfactionTry not to let financial reward be a key driver in your decision process. It is a little about “having it” and a lot about “doing it.”

OpportunitiesThree or four big opportunities will come in your career. Look and be ready for them. Be open to change. (e.g. aerospace guy selling purses.)

Approaches Act as a free agent.Employ multiple streams of income to diversify your revenue.Pick a career path and grow with the company and a rising tide.

Factors to Financial/Job Satisfaction

0102030405060708090

100

Factors

EnjoymentLocationIncomeCareer PathHelp OthersLifestyle

Average should be more than say 60% to remain in job.

Average = 58% (time for change)

FUND TYPE 1YR 3YR 5YR 10YR 20YR

Early Stage VC -32.7 68.0 49.9 33.4 21.5

Later Stage VC -17.0 19.1 21.6 24.0 16.9

All Buyouts -10.7 -.6 4.6 10.5 14.0

Mezzanine -3.2 7.0 8.1 11.1 10.9

NASDAQ .3 -9.2 8.6 11.8 12.5

S&P 500 .2 -2.4 10.2 12.5 13.6

SECTOR IRR UPSIDE (NET WORTH)Corporate job, investing wisely 10% $1-2 millionVenture capitalist large variance $1-100 millionCorporate job, executive large variance $3-50 millionResidential real-estate rental property 14% $1-5 millionCommercial Real-estate rental property 15-20% $1-8 millionResort real-estate rental property 15%-18% $2-10 millionOwner of small business 20-30% single digit millionsOil and Gas ownership 30-40% double digit millionsFounder of technology company 75%+ $25-200 millionsFounder of public company 1000%+ hundreds of millions

Where is the Money?