The Kai Method VC Proposal II

1. November 2008 CONFIDENTIAL Proposal for Portfolio Company Growth: Innovative strategy workshop

5. DOWN TURN IN ECONOMY OFFERS OPPORTUNITIES AS WELL AS RISKS Representative quotes “ Great entrepreneurs build value and market-share in down markets. They go to work seven days a week and the(y) breakout when other folks check out.” “ Usually, when the economy slides, the first natural reaction is to cut expenses, conserve cash, and hunker-down to weather the storm. All good advice. But don’t forget also that this could be your time to shine, albeit, in a strategic and intelligent way.” “ If you are start-up that is not cash-flow positive you are in a tough spot right now. If you haven't figured out your business model yet you are in trouble.” Jason Calacanis, founder of Mahalo, co-founder of Weblogs Inc., industry blogger “ Like every major shift in the environment, this one will offer opportunities as well as risks…The real key is to have a keen understanding of the game on the field and to be the one that adjusts swiftly, rather than the one that moves after it’s become blatantly obvious to everyone else it’s time to move.”

6. VENTURE CAPITAL FIRMS HAVE RECOGNIZED THE NEED FOR INNOVATIVE STRATEGY AMONG THEIR FUNDED COMPANIES Representative website quotes “ CEOs need to move beyond products toward using many types of innovation. They should start by using diagnostics and toolkits that start the innovation process . . . they should consider working on a few bold concepts with teams and implement these new ideas clearly and quickly.” “ We encourage our portfolio companies to make sure they take time out from the operational demands of their business to think about the bigger strategic picture.” “ Ready-Aim-Fire. Whether you know it or not, this seems to be the way that a lot of early stage companies make strategic and tactical decisions. People run around the halls and manage by crisis, moving from one deal or issue to the next without any overarching goals and process in place.” union square ventures “ Strategic planning sessions often fail to be either strategic or helpful in planning for the future. The expense in time, energy, and dollars can be significant. And yet, often the process leaves people frustrated and unfulfilled.” “ The absence of a framework or model for decision making and discussion and the lack of a common lexicon to discuss issues results in people talking past one another and endless loops that lead nowhere.” Will Price , former MD at Hummer Winblad Venture Partners, current CEO Widgetbox

9. 7 KEY QUESTIONS TO OUTTHINK THE COMPETITION Partner with someone unexpected Move early to the next battle-ground Lock up resources Attack from two fronts Introduce a new piece the board Coordinate the uncoordinated Embrace what others abandon Who else benefits if you win? Where is the next battleground? What inputs can you control? With whom can you launch a two-front battle? What player do you wish was in the game? Who could you coordinate? What has been abandoned? 1 2 3 4 5 6 7

10. EXAMPLES OF CLIENT IDEAS GENERATED AT WORKSHOPS A division of a leading hardware firm conceived of an idea for sharing past purchase data with distributors. They structured a tiered program that gave certain loyal distributors preferential access to leads in exchange for loyalty. They launched the program in 7 Latin America countries initially and later expanded it through all of Latin America and Asia. The program tripled revenues in three years. An entrepreneur was about to enter into a simple commercial agreement and realized that he represented a “borrowed road” to his new partner. He saw an opportunity to form a broader alliance by which his partner would distribute its services through his network of 7,000 independent sales representatives. He successfully established relationship and now has an expanded portfolio to offer. Southeast US. regional bank saw an opportunity to establish an alliance with a similar bank in Northeast to co-serve clients that were co-located in the regions. They can now offer retirees moving from the Northeast to the Southeast a seamless banking relationship. A marketing team wrestling with foreign entrants saw an opportunity to lobby for changing importation laws in a way that put foreign competitors at a disadvantage and found new ways to use existing regulations to their advantage. They are currently pushing regulatory changes through. A mid-sized pharmaceutical company was facing flat growth held down by deteriorating regulatory and competitive environments. We helped them generate new growth options, prioritize the highest-potential ones, develop execution plans, and build a tracking system to continually monitor progress. The company focused on the product-market segments in which it could win, partnered to expand production capabilities abroad, and began growing faster than the market. Client Ideas 1 2 3 4 5

11. REPRESENTATIVE CLIENTS “ Kaihan's groundbreaking work on strategy development changes the game for organizations facing an increasingly competitive environment. As a consultant and facilitator, Kaihan makes developing strategy look easy but don't be fooled. The easygoing demeanor masks depths of experience, a razor-sharp intellect and true creative genius. We have benefited from working with this emerging leader in the field of strategic consulting." - Shannon Wallis, Director Microsoft Worldwide Leadership Programs

14. KAI WORKSHOPS COMPARE FAVORABLY TO OTHER AVENUES FOR ENTREPRENEURS TO BECOME INNOVATIVE STRATEGISTS Professional development: add a tool to strategists’ repertoire Cross-company strategy innovation Actionable Items Low Time Commitment Cost Efficiency Low High

15. 1% CONVERSION RATE ON PORTFOLIO COMPANY IDEAS GENERATED TO GROW REVENUE WOULD LIKELY YIELD 75% RETURN ON INVESTMENT 75% return on KAI workshop investment See Appendix for return calculation

18. CONTACT INFORMATION For additional information, please contact: Benjamin Bewick Consultant KAI Method LLC 1756 N. Bayshore Road Miami, FL 33132 [email_address] Cell: 415-420-2329 Fax: 888-253-8422 www.kaimethod.com

20. WHO WE ARE: KAIHAN KRIPPENDORFF S trategist, former McKinsey consultant, and author of three business strategy books – The Art of the Advantage , Hide a Dagger Behind A Smile , and The Way of Innovation – Kaihan Krippendorff has over a decade studying corporate conflict. Kaihan works regularly with large and medium-sized corporations including Microsoft, J&J, Ryder, DHL, and Fidelity Investments to design bold and innovative growth strategies. He delivers key-note speeches across the U.S., Europe, Asia, and Latin America and lectures regularly at business schools including Wharton and MIT Sloan. He earned his MBA from Columbia Business School and London Business School, his BSE in Finance from the University of Pennsylvania's Wharton School, and his BSE in Engineering from the University of Pennsylvania's School of Engineering.

21. WHO WE ARE: DOUG MUIR D ouglas Muir is an authority in business strategy for small to mid size businesses and the credit industry. He has successfully built several multi-million dollar businesses from the ground up. He is the Chief Operating Officer of KAI Method, LLC, a firm that helps SMB companies design innovative growth strategies and also trains the owners and management to be more creative strategists. Doug speaks internationally to entrepreneurs, finance, real estate, banking, and mortgage professionals about the importance and effects of credit. He has been published in many financial papers and magazines including The Scotsman Guide, a prestigious magazine for the banking, mortgage, and investor industry, and he was recently featured in Kaihan Krippendorff's business tactics book, "Hide a Dagger Behind a Smile" about how he infiltrated the insurance industry and locked out his competition.

23. WHO WE ARE: BENJAMIN BEWICK Finance professional with extensive economic consulting experience. Ben invested in portfolios of corporate debt for a $2 billion proprietary book at Wells Fargo and negotiated transaction details with investment bankers. He also co-managed $900 million of corporate debt for outside investors. Ben advised on a number of M&A transactions and antitrust lawsuits in Silicon Valley, including Seagate Technology’s $1.9 billion acquisition of Maxtor Corporation and Fortune Brand’s $5 billion acquisition of Canadian Club, among other brands, from Pernod Ricard. He helped a number of mergers pass regulatory review by the Department of Justice and Federal Trade Commission. He worked with economic experts at Berkeley, the Hoover Institute at Stanford, NYU, and Princeton, including three former US Department of Justice deputy assistant attorney generals for antitrust. In the late 1990’s, Ben gained operations experience at two financial software startups in the Boston area. Ben has a B.A. in Economics and History from the University of Pennsylvania and was a member of the 1991 National Championship crew team.

25. 1% CONVERSION RATE ON PORTFOLIO COMPANY IDEAS GENERATED TO GROW REVENUE WOULD LIKELY YIELD 75% RETURN ON INVESTMENT Return Calculation Cost of Workshop Additional Revenue at Exit per Idea Profit Margin Profit at Exit Successful Ideas Total Additional Profit at Exit Affect on Sales Price Yield 10,000 100,000 20% 20,000 2 40,000 200,000 53% 10,000 250,000 20% 50,000 2 100,000 500,000 75% 10,000 500,000 20% 100,000 2 200,000 1,000,000 93% Assumptions: Exit in 9 years Exit multiple of 5 x EBITDA 10 companies at workshop, 20 ideas generated per company, 200 total ideas generated, 1% converted successfully results in 2 ideas that have significant impact. Note: These assumptions are conservative and could under estimate returns.