Tom Nastas (Thomas D. Nastas) presentation (Raising International Capital) at the 3rd Moscow Venture Forum, Moscow, 17/18 June 2009

1. Show Me the $! How Russian
SMEs can Raise Foreign Capital
3rd Moscow Venture Forum:
Moscow Russia, 17/18 June 2009
Innovative Ventures Inc.
Haslett, MI. USA
Moscow, Russia
Thomas Nastas
Founder
Tom@IVIpe.com
www.IVIpe.com
17/18 June 2009 www.IVIpe.com
Info@IVIpe.com

2. Today’s Message
Part I
What’s Happening in the Market, VC/PE?
The Good & the Bad
Part II
Russian SMEs: Raise Foreign Capital!
Clarify Motivation & Your Reasons Why
Improve Your Chances of Success
Specific Actions to Take
17/18 June 2009 www.IVIpe.com
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3. IVI History-Direct Invest &
Advisory
Canada (1992)
Europe (1992/94)
C$100MM-Canadian
Bus. Dev. Bank TP Fund, $10MM-
EU, $-Financière
St Dominique,
Paris
USA (1986)
Russia (1997)
The Michigan Product
Dev. Fund ($5MM) HP LP, $30MM-EBRD &
USAID
Africa (1993/96)
E. Africa $5MM, Sub-
Saharan, $200MM, South
Africa,$30MM, IFC/WB
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4. About Me
• Founder of IVI,1986. In
Russia since 1997
• Moscow Bank, Member,
Board of Directors, 2007
Ассоциация
независимых • Member, Board of Directors,
директоров 2008
• Moscow MBA Program, Prof
of VC & Marketing, 2002/9
• Moscow, MBA Advising, 2001
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5. Part I: What’s Happening in
the Market?
The Good & the Bad
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6. Successes in the Market
Since 2001
PBC Lasers
& Wostec
Multinationals w/R&D Labs in Russia
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7. Limited Success in Raising
Int’l $
Insight Venture
Partners
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8. Crisis in Int’l PE/VC
Distributions from Funds to LPs (Investors)
100%
90% 15%
29%
80% 41%
70%
R e s p o n d e n ts (% )
6%
42% 74%
60%
50%
40% 37%
30% 65%
20% 43%
22%
10% 22%
0% 4%
Winter 2004-05 Summer 2006 Winter 2007-8 Summer 2009
Source: Collier Capital
Improve No change Deteriorate
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9. Crisis in Int’l PE/VC Con’t
% LPs Receiving >16% Net Returns
100%
90%
80%
R e s p o n d e n ts (% )
70%
60%
50%
40%
30%
20%
10%
0%
Funds-of- North American North American European venture European buyouts Asia-Pacific venture Asia-Pacific
funds/generalist venture buyouts buyouts
Source: Collier 16% or more Less than 16%
Capital
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10. Crisis in Int’l PE/VC Con’t
LP Plans for Investment (Over Next 3 years)
100%
9%
90%
31%
80%
70% 40%
Respondents (%)
60%
50% 39%
40%
30%
51%
20%
30%
10%
0%
Summer Summer
Source: Collier Capital 2006 2009
Increase No change Decrease
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11. Crisis in Int’l PE/VC Con’t
LPs Declining to Invest in Last 12 Months
100%
90% 16%
29%
80%
55%
Respondents (%)
70%
60%
50%
40% 84%
71%
30%
20% 45%
10%
0%
Source: Collier Capital
Summer Summer Summer
2005 2007 2009
Declined some re-investment requests Accepted all re-investment requests
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12. Crisis in Int’l PE/VC Con’t
Likely Valuations; 12/09 vs. 12/08
Lower by Higher by
41-60% up to 20%
(4%) (6%)
Remain
unchanged
(18%)
Lower by
21-40%
(33%)
Source: Collier Capital
Lower by
up to 20%
(39%)
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13. Crisis in Int’l PE/VC
Proportion of VC/Buyout Funds Unable to Raise New $
within 7 Years
Venture capital firms 28%
Buyout firms 23%
Conclusions: less $ for VC, more competitive for LP $ & VC $:
VC invest in profitable SMEs
Source: Collier Capital
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14. Part II: GoForward Plan to
Raising Int’l VC $$
Issues For Entrepreneurs/SMEs:
1. Why Int’l $-location of customers
& access the market for expansion
vs. start-up or ego
2. Stage of development, seed vs.
growth
3. Proof: Are you best in class, top 3
in your industry?
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15. Reasons Why
Components of SME Success Probability
Company has enough $$ 80%
Mgt Capable & Focused 80%
PD Successful 80%
Mfging Successful 80%
Competitors Behave as Expected 80%
Customers Want Product 80%
Pricing is Correct 80%
IP Issued 80%
Combined Probability of Success 17%
Success Rate <10% if Probability of One Event falls
from 80% to 50%
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16. Realities of VC Investment
Ex: Global Spend in Clean Tech
(2006)
• Corporate R&D Investment = $22 billion
• Government R&D Investment = $24 Billion
• VC Investment in R&D = $2 Billion
Same Pattern Repeated in Most Industries:
VCs Fund Commercialization Risk, not Tech
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17. Reasons for Rejecting
Russian Tech Deals
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18. Reasons for Rejecting
Russian Tech Deals
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19. Action Item #1 for
Entrepreneurs/SMEs
1. Build Demand in the Supply Chain
 Link to Multinationals Interest: User Pull,
Testing, Deploy & Commercialize
 Solve Tech & Supply Chain Needs/New
Apps
 Don’t Worry about Small Volumes
 Build Locally, Upgrade Later for National &
Int’l Expansion Info@IVIpe.com
17/18 June 2009 www.IVIpe.com

20. Where’s the Customer Pain
(Need) in the Industry?
1. MORE Perf, Execution & Cost Reduction
 Not GameChangers; blocking/tackling tech so
customers meet business plan
2. MORE Local Content Applications
 Focus on Tech Challenges for Dev. & Growth
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21. Examples: Get Integrated
into Global/Russian Projects
1. Apps for Smartphone & Social Platforms
2. In <15 months, iPhone, Blackberry, Google &
Facebook (fbfund) funds invested over $55
million into 80 companies
 New Companies & New Employment
 New Applications for Smartphones, Google
Android & Facebook
 More Investment
 New Ideas
17/18 June 2009 www.IVIpe.com
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22. Examples: Get Integrated
into Global/Russian Projects
3. HP ‘Central Nervous System for Earth
 Nanosensors & IT to gather, transmit & monitor
data on a global scale through intelligent nano-
fabric networks
4. IBM’s Smart Planet Initiative
5. Cisco & NASA: ‘Planetary Skin’ Project
 Capture, collect, analyze & report environment
data from satellite, airborne, sea & land sensors
across Earth
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23. Examples: Get Integrated
into Global/Russian Projects
6. Russia: Shtokman, Natural Resources for
Solar & Alt. Energy Business Models
 Nitol Solar: Raised $500 million from Chinese &
US customers, IFC & Rusnano.
 Chemical division processes chlorine, caustic
soda and others to produce trichlorosilane (raw
material for polysilicon production)
 Polysilicon Division processes raw material into
photovoltaic wafers
17/18 June 2009 www.IVIpe.com
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24. Domestic Opts to Build Bio-
Tech Supply Chain in Russia
Agricultural Drugs & Medical Devices Hospitals Research, Testing, &
Feedstock/Chemicals Pharmaceuticals & Equipment Medical Labs
 Agricultural  Medicinal &  Laboratory  Specialty  Biological
processing botanicals apparatus & hospitals research
 Basic organic furniture
 Pharma-  University  Commercial
chemicals ceutical  Surgical, medical medical
 Ethyl alcohol preparations medical, dental, research research
mfg. ophthalmic hospitals
 Diagnostic & analytical  Testing
Organic fiber substances instruments &  Clinical laboratories
mfg. equipment research
 Biological institutions  Medical
 Fertilizers products  Irradiation laboratories &
apparatus & diagnostic
 Pesticides and imaging
other agricultural electromedical
chemicals equipment centers
17/18 June 2009 Product-Oriented www.IVIpe.com Service-Oriented
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25. Action Item #2 for
Entrepreneurs/SMEs
2. Benchmark Your Tech to Competitors
& Alternative
 Often & Early
 Define Strengths & Weaknesses
 Test Under Different Operating &
Customer Conditions
 Invest to Overcome Deficiencies
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26. 17/18 June 2009 www.IVIpe.com
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27. 17/18 June 2009 www.IVIpe.com
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28. The Standard?
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29. Competition is Every Where
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30. Multiple Sources of
Competition
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31. Build the Basics
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32. Action Item #3 for
Entrepreneurs/SMEs
3. Create Relationships & Leverage
Existing Ones
 Get Integrated into Supply Chains of SMEs
that have raised Russian or Int’l $, e.g.,
Acronis, Parallels, Ozon, Enforta, Volga
Gas, Air-in-Space
 Prove your contribution to their business
 Participate in Int’l Biz Plan Competitions
to Develop Awareness & Mkt. Reaction
17/18 June 2009 www.IVIpe.com
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33. Action Item #4 for
Entrepreneurs/SMEs
4. Target Int’l Funding Orgs’ for $
 For R&D, Testing & PD Funding
 USIC, CRDF, ISTC, EU Eureka/EuropeAid
 In-Q-Tel (CIA VC fund) & Red Planet (US
Army) if you have US presence & in their
target for investment
Attract $ from Russian groups like Rusnano to start.
Build relationships with RVC (РВК)
17/18 June 2009 www.IVIpe.com
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34. Concluding Remarks
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35. Don’t Give Up
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36. Believe in Yourself/Accept
Rejection
 Oldest VC Firm, investing since 1911
 Deals Rejected:
Apollo Computer
(acquired by Hewlett Packard)
BVP's Felda Hardymon was offered a small position in the
company's last private round, and rejected it: too small
a position, he thought, at too high a price. In less
than a year it was worth 17x more.
17/18 June 2009 www.IVIpe.com
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37. Believe in Yourself/Accept
Rejection
 Deal Rejected:
Check Point
In 1994, Gil Schwed pitched his idea to BVP's David
Cowan, who said that Gil would never get
distribution in the US. The next year, Check Point got
a huge Sun OEM deal and sold $25M of firewall
17/18 June 2009
software.
www.IVIpe.com
Info@IVIpe.com

38. Believe in Yourself/Accept
Rejection
 Deal Rejected:
eBay
"Stamps? Coins? Comic books? You've GOT to be kidding,"
thought Cowan. "No-brainer pass."
17/18 June 2009 www.IVIpe.com
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39. Believe in Yourself/Accept
Rejection
 Deal Rejected:
Federal Express
Incredibly, BVP declined on Federal Express seven times.
17/18 June 2009 www.IVIpe.com
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40. Believe in Yourself/Accept
Rejection
 Deal Rejected:
Google
Cowan’s college friend rented her garage to Sergey &
Larry their 1st year. In 1999 and 2000 she introduced
Cowan to “these two really smart Stanford students
writing a search engine.” Students? A new search
engine? In the most important moment ever for a
Bessemer rejection, Cowan asked her, “How can I get
out of this house without going near your garage?”
17/18 June 2009 www.IVIpe.com
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41. Believe in Yourself/Accept
Rejection
 Deal Rejected:
Paypal
David Cowan declined on the Series A round. Young &
unproven team, regulatory problems, and, 4 years
later, a $1.5 billion acquisition by eBay.
17/18 June 2009 www.IVIpe.com
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42. Believe in Yourself/Accept
Rejection
 Deal Rejected:
StrataCom
(acquired by Cisco)
Felda Hardymon: "[Sierra's] Pete Wendell asked if I'd like
to invest in Stratacom, which was doing a 'fast packet
switch.' I gave him a blank stare."
17/18 June 2009 www.IVIpe.com
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43. Technology In Many Places!
Just Look & Define
Slaughter Raising Genetic Engineering
& Breeding
Butcher
Distribution, Storage & Retail Locations
Processing- Ham, Kielbasa
Delivery
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44. Download at
www.IVIpe.com
News 2007
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45. Thomas D. Nastas
Tom@IVIpe.com
www.IVIpe.com
Tel. 7.985.923.47.27
Innovative Ventures Inc. Moscow, Russia
Haslett, MI USA
17/18 June 2009 www.IVIpe.com
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