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2501 Catlin Street | Suite 205 | Missoula, Montana 59801 | P: 406.541.6461 | F: 406.541.6464 THANK YOU FOR YOUR INTEREST IN FUNDING THROUGH MEP ANGEL NETWORK. MEP Angel Network is a group of local investors that aims to make meaningful capital investments of between $250,000 and $750,000 in early stage companies with ties to Missoula, Montana. To be eligible, you must: Be in the startup, early stage or stage-two phase of development. Complete the required paperwork for the screening process through Missoula Economic Partnership. Complete the required screening by MEP Angel Network’s Entrepreneur Committee. Companies selected to present to investors must: Upon selection pay a nominal fee of $250 to help cover associated costs. Participate in a two-hour presentation coaching session with the Entrepreneur Committee. Deliver a presentation as specified in the MEP Angel Network application kit on their scheduled day. Be prepared for investors to collectively or individually conduct due diligence on finance, operations, market potential and more. Be ready to conduct negotiations on the requested amount and provide an accounting for how that money will be used by the company. This kit includes: Investment process overview. Scoring for applications. Angel funding application. Requirements and tips for in-person presentations. If you have questions regarding the process or would like to become an investor, please contact Brigitta Miranda-Freer at 406.541.6461. MEP ANGEL NETWORK, 2012 Application Kit | 2 MEP ANGEL NETWORK INVESTMENT PROCESS OVERVIEW The priority for the MEP Angel Network is to invest significantly in innovative, Missoula-based companies with a high likelihood of market success. We are looking for early stage companies that we believe can make a strong impact on Missoula’s economy, job outlook and business future. Therefore, we take the vetting process seriously and screen all applications rigorously. Only a small portion of applicants will be invited to present to network investors and only a portion of presenters is likely to be funded. Companies applying to the network are typically in their A or B investment rounds and will have already secured $250,000 to $750,000 of investment from friends, family or the ownership team itself. If you plan to submit an application, we encourage you to connect with the Innovation Initiative (at MonTEC), Missoula Economic Partnership or other advisors as you prepare your application. OUR STRUCTURE: MEP Angel Network is not a fund and does not invest as an LLC or other entity. Investors may collaborate on due diligence, but make individual investment decisions. Individuals may choose to form a single-purpose LLC for investment outside the scope of the network’s involvement. We hold up to four pitch sessions per year. MEP ANGEL NETWORK, 2012 Application Kit | 3 MEP ANGEL NETWORK INVESTMENT PROCESS STEP ONE: Apply Interested companies must complete the application provided with this kit along with an executive summary not to exceed two pages in length, and provide a copy of their proposed 12-slide PowerPoint investor presentation. These must be submitted to the Missoula Economic Partnership. Incomplete or improperly filled out submissions may be eliminated from consideration. STEP TWO: Review Candidate applications are screened and scored by the Missoula Economic Partnership. Each application is judged using the scoring sheet in this packet. Ultimately, up to six companies will be recommended for a live Deal Screening session with the Entrepreneur Committee, which consists of up to 10 network members. STEP THREE: Deal Screening Each company is given seven minutes to present to the committee, followed by an eight -minute question and answer period. Presentations must be crisp, structured as requested (see Live Presentation Requirements) and delivered professionally. At the end of the screening, the Entrepreneur Committee recommends as many of the companies as it sees fit for presentation to the full MEP Angel Network. STEP FOUR: Full Network Presentation Companies accepting an invitation to present to the full MEP Angel Network will be charged a nominal fee of $250 to help cover the cost of managing the process. They will also be required to participate in a two-hour presentation coaching session with the Entrepreneur Committee. Following that, participants will present to the full MEP Angel Network (approximately 25 members and invited guests). Presentations are required to be no more than 15 minutes , with an additional 10 minutes for questions and answers. After each presentation, the entrepreneur is excused. Investors discuss the opportunity and may choose to pursue due diligence with that company. STEP FIVE: Due Diligence Companies with investor interest then enter into a due diligence phase with those investors. Typically, the company will set a conference call or meeting in its office seven to 10 days after the presentation. It is common for one or two network investors to take the lead in due diligence and negotiations with the company. MEP ANGEL NETWORK, 2012 Application Kit | 4 MEP ANGEL NETWORK APPLICATION SCORING SHEET The following criteria will be used to score your application only. MEP Angel Network Screening Score Sheet MEP ANGEL NETWORK, 2012 Application Kit | 5 MEP ANGEL NETWORK ANGEL FUNDING APPLICATION Company name: Presenter’s name: Address: Title: Date founded: Office #: Number of employees: Full time: Part time: Cell #: Email: Website: Brief company description: Please describe your company’s characteristics in terms of the following: 1. Marketing / Space Clear problem? Clear pain? Barriers to entry? Competition? 2. Execution Plan Defensible IP? Solid revenue driver? Scalability? 3. Traction Customer satisfaction? Sales approach? Sales cycle? Sales pipeline? 4. Revenue Potential Pricing model? Pricing changes over time? MEP ANGEL NETWORK, 2012 Application Kit | 6 5. Profitability Current burn rate per month? $ Revenue Year Description 2010 Actual 2011 Actual 2011 Forecast 2012 Forecast 2013 Forecast Revenue COGS Gross Profit Expenses EBITDA 6. Management Team Relevant experience? Track record? Complete team? 7. Board & Advisors Relevant experience. 8. ROI Potential risk and opportunities? 9. Investment Required Round? Proposed deal structure? 10. Valuation Information What is the aggregate dollar amount of capital invested into the company to date? MEP ANGEL NETWORK, 2012 Application Kit | 7 Funding History Source of capital Date of investment Series Number of equity shares issued Class of equity shares issued Number of shares outstanding Post-money valuation for each funding Are previous investors participating in this round? Use of the funds raised in this round: Pre-money Valuation: $ 1. The basis and empirical data (if any) that is supportive of the pre-money valuation; i.e., show market data, financial models, calculations that are the basis for the value just prior to the latest capital investment. 2. Describe similar companies that you used as benchmarks for the liquidity event that demonstrates their multiple of return or internal rate of return (“IRR”) on their investment in your company at this funding round. 3. Show the market stock price or acquisition multiples for each company described in number 2. 4. In addition to the multiple (such as 3 times revenue or 7 times EBITDA), show the dollar amount of the earnings and revenue for each of the benchmark companies at the time they were priced in the market. For acquisitions, the form of payment (description of the consideration; cash, stock, debt, etc.) paid by the buyer to the sellers in exchange for the target company must be detailed. 5. If financial models (such as a discounted cash flow analysis) were used to value your underlying revenue growth, profit margins, projected working capital needs and capital expenditure expectations, then the basis for discount rate used to present value future cash flow streams must be shown, with a meaningful explanation. An unfounded assertion pertaining to an input to the model will not be considered fulfillment of this requirement because network investors must receive a comprehensive rationale from MEP ANGEL NETWORK, 2012 Application Kit | 8 presenters to make informed investment decisions. 11. Exit Strategy 12. Resources Needed Beyond Capital Introductions to customers, distribution channels. 13. Executive Summary Include two-page executive summary. MEP ANGEL NETWORK, 2012 Application Kit | 9 MEP ANGEL NETWORK LIVE PRESENTATION REQUIREMENTS You will be allowed seven minutes for presenting during the deal screening, followed by eight minutes of questions and answers. Final presentations to investors are 15 minutes, followed by 10 minutes of questions and answers. To ensure you cover all necessary information, you are required to structure your slides as follows. 1. Title slide – Company, contact information, logo, presenter name. 2. Customer situation (1-2 slides) – What is the problem? What problem are customers avoiding? 3. The Product / Solution (1-2 slides) a. Solution scalability – ability to serve. b. One large customer vs. many small customers. c. Core Tech/I.P. and barriers to entry for competitors. d. (Key mistake – tell too much; too much jargon.) 4. Value proposition for customer (1 slide). 5. Initial target segment and total market (1 slide). 6. Marketing strategy (1 slide). 7. Sales strategy (1 slide). 8. Product strategy (1 slide). 9. Management and board (1 slide). 10. Financials – current and projections (1 slide). 11. Investment required (1 slide). 12. Recap (1 slide). MEP ANGEL NETWORK, 2012 Application Kit | 10 MORE ON PRESENTING: Follow the above format exactly: Investors are looking for very specific content in presentations. Clearly presenting that content in the order indicated will ensure the best opportunity to be funded. Emphasize the right content: Your product or service is important to investors. However, you would not be presenting to the full network if we felt your idea was unmarketable. Therefore, we highly recommend you focus your time on slides seven through 11. You don’t want to find yourself rushing at the end because you spent too much time on the first slides. Avoid putting too much information on slides: Clear, clean, concise slides communicate well in a short period of time. Do not read your slides verbatim: Show you have a mastery of your story and the most vital information by using slides as emphasis, not as a crutch. Seek assistance: We strongly encourage presenters to practice thoroughly and know the material well. Presenters may gain pre-pitch guidance through seminars or one-on-ones available from the Innovation Initiative or the Missoula Economic Partnership. MEP ANGEL NETWORK, 2012 Application Kit | 11