Security Innovation & Startup How to get VC funding for security projects EXPERIENCES Entrepreneur Investor 2002-2010 2011-2015 Identity Security Management (SSO) China AI of AV Started 1997 Threat Intelligence Endpoint Detection & Response THE BUSINESS OF SECURITY ENTREPRENEUR TURNED INVESTOR VENTURE FIRM FOCUSED SOLELY ON SECURITY  IT Security is $30+ billion existing spend with the largest segments growing over 10%  Undergoing major dislocations, rife with innovation opportunities  Proven investment returns in space from current cycle in “Enterprise Infrastructure”  Highly specialized area with unique domain expertise required 4 $100M FUND IS RIGHT SIZED FOR PREMIUM IRR%  Big enough to invest in great companies and teams  “Smaller” venture fund enhances potential for returns  $75m primary focus on Series A & B venture capital  $25m growth alliance with KKR  Global opportunities underserved currently – great companies exist outside SV FIRM FORMED BY SECURITY INSIDERS  Company operating experience: ~20 year entrepreneur in broad functional roles  Venture/PE Experience: raised capital from 10+ firms, coinvestor with 10+ firms  Team – founders known each other 10 yrs. from 3 coinvestments  Founders have access to high quality deals from network SPECIALISTS ADVANTAGE IN ADDITION TO NORMAL VENTURE INVESTMENT SUCCESS FACTORS OF SECURITY INVESTING SUCCESS ALSO DEMANDS  Large potential markets  Deep knowledge of security IP  Great founders & teams  Access to limited pool of technical talent  Disruptive technology  Great products  Changing industry structure  Attractive investment terms  Access to influential white-hat thought leaders  Relationships with security co-investors  Grasp of government alliances – geopolitics  Insight into global import/export and standards  Knowledge of prior security architectures  Insight into privacy and law enforcement  Understanding software development & licensing  Knowledge of open source & standards  Relationships with big security companies 5 SECURITY IS UNIQUE “Any sufficiently advanced technology is indistinguishable from magic.” Arthur C. Clarke 6 INVESTMENT CRITERIA Security prominent part of company • Over 200 plans in months • Early venture capital round • Sourced from networks of trusted contacts and referrals • Series A & B preferred stages • Security industry reputation of CEO/founding team • Strong management team aware of own strengths/weaknesses • Rising management talent, the next generation founders - PGP, Foundstone 7 Financial terms and structure • $1m-$5m fund investment in $1m-$10m round size • Co-investors preferred • Reserve $5m-$8m of fund for total company investment Value creation opportunities exist • Coaching role to CEOs having walked in their shoes • Add business operational value early from experiences • Board members • Venture relationships • Partner introductions • Preferred security with liquidation preference • Customer introductions • Fair valuation and terms • Capital markets & services introductions • Executive teams and talent 1011 VALUE ADD + Operating experience counsel CEO and team Strategic partnerships and venture community • Advise CEOs from real experience • Investor introductions – venture, strategic, LPs • Stage appropriate scaling investments – global growth • Business development – value creation role • Employee and team sourcing from deep networks • Commercial deals expertise – multi-party business models • Organization chart tradeoffs PM/PMM, CTO/VPE, VPS/BD • Product roadmap and key customer tensions • Board meeting effectiveness • Industry executives network – CEOs, CTOs, CFOs, Co Dev • Service provider rolodex for security issues • Board member sourcing 8 M&A and IPO experiences • Advisory role on M&A process from expertise in capital markets, company and investor side • Private capital raising and structure expertise • Public markets expertise – IPO and secondary, global options for companies • Network of leaders in relevant roles at leading firms 1011 INVESTMENT THEMES Mobile first users and security enabled products and services  Mobile benefits unstoppable – how will security requirements need to be adapted?  Location based ecosystem, anonymous and ephemeral use cases take center stage  The devices are the main customer interaction channel, mobile is the internet  Prospects have multiple devices and have simultaneous interactions wit