John Cook Executive Director – WJ Hopper & Co. Limited

John CookExecutive Director – WJ Hopper & Co. Limited

Chairman – Thunderbird Private Equity Center Executive Advisory Board

Raising Venture Capital: An Entrepreneurial &

GP/LP Perspective

April 2 & 4, 2008

WJ Hopper & Co. Limitedwww.wjhopper.com

Boutique Investment Bank – with global representation

London, Zurich, San Francisco, BrusselsTokyo, Tel Aviv, Sao Paolo, Reykjavik

Focus: International Private Placements Clients: Leading Private Equity Firms and Private CompaniesInvestors: Institutional, Government and Private Investors John Cook: Purdue University BS; Thunderbird MBA; International Harvester, Merrill Lynch, Security Pacific Bank

What are effective strategies and tactics to raise capital, both for entrepreneurs and fund managers?

Vision, strategy, tactics… and lessons learned…

“Raising a new fund is an event of singular strategic importance for a private equity fund. The firm’s future is, in effect, placed into the hands of institutional investors…whose capital allocation decisions…are a key influence in shaping the private equity industry. These investors will, by choosing whether or not to participate in the fund, either provide a mandate for continued growth or cast a collective vote of no confidence from which very few managers will ever recover.”

Importance of Fundraising

Source: “Fundamentals of Private Equity” - PEI 2008

Fundraising Ecosystem

Three Layer Cake

Endowments

InsuranceLimited Partners

Governments

Banks

Pension Funds

Foundations

Family Offices Corporations

A B C DHGFE

Fund of Funds

(USA / EUROPE / ASIA / LATAM / MIDEAST)Sovereign Wealth

Funds

USA / EUROPE/

ASIA/ L

ATAM/

MIDEAST

CARLYLE GOLDMAN NEA CVC

Secondaries

Stakeholders

$500 MM Thunderbird Private Equity Partners

LPsUSA

LPs ASIA LPs

LATAM

ED

CB

A

Legal

Acct

GP=Cabrera Mgt LLC

Regulatory

CUSTOMERS

SUPPLIERS

EMPLOYEES

LENDERS

EXITIPO

TRADE SALE

Audit

Advisor

LPs Europe

ENTREPRENEURS

Fundraising Process

Five Step ProcessTotal Time 12-24 Months

DD/ClosingRoad-showsMarketingPre-Marketing Strategy Formulation

LPs with decision-making process move forward.

Due Diligence documents sent to LPs

LPs visit manager’s office LPs agree to commitments Communicate closings to

remaining LPs

Contact potential LPs and distribute Fund marketing material

Send overview / teaser to initial targeted parties

Send PPM to requesting parties

Set up conference calls or face-to-face meetings for road-show period

Complete LP Questionnaires Invite LPs to visit HQ

Understand and articulate market opportunity

Initial formulation of fund strategy and tactics

Internal and external review and evaluation: resources, competition, market opportunity, team

General agreement on fund strategy, terms, team, process and documentation

Preparation of documents/DD material

Select key advisors Work with advisors to

create suite of documents. Map universe of LPs, decide

on who to approach and when and by whom

Finalize LPA, PPM, PPT, overview, diligence package, subscription agreements.

Develop communications strategy

Form new fund entity

On-site presentations and meetings with interested LPs

Various formats possible depending on size of team and geography:

Individual visits to LPs combined into a tour

or

LP group invited to luncheon or other event hosted by GP

Decision to Proceed

Identify and interview advisors

Retain Advisors, Form Team

Completed Marketing Docs

Prepare to go to market

Marketing strategy agreed

Road-show set up with LPs

Manage process and monitor feedback

Incorporate feedback from market

Begin to get signed subscription agreements

Monitor objections, make refinement in process

Face-to-face meetings with LPs

First, interim and final closings

Proceed with final closing process

Begin investment process

Documents

Marketing Package

Overview

Flip chart presentation

Private Placement Memorandum

Due Dilligence Package Subscription agreement Summary of all

contracts Actual contracts

(only if requested) Names of advisors to

the fund Sample reports to

investors Estimated timelines Asset allocations

Curricula vitae Attribution analysis Investment transactions Management references Pipeline of deals Articles of incorporation Risk mitigation

Private Placement Memorandum Executive Summary Investment Thesis and Rationale Investment Strategy, USPs and Value Add Sector and Geographic Focus Investment Process, Diligence Process, Use of Debt, Exits Team Members and Advisory Board Track Record with Attribution Analysis Deal Sourcing and Pipeline Key Terms of the Fund Risk Factors and Conflicts of Interest Legal and Regulatory Matters Appendices

Standard Limited Partnership TermsObjective = Alignment of Interests

Fund name: Thunderbird Private Equity Partners LPLegal structure Delaware Limited PartnershipManager: Cabrera Capital Management LLCFund size: $500 MillionMinimum: $5 MillionTerm: 10 years + Two ExtensionsManagement fee: 2% during investment period then decliningCarried interest: 20% with 8% Hurdle RateGP contribution: 2% of Committed CapitalCo-investments: Yes for Large Commitments

Vision, Strategies and Tactics

What is the Fundraising Vision?

Strategic Questions

Blanket The Market Or Be Selective?Geographic Target: Local, Regional, National, Global? Types of Target: Corporate Venture, Active Passive, Govt?Which Staff Should Undertake The Task?Documents – Who, What, When, Where, How?Selecting Advisors: Legal, Accounting, Communications How Much Time and Money Will It Take?Use Placement Agents Or Go It Alone?

What General Partners Need…

HIGH QUALITY, VALUE-ADD INVESTORS

Good Relationships with LPs Strong LPs with Patience, Understanding, Insights and Trust LPs with Sophisticated Approach to the Asset Class Low Turnover of LP Investment Managers Global Diversification of Investor Base Value Added LP Base – Advisory Board Members, Co-Investors No Interference in Running the Fund – Little Friction Help with Exits, M&A Opportunities, Company Building Help with Secondary Market for LPs Who Need to Sell

What Limited Partners Want?DIVERSIFICATION, HIGH RETURNS, LOW RISK

Attractive Market Opportunity Over Long Time Horizon Broad and Deep Pipeline of Deals – Systematic Approach High Quality Team with Cohesion, Credibility, Balance, Stability Prefer to Back Strong Teams – No One-Man-Band Portfolio Diversification Across Sectors, Stages, Geography Special Terms: Co-Investments, Technology Window, M&A or IPO Rights Stable Investment Environment: Regulatory, Economic, Fiscal Controlled and Manageable Risk Parameters Clear Value Creation Strategy of the Team Serial Relationship with GPs Clear Exit Routes via M&A, IPO, Strategic Sales Lower Fees – Equitable Risk Sharing

Target Investors – LP Decision Process

Insurance Companies = Institutional Model Commercial Banks = Institutional Model Investment Banks = Strategic / M&A / IPO Pension Funds = Institutional Model Corporate Investors = Strategic Drivers Foundations = Opportunistic / Strategic Endowments = Opportunistic / Strategic Fund of Funds = Institutional Model Governments = Strategic / Social Objectives Private Investors = Opportunistic / Personal

Sovereign Wealth Funds: $2.5 Trillion ProblemAbu Dhabi Investment Authority $875 billion Government Pension Fund of Norway $350 billion Government of Singapore GIC $330 billion Saudi Arabia $300 billion Kuwait Investment Authority $250 billion China Investment Corporation $200 billion Singapore Temasek $159 billion Stabilization Fund of Russia $158 billion Canada Pension Plan $119 billion Australian Government Future Fund $ 61 billion Qatar Investment Authority $ 50 billion Alaska Permanent Fund $ 40 billion Libyan Investment Authority $ 40 billion Brunei Investment Authority $ 30 billion Korea Investment Corporation $ 20 billion Malaysia Kazahana National $ 18 billion

Wrong Attitude

This is a Piece of Cake My Fund Was Made In Heaven Every LP Will Want My Fund Raise as Much Capital as Possible This Will Take No Time At All LPs Are Real Dummies Target All LPs Of All Types In All Categories Everywhere No Need For Personal Visits No Need For Professional Advisors

Right Attitude

My Fund Must Have Its “Issues”And Problems Only A Few LPs Will Be Interested In My Fund Better To Pace Myself, Do This In Stages Work My Network Personally This Will Take 5 Times Longer Than I Planned This Will Cost 5 Times More Than I Planned LPs Are Pretty Experienced Folks Target Specific LPs Of Specific Types Be Prepared For Travel Good Advisers Add Value

Fundraising Trends

Big Picture Explosion of Private Equity Globally Greater Acceptance of Asset Class by Stakeholders Larger Fund Sizes, Larger Institutional Allocations Top Firms Produce Best Returns - Persistence Growth of Secondary Market – but at a price Greater Sophistication at GP and LP Levels More Transparency, Better Investor Relations Standardization of Terms & Conditions Greater Value Added Role of GP Better Governance and Regulatory Environment Better Risk Measurement and Control However --- Much More Criticism of the Industry

Current Environment Buyout boom of 2003-2007 has come to an end (or paused) Buyout firms paid too much for deals at the 2006-2007 peak Debt market closed for larger deals, more equity to complete deals Recession is fully underway – may be long recovery Dollar at all time low and dropping Mortgage market in turmoil with subprime mess Stock markets increasing volatility Financial sector Bear Stearns, UBS, Merrill Lynch, Northern Rock Sovereign Wealth Funds coming on stream big time Fed and White House taking emergency steps to provide stability AND YET --- private equity allocations are increasing!!

Popular Sectors / Trends Traditional: TMT, Life Sciences, Healthcare Mid-Market Buyouts / Expansion / Growth Specialized:

Clean Tech Sector Energy: the hydrocarbon problem Infrastructure: electric grid, telecoms, ports, transportation

Emerging Markets: BRICS + N11 First Tier: India, China, Central & Eastern Europe Second Tier: Latin America, CIS, Middle East, Africa

Increasing Interest in Venture & Growth versus Buyouts Globalization / Regionalization Opportunities

Predictions for 2008

Slow Down in Mega Buyouts (credit crunch/recession/falling markets) Pick Up in Late Stage Venture & Other Sectors (less leverage) Non-US Markets to Stay Strong (less mature, still growing) Secondaries & Distressed =Strong Growth, Tighter Pricing Sovereign Wealth Funds & Petro Dollars Make Bigger Splash Think Contrarian - Take Advantage of the Carnage Biggest Challenge: Build the Case for Value Add Greater Convergence of Asset Classes

Source: Dow Jones Private Equity Analyst “Review & Outlook”

Survey of Institutional Investors : 2008

Source: Dow Jones Private Equity Analyst “Review & Outlook”

Plans to Increase / Decrease Allocations: 78% plan to maintain or increase allocations to private equity 22% plan to reduce or terminate allocations to private equity

Areas of Increasing Interest: Distressed debt, mezzanine, secondaries, co-investments, venture capital, growth equity, small and mid-market buyouts, cleantech, China, India, Russia, Western and Eastern Europe, Latin America

Biggest Areas of Concern: Credit crunch, economy, recession, exit markets, massive fund sizes, manager selection, tax law changes

Where Does The Money Flow?

Source PEI: 1600 active LPs worldwide

Institutiontype and

geographicalsplit of

investors in private

equity funds

Sector Allocations: Who Gets Most?

Source PEI: 1600 active LPs worldwide

Top 50US pension

fund’scurrent average

allocation breakdown

by fund type.

Regional Allocations: PE Stays Close to Home

Source PEI: 1600 active LPs worldwide

Global plusNorth America,

Europe, Asia/Pacific

based LPs averagegeographical split

ofInvestments

Source: Probitas Partners

Source: Probitas Partners

Source: Probitas Partners

EMPEA’s 2007 fundraising statistics show that private equity funds investing in emerging markets raised US$59 billion in fresh capital in 2007, a 78% increase over the US$33 billion raised in 2006. Fund sizes broke records, with 19 funds raising US$1 billion or more. The average size of closed funds grew dramatically, from US$272 million in 2006 to US$426 million in 2007.

Source: Emerging Markets Private Equity Association

Source: Emerging Markets Private Equity Association

Source: Emerging Markets Private Equity Association

2007 REVIEW & 2008 OUTLOOK – USAChanges in Capital Commitments

2007ACTUAL

2008PROJECTED

ALL USA PRIVATE EQUITY

$300 B 100% $180 B $320 B 100%

BUYOUTS $230 B 75% $125 B $250 B 65-70%

VENTURE $32 B 10% $23 B $37 B 12-15%

OTHER $45 B 15% $30 B $50 B 15-28%

Source: Dow Jones Private Equity Analyst

Lessons Learned:Tips & Tricks

The Marketing Push New LP Relationships are the Hardest to Cement Start Pre-Marketing Two Years Ahead of Fundraising Be Prepared for the Long Journey! Assemble All Documents Before Fundraising Document Everything, Especially Track Record Get Local Anchor Investors in First Think of Every Question Ahead of Time Designate One Senior Partner As Point Person Brief Your References, Keep Them Informed Use Professional Advisors Use Technology – Video OK – But Face to Face Better

The Marketing Push Determine Priorities: Close To Home LPs First Leverage Your Secret Sauce: Why Are You Unique? Spoon Feed LPs What They Need – No Big Push Use of Virtual Data Room Learn From Each Presentation: Adopt and Adapt Do Not Push LPs for Early Decisions (Court a Negative) Deal Attribution Critically Important Track Record Is 90% of the Game – Present it Well! Answer Each LP Question Carefully Must Involve Most Senior Team Members Must Have “Market Terms” (For Your Fund-Type)

The Marketing Push

Keep in Front of LPs – Send Stuff Regularly Must be a Good “Fit” with LP Strategy and Timing Talk About the Mistakes and Lessons Learned Show Succession Plan is in Place Think Long Term -- Ten Year Marriage Be Anecdotal, Personal Relationships Matter Two Way Conversation – Learn to Listen and Question Lighten the Atmosphere – Be Relaxed Send Thank You Notes for Meeting and Advice Get used to it -- Fundraising is a Life Style!

Conclusion: What it Takes?

Takes Time – 12-18 months to raise new funds Takes Skill – It is an art, not a science Takes Luck – External events impact success Takes Money – $1 million per launch Takes a Team – Cohesive, hungry, smart, dedicated Takes a Story – who, what, how, when, where, why Takes Persistence – Must turn over many rocks!

Happy Ending:Thunderbird Private Equity Partners

Closes Fund at $600 million…20% Over-Subscribed!

Thank You!

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