Webcast: Venture Capital inbrazil

Webcast: Venture Capital inbrazil Patrick Arippol, Founding Partner, DGF Investimentos Renata Guinther, Head of Investment, FINEP Rodrigo Menezes, Partner, Derraik & Menezes Advogados Susana Garcia- Robles, Principal Investment Officer MIF/FOMIN Cristiane Nascimento, Project Manager ABVCAP Supported By Institutional Support Organized By 1

AGENDA Renata Guinther, Head of Investment, FINEP The Brazilian Innovation Agency Susana Garcia-Robles, Principal Investment Officer in charge of MIF Early Stage Equity Group, MIF/FOMIN The MIF and its Catalytic Role Building a VC Industry in Brazil Rodrigo Menezes, Partner, Derraik&Menezes Advogados Structuring VC Investments in Brazil Patrick Arippol, Founding Partner, DGF Investimentos Current Venture Capital Market in Brazil A VC s ViewPoint 2

March 2013 Título da Apresentação

FINEP Brazilian Innovation Agency Mission: To promote Brazil s social and economic development through public support to science, technology and innovation in companies, universities, technology institutes and other public or private institutions. Instruments Grants Loans Investments Strategic Orientation Companies Research Institutes & Universities

INOVAR PROGRAM

INOVAR Program A little bit of history... In the year 1999, FINEP conducted a diagnosis on the obstacles and challenges faced by technology-based SMEs to access finance through innovative financial instruments like seed and venture capital investments. As a result of this, FINEP approached the Multilateral Investment Fund (MIF) to work together on a program to be called.

Main Gaps Detected at the time Too few GPs with track record No effective bridge between investors and SMEs Poor market for IPOs Too few national investors in VC/PE asset class No VC industry representation Limited regulatory framework and legal vehicles for on-shore VC/PE investments

INOVAR Program Inovar was created to stimulate the formation of innovative companies and help them gain access to capital. Goals: Develop an ecosystem conducive to VC investment Forge relationships among Brazilian and international institutions Increase local sources of capital/investors Facilitate the creation of new local VC funds and fund managers Instruments:

INOVAR Achievements Number of partners working with INOVAR grew from 4 to 17, 11 of which are pension funds Fund Process 13 calls for VC/PE fund proposals and 6 calls for Seed funds proposals 241+ proposals received and 110+ approved for due diligence 161 investors have participated in panels to evaluate fund proposals Inovar Investors represent around 10% of Brazil s GDP $223M from FINEP and $1.90B from other investors in 26 funds (FINEP s portfolio) VENTURE, SEED and IPO FORUMS 36 Forums: 19 Venture, 11 Seed and 6 IPO 4000+ screened companies and 345 coached and presented to investors $1B+ invested in 75 innovative companies through the Seed, Venture and IPO Forum 90+ Angel investors attracted to 2 Seed Forums Scalability Cost of program was $16,4M, of which $3,7M was contributed by MIF INOVAR facilitated $1B+ in investment in SMEs Leverage of 5.37:1 for Innovation; 7.97:1 from private sector investors and 9,18:1 global Inovar has become a benchmark for other LatAm Countries in fostering VC

Current Gaps Early-stage still needs fostering Investment Committees in Vc funds Best Practices

INOVAR as a Public Policy Program Key Drivers: Innovation and Financial Return International Partnerships: FUMIN/IADB ; LAVCA ; ILPA Local Partnerships: ABVCAP ; BMF&BOVESPA Lessons Learned: Dedicated team. Simple models. As many positive externalities as possible. Stick to your project s fundamentals. Focus on achieving the projected results. Stay ahead of the market.

FINAL REMARKS FINEP is well positioned to prospect and originate investment opportunities in innovative companies and, in being fully committed to increasing the innovation rate in Brazilian companies, we see Venture Capital as one of the best strategic instruments to achieve this goal. The most interesting thing about Inovar is the possibility to affect change on a national scale through a program that has been seasoned for 12 years and provided great track record.

Thank You! Renata Guinther Investment Area Superintendent FINEP Brazilian Innovation Agency MCTI Ministry of Science, Technology and Innovation rguinther@finep.gov.br

AGENDA Renata Guinther, Head of Investment, FINEP The Brazilian Innovation Agency Susana Garcia-Robles, Principal Investment Officer in charge of MIF Early Stage Equity Group, MIF/FOMIN The MIF and its Catalytic Role Building a VC Industry in Brazil Rodrigo Menezes, Partner, Derraik&Menezes Advogados Structuring VC Investments in Brazil Patrick Arippol, Founding Partner, DGF Investimentos Current Venture Capital Market in Brazil A VC s ViewPoint 14

THE MIF AND ITS CATALYTIC ROLE BUILDING A VC INDUSTRY IN BRASIL SUSANA GARCIA-ROBLES MARCH 2013 ABVCAP WEBCAST-VENTURE CAPITAL IN BRAZIL DRAFT

Building the Seed and Venture Capital Industry of LAC for over 16 years The Multilateral Investment Fund (MIF): an independent trust fund (1993) and managed by the IDB. Mandate for high risk and innovation. It supports private sector development through equity investments, debt, and technical assistance. The MIF was a pioneer in the VC industry, entering in 1996 when it was virtually non-existent in LAC, helping rebuild it through subsequent business cycles in the Region, and was instrumental in developing the industry. Historically, the MIF has been the largest early stage investor with the widest regional coverage: We have invested in more than 66 funds in the Region. Since 1996 the MIF has invested approx. US$ 260 M in LAC, catalyzing US$ 1.2 B. Over the years the MIF has invested in 38 first-time fund managers covering a wide variety of sectors, including Information and Communication Technologies, Life Sciences, Clean Technologies, Technology applied to Agribusiness, among others. Today the MIF has a portfolio of 52 funds, 45 active funds and 7 pending their first closing, and is a leading provider of lessons learned and experiences for new investors in LAC. We go where we see a market opportunity and basic conditions (a conducive ecosystem): multi-sector, and sector agnostic (although tech is where we have a portfolio valued today at 2X), and with no quotas for a given country, only focused in LAC. DRAFT 16.

BRAZIL: A LABORATORY OF EXPERIENCES AND LESSONS LEARNED The MIF started its activity in 1998 and never retrenched in spite of crises or volatility. Instead, the MIF bet on supporting local first-time fund managers to create a local VC industry. BRAZIL became a laboratory of experiences and lessons learned for the MIF. What we did in Brazil helped the MIF support VC in other countries in the Region. Since 1998, the MIF has been one of the main supporters of the Seed and VC industry in Brazil, investing directly in VC funds and implementing programs to improve the VC ecosystem through the INOVAR I and II initiatives. The MIF has historically supported 17 funds. As of 2012, the MIF only has four funds that are actively investing or about to start operations: Burrill, Performa, C-Ventures, and Vox. The other funds will be finishing their lives within the next two years. It is important to mention that MIF s current portfolio in Brazil is performing well and the MIF is expecting a net gain in the Brazilian portfolio. The INOVAR I Program supported VC funds starting in 2001, launching calls for funding proposals and matching institutional investors with promising funds. In 2007, MIF approved INOVAR II, a follow-on program, which also has calls for seed fund proposals, as well as focusing on attracting angel investors to the industry. The selection of funds is performed through a competitive process and using rigorous due diligence standards. MAIN CONTRIBUTION: new local and first-time fund management companies supported, training in international bets practices, pension funds investments. DRAFT 17.

BRAZIL S VC INDUSTRY Brazil as a pilot test: The MIF took the INOVAR concept to other countries: Chile, Colombia, Peru, Jamaica, Costa Rica. The MIF partnership with ABVCAP is also intended to transfer knowledge on how to build VC associations in other countries. Lessons learned: i) innovation wasn t always welcome if the product was pioneer; this is changing now, ii) good number of fund management companies, investors and potential investments to jump- start the industry made the industry take off even if small at the early stage, iii) market is huge: a pro (you don t need to go outside Brazil to grow your company) and a con (you don t need to go outside Brazil to grow your company). Brazil today: i) having developed a local VC/PE industry because overseas investors were not that interested in Brazil a few years ago, the challenge is now how to adapt it to best international practices (e.g, IC composition; different sector funds under the same fund management company looks like lack of a strategy to the foreign investor); ii) early stage financing remains a challenge. DRAFT 18.

BRAZIL AND THE REST OF LAC Chile and Uruguay: need to go global due to their small markets. Colombia: like Brazil 10 years ago, strong government support. Argentina: very innovative and exporting entrepreneurs. Peru: only a few PE funds, lack of government support for early stage. Mexico: finally taking off, a new generation of fund managers. Central America: more traditional investments, use of mezzanine financing. WHY CONTINUE INVESTING IN BRAZIL? Need to grow angel networks and seed investment. Need to foster commercialization of the innovation produced in academic centers. Great potential: natural resources, a growing middle class that demands services and products. DRAFT 19.

THANK YOU For more information, please contact Susana Garcia-Robles (susanaro@iadb.org) DRAFT 20.

AGENDA Renata Guinther, Head of Investment, FINEP The Brazilian Innovation Agency Susana Garcia-Robles, Principal Investment Officer in charge of MIF Early Stage Equity Group, MIF/FOMIN The MIF and its Catalytic Role Building a VC Industry in Brazil Rodrigo Menezes, Partner, Derraik&Menezes Advogados Structuring VC Investments in Brazil Patrick Arippol, Founding Partner, DGF Investimentos Current Venture Capital Market in Brazil A VC s ViewPoint 21

2013 Structuring VC investments in Brazil

Structuring VC investments in Brazil Investment structure Transaction Documents Rights, Preference and Privileges of VC investors Pay attention to...

Investment Structure Local or Foreign vehicles Holding companies or investment funds Brazilian target or foreign target with an operational entity in Brazil Equity or Convertible debt

Rights, Preference and Privileges of VC investors Preferred shares with voting rights Tag Along / Drag Along / ROFR Liquidation preference Anti-Dilution Protection Non Compete and permanence of Founders Put Option Appointment of members of BOD / officers Registration Rights

Rights, Preference and Privileges of VC investors Protective Provisions Restriction on transfer of shares Approve distribution of dividends Amendment to company by-laws Approve Stock Option Plans Approve unbudgeted expenditures Approve loans or offer guarantees

Transaction Documents NDA Term Sheet / MOU / LOI Investment and Subscription Agreement Shareholders Agreement By-laws

Pay attention to... Tax issues Labor matters Intellectual Property Software Litigation Consumer claims Other areas (regulatory, anti-corruption, environmental, etc.)

Thank you Email: rodrigo.menezes@derraik.com.br Derraik & Menezes Advogados São Paulo Rio de Janeiro www.derraik.com.br

AGENDA Renata Guinther, Head of Investment, FINEP The Brazilian Innovation Agency Susana Garcia-Robles, Principal Investment Officer in charge of MIF Early Stage Equity Group, MIF/FOMIN The MIF and its Catalytic Role Building a VC Industry in Brazil Rodrigo Menezes, Partner, Derraik&Menezes Advogados Structuring VC Investments in Brazil Patrick Arippol, Founding Partner, DGF Investimentos Current Venture Capital Market in Brazil A VC s ViewPoint 30

Current Venture Capital Market in Brazil A VC s ViewPoint DGF Inova / DGF Investimentos Patrick Arippol Director parippol@dgf.com.br Phone: +55 11 3521 3700 www.dgf.com.br ABVCAP Webcast March, 27th, 2013 Documento Interno e CONFIDENCIAL Versão #2

Sector Specific Mid Sized Companies Innovative Start-ups Introducing DGF Investimentos Practice Areas DGF Early Stage 1 Status: Exiting Size: R$ 22M Vintage: 2002 DGF Early Stage 2 Status: Launching Size: R$ 50M Vintage: 2012 Mid Sized Companies GROWTH CAPITAL DGF GROWTH 1 Status: Invested Size: R$ 100M Vintage: 2007 DGF GROWTH 2 Status: Raising Size: R$ 300M Vintage: 2013 Early Stage Special Thesis DGF BIOENERGY 1 Status: Investing Size: R$ 300M Vintage: 2009 32 Documento Interno e CONFIDENCIAL Versão #10

Introducing DGF Investimentos Highlights Exits Portfolio Import / Export Software Tax Software Developer CRM Software Developer IT Infra-Structure Outsourcing Software for mobile ticket sales B.I. Solution for Healthcare On-demand printed products Corp. Expanse Mngt. Software Telecom R&D Outsourcing 33 Documento Interno e CONFIDENCIAL Versão #10

Introducing DGF Inova: Criteria & Pipeline CRITERIA & DIRECT SOURCING Criteria ( sweet spot ): STAGE Revenues of U$1-3M with proven business cycle and profitability potential BUSINESS MODEL Consistent and with attractive dynamics (recurring revenue, etc) GROWTH Potential >U$50M revenues in 5yr TEAM Stellar entrepreneur and team INNOVATION Innovative company TICKET Invest U$1-5M per company EXIT Clear exit opportunities Sample Investment Theses: Enterprise mobile software platforms High-growth Cloud & Saas plays (long-tail) SaaS solutions to drive on-line customer acquisition for small and medium companies Highly scalable web platforms in healthcare Business Intelligence applications Value-added distribution of virtual goods (retail) SNAPSHOT Pipeline Status since launch U$25M fund launched in January 2012 913 companies analyzed 2 investments completed Direct-sourced projects (from 30% to 70%) Segment Representation among top prospects: E-Commerce infrastructure: 18,5% Cloud/SaaS: 15,4% Web 2.0 / Internet Advertising: 13,8% Health-Web: 12,3% Mobile: 10,8% Financial Technologies: 7,7% IT-enabled Services: 6,1% Online Media: 6,1% Education: 4,6% Other: 4,6% 34 Documento Interno e CONFIDENCIAL Versão #10

Topics: Current Venture Capital Market in Brazil One VC s ViewPoint Myths Worth Dispelling: VC investing in Brazil is similar to VC in Silicon Valley (Risk of One Size Fits All Approach) The moment for good VC Investments in Brazil has passed (Risk of Following the Herd ) 35 Documento Interno e CONFIDENCIAL Versão #10

One VC s ViewPoint Risk of One Size Fits All Approach Dispelling Myth#1: VC investing in Brazil is similar to VC in Silicon Valley YES Bring Insights from a Mature into a Maturing Market Sector-specific support for global technology companies Increase direct sourcing and specialization Best practice / governance at global levels NO Use the Same Investment Approaches Only proven models are worth investments: great local and BRIC-specific business models Spray and pray : portfolio company monitoring is more demanding Pay US-valuations: exit markets command different valuations Assume follow-on investors will be there for good companies: don t be so sure better be ready for follow-ons Good companies will find exits: Again don t be so sure. Best to find companies with multiple paths to exit, and help them reach significant scale 36 Documento Interno e CONFIDENCIAL Versão #10

One VC s ViewPoint Risk of Following the Herd Dispelling Myth #2: The moment for good VC Investments in Brazil has passed Local VC eco-system has matured: specialized law firms, etc Critical mass has been reached for companies to hit it out of the park consumption (e.g. mobile phone users), entrepreneur quality, etc Moderate economic down-cycle in Brazil is already creating interesting investment opportunities (cherry-picking of Series B investments) 37 Documento Interno e CONFIDENCIAL Versão #10

Don t miss our next Webcast: Confirmed panelists: Cesar Collier, Managing Director, Siguler Guff Cristiano Gioia Lauretti, Partner, Kinea Investimentos Fernando Borges, Managing Director and Co-Head of the Carlyle South America / Vice Chairman, ABVCAP 38

Thank you for your participation! See you at the ABVCAP Conference next month! 15-16 April 2016 São Paulo Cristiane Nascimento cnascimento@abvcap.com.br Supported By Institutional Support Organized By 39