Our fund is focused on capital appreciation, which we seek to achieve through investments in the equity securities of later stage, private, pre-IPO companies.  We believe investors place a premium on liquidity, or having the ability to sell stock quickly and efficiently through an established stock exchange.  Our goal is to buy privately, sell publicly and capture the difference.

If a portfolio company has abandoned plans to pursue an IPO, we may take other steps to exit the investment including the use of secondary marketplaces that specialize in the trading of private company securities.  If we are not able to liquidate our shares privately, we may seek to have the portfolio company consider a sale or merger with a strategic buyer as a possible alternative to an IPO.

Our portfolio company investments are typically in the form of convertible preferred securities that are convertible into common stock, common stock, warrants exercisable into common or preferred stock, or structured as a loan that is convertible into common stock.  Most of our investments are made at fixed valuations determined at the time of our investment with no downside adjustment protection.  However, in certain cases, our conversion price may be adjusted based on a pre-determined discount to our portfolio company’s IPO price.

We generally acquire our equity securities principally through direct investments in prospective portfolio companies.  However, we may also purchase equity securities in so-called “secondary transactions” from selling stockholders in later stage, private, pre-IPO companies, who are typically either current or former management or early stage investors in these companies.

While we focus on companies across a broad range of growth industries that we believe are being transformed by technological, economic and social forces, we intend to focus our investments in the following industries, or in companies that support companies in these industries:  Technology, Internet & Software, and Cleantech.

We invest primarily in U.S. companies.  However, we may invest on an opportunistic basis in certain non-U.S. companies.  In no event will the total value of our non-U.S. investments exceed 30% of the total value of our assets.

Because certain industry segments require specialized knowledge, we typically do not consider investments in real estate, construction, and mining and exploration.  We also typically avoid investments in companies whose principal place of business and executive management is located in China due to the unique due diligence risks associated with Chinese companies.

The primary sources of our investment opportunities are from our relationships with venture capital firms and investment banks, secondary markets that specialize in the trading of private company securities, and our direct outreach to private companies.

Over the past 15 years, the public capital formation process in the U.S. has changed, with the average market capitalization of a company completing its IPO and the average amount raised in an IPO having increased substantially.  As a result of these market conditions, micro- and small-cap companies generally must demonstrate an ability to raise private capital prior to an IPO to be successful in the IPO process.  We believe these pre-IPO rounds evidence existing investors’ continuing commitment to the company, establish new investors’ pricing for the round, and strengthen the company’s balance sheet as it prepares for the IPO process.

We have identified the following three core criteria that we believe are important in meeting our investment objective:

• Revenue:  $10 million+ trailing 12 months
• IPO Timing:  Within 18 months
• Return Potential:  2x return over 3 years

These core criteria provide the primary basis for making our investment decisions.  However, we may not require each prospective portfolio company in which we choose to invest to meet all of these core criteria.