Uncle California Accelerator

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UNCLE CALIFORNIA

San Francisco – Boston – Budapest 2014

Silicon Valley Hungarian Accelerator

“a bridge between Hungary'ʹs innovation and a successful US business” “reverse brain drain in a smart way”

Only in Silicon Valley…

Ñ  Founded in 2013, Uncle California is a San Francisco-‐‑based accelerator structured around two investment themes with strong pipelines in both: Ó  No 1: assist Hungarian start-‐‑ups to access the Silicon Valley and

Boston ecosystems Ó  No 2: match American founders with Hungarian technical

background

Ñ  We have a team in place in Silicon Valley, Boston, and Budapest with an established professional network in the Silicon Valley and Boston start-‐‑up, accelerator, and venture capital communities coupled with 50+ years of experience in Central Europe

Ñ  We are currently fundraising for a small private fund to be matched by a generous matching grant from the Hungarian government’s Gazella program

Uncle California

Ñ  Balazs Laszlo Karafiath is an entrepreneur & communication researcher. His current venture is Culture2 Inc. based in San Francisco. He is the co-‐‑founder of Darwin’s Marketing Evolution, a research & consulting company successfully incorporating meme science into marketing practice. He was a World Fellow of 2006 at Yale University. In 1997, he founded Carnation, Inc., a start-‐‑up internet consulting and marketing company. Laszlo co-‐‑founded Central Europe’s biggest week-‐‑long music and arts festival, Sziget at the age of 20. Laszlo is an active angel investor in Budapest and San Francisco. He is based in San Francisco.

Meet the Team

Ñ  Barnabas Gero is a corporate finance professional with over 10 years experience in M&A, equity fundraising, and project finance. Barnabas has received his Mphil in Management from Columbia Business School and afterward worked for an incubator called IronStreetLabs in New York. After returning to Hungary, Barnabas worked for Citigroup and Deloiae in corporate finance. In the last five years, Barnabas has been an independent advisor to numerous companies such as Lapker, Richmond Capital Partners, or Helit, while acting as the head of corporate finance at PannErgy, a Budapest Stock Exchange-‐‑listed geothermal developer. Since moving back to the United States in 2012, Barnabas has been focusing exclusively on building Uncle California. He is based in San Francisco.

Meet the Team

Ñ  The objective of the program is to support the development of the Hungarian start-‐‑up ecosystem and promote Budapest to become the start-‐‑up center of Central Europe

Ñ  The program includes selection of accredited accelerators (“Gazellas”) which invest private funds along a generous non-‐‑refundable matching grant in promising start-‐‑ups and seek to accelerate them toward international prominence

Ñ  The goal of the program is to seed start-‐‑ups that could be successful internationally, while keeping technical operations in Hungary

Ñ  In the first round of the program (“G1”) four accredited accelerators (the “Gazellas”) were selected, while the second round of the program (“G2”) is to be announced shortly.

The Gazella Program

Ñ  The amount of matching grant allocated to each Gazella is approximately $2.5 million, while up to $1 million of private capital is required to trigger disbursement of the above matching grant

Ñ  Although the non-‐‑refundable matching grants are disbursed directly to start-‐‑ups, Gazellas have complete discretion in their selection of recipients and will act as private investors, using customary private investment processes and corporate control techniques

Ñ  Finally, Gazellas are allowed to acquire up to 20% stakes in the start-‐‑ups in exchange for the above services.

A balanced system of matching grants and private investments

Ñ  Uncle California will apply for accredited accelerator status in the upcoming G2 and seeks to raise soft commitments from a group of venture capital and angel investors in the Bay Area, Boston, and Hungary

Ñ  The investors will invest directly into start-‐‑ups sponsored by Uncle California and no investor is under obligation to invest

Ñ  Given the parameters of the program, private ticket sizes for each start-‐‑ups will be between $100,000 to $200,000

Ñ  In each transaction, the private investors would receive warrant coverage for 50 percent their investment, while Uncle California will provide up to 5 times the private investment amount using the grant received as part of G2

Bridging Silicon Valley angels and Budapest startups with a +50% Warrant Coverage

Ñ  In addition to applying to G2, Uncle California also plans to explore the acquisition of one of the accredited accelerators from G1

Ñ  The advantage of acquiring such a vehicle is the increased certainty of access to the generous matching grant, while the downside is the required upfront cash outlay

Ñ  We are in preliminary negotiations with owners of the G1 Gazellas and expect to negotiate a purchase price in the region of $500,000 to $750,000 depending on the increase in the non-‐‑refundable matching grant as part of G2

Headstart: buyout of an existing player

Investment structure at G2

Founders (74%)

Uncle California

UC (17%) Angels 9%

$250K $2.5M

Angel #1

$250K $250K

Angel #3

Angel #2

Ñ  Uncle California makes 5-‐‑10 investments totaling $3.25 million of which it contributes $2.5 million

Ñ  Angels contribute the balance of $750,000

Ñ  Angels’ share is 30% of California’s investment

Ñ  Angels receive 50% warrant coverage premium at their investment

Ñ  Angels are under no obligation to invest in each deal, only the ones they like

Investment portfolio

Investment returns at G2

Founders (74%)

Uncle California

UC (17%) Angels 9%

$940K $5.3M

Angel #1

$940K $940K

Angel #3

Angel #2

Ñ  Assuming a 2.5 times increase in the portfolio, Angels receive a total value increase of 3.75 times


Investment structure at G1

Founders (74%)

G1 Gazella

Angels 26%

$400K

$4M

Angel #1

$400K $400K

Angel #3

Angel #2

Ñ  Angels acquire G1 Gazella for $700,000

Ñ  G1 Gazella makes 10-‐‑15 investments in the amount of $5.2 million of which it contributes $4 million

Ñ  Angels contribute an additional $1.2 million for a total investment of $1.9 million including the purchase price

Ñ  Uncle California acts as advisor to Angels in arranging the acquisition of a G1 Gazella and originating and structuring investments

$700K


Uncle Cali

origination and deal structuring


Ñ  Angels have two alternatives for compensation: Ó  #1: Increased warrant coverage for their private

investments in particular start-‐‑ups Ó  Returns from the whole portfolio

Ñ  The above structure allows angels to be selective if they prefer increased exposure to particular start-‐‑ups

Ñ  In this case, they receive higher warrant coverage, but their stake in G1 Gazella will decrease

Ñ  Uncle California will be compensated by options in the start-‐‑ups

Ñ  Preliminary terms: Ñ  8% Preferred returns for Angels with catch-‐‑up for Uncle California Ñ  Equal split of returns after preferred returns and catch-‐‑up

Ñ  At 2.5 times portfolio return, the above structure would provide Angels 4X times return on their total investment


Ñ  Given the amount of non-‐‑refundable grant money and the preferred returns, Angels are protected on the downside, while receive highly aaractive returns if the investment performance is above 1.5 times at the portfolio level

Portfolio(return(multiple 0.50((( 0.75((( 1.00((( 1.25((( 1.50((( 2.00((( 2.50((( 3.00((( 3.50((( 4.00(((Angel(return(multiple 1.39((( 1.54((( 1.89((( 2.24((( 2.59((( 3.29((( 3.98((( 4.68((( 5.38((( 6.07(((

Portfolio(IRR =12.9% =5.6% 0.0% 4.6% 8.4% 14.9% 20.1% 24.6% 28.5% 32.0%Angel(IRR 6.9% 9.1% 13.6% 17.5% 21.0% 26.9% 31.8% 36.2% 40.0% 43.4%

Ñ  Mobile workflow process management app developer

Ñ  Cloud-‐‑based enterprise software development company

Ñ  Real-‐‑time virtual reality software developer Ñ  Digital personal trainer software start-‐‑up Ñ  3D printer developer start-‐‑up Ñ  Virtual CRO start-‐‑up Ñ  Retail coupon management company Ñ  Visual geocaching start-‐‑up Ñ  Gamified talent screening start-‐‑up

Our pipeline in investment theme #1

Ñ  Home inventory management start-‐‑up (Boston) Ñ  High-‐‑tech camera hardware company (San Francisco)

Ñ  Health-‐‑tech start-‐‑up developing a smart thermometer using the BLE standard (Los Angeles)

Ñ  Embedded advertising start-‐‑up (Los Angeles) Ñ  Camera based parking app start-‐‑up (San Francisco)

Our pipeline in investment theme #2

Appendices

Ñ  Csaba Csoma: CTO, HealthExpense, focus: enterprise software, healthcare applications

Ñ  Tamas Henning: business development, Skype; focus: enterprise software, communication applications

Ñ  Sandor Nagy: COO, McGraw-‐‑Hill Education; focus: education applications

Ñ  Janos Veres: program manager, XEROX PARX, focus: hardware, internet of things

Ñ  Tibor Mozes: SVP, Engineering at InfoScout, focus: mobile, big data, gaming, adtech

Ñ  Paul Cheng: founder and CEO, Phigital; focus: mobile, adtech Ñ  David Varnai: ecommerce manager, Zenni; focus: ecommerce Ñ  Gabor Csele: founder and CEO, Namo Media, focus: adtech Ñ  Laszlo Horvath: president, ActiveMedia; focus: SEO Ñ  Aaila Toth: C3 Energy, SVP Worldwide sales; focus:

renewables and big data Ñ  Peter Gajdos: portfolio manager, CMEA Capital; focus:

renewable energy, venture capital Ñ  Andras Forgacs: CEO, Modern Meadow, focus: biotech

Our Mentor Network

Ñ  Zsolt Krajcsik: animation professional; founder, Setec; focus: film and entertainment application, personal quantification and wearables

Ñ  Viktor Bullain: project manager, virtual application, Turner Construction; focus: enterprise software

Ñ  Tibor Kozek: CEO, Imagize LLC; focus: hardware/software applications

Ñ  Andras Toth: Associate, Plug & Play Ventures; focus: venture capital and business development

Ñ  Zoli Piroska, Founder and CEO, Secret Sauce Partners; focus: retail applications

Ñ  Daniel Yoon: finance at Tapingo; focus: hospitality, online travel applications

Ñ  Michael Globits: marketing manager, SF Fitness; focus: personal quantification, ecommerce

Ñ  Zoltan Szendroi: founder, RealBird; focus: real-‐‑estate applications, personal quantification and wearables

Ñ  Oren Knopfmacher: post-‐‑doc, Stanford; focus: medtech Ñ  Patrick Vlaskovits: founder, Superpowered, mentor 500startups;

focus: lean entrepreneurship

Our Mentor Network

Ñ  The Gazella program was established by Hungary’s National innovation Agency in 2013

Ñ  The objective of the program is to support the development of the Hungarian start-‐‑up ecosystem and promote Budapest to become the start-‐‑up center of Central Europe

Ñ  In the first round of the program (“G1”) four accredited accelerators (the “Gazellas”) were selected

Ñ  The Gazellas invest private funds along a generous non-‐‑refundable matching grant in promising start-‐‑ups and seek to accelerate them toward international prominence

Ñ  In exchange for their role as accelerators and gatekeepers to public funds, Gazellas are allowed to acquire ownership stakes in the start-‐‑ups

Ñ  The goal of the program is to seed start-‐‑ups that could be successful internationally, while keeping technical operations in Hungary

Ñ  The accredited accelerators of G1 are currently finalizing the funding contract with the Hungarian government

Ñ  2nd round of the Gazella program (“G2”) is expected to be announced shortly with submission deadline in early summer and final selection during the summer

Ñ  Four new Gazellas are expected to be selected in G2, while matching grants are expected to be increased for the G1 winners

The Gazella Program

Ñ  The amount of matching grant allocated to each Gazella in G1 is approximately $2.5 million, while $0.5 million of private capital is required to trigger disbursement of the above matching grant

Ñ  Gazellas also receive a non-‐‑refundable grant for operating expenses in the amount of $250,000 which requires $150,000 in matching private funds to be triggered

Ñ  At the same time, due to the rigid disbursement of the matching grants, up to $0.5 million in private funds will be required to provide the necessary liquidity to allow for smooth operations

Ñ  Four new Gazellas are expected to be selected in the upcoming G2, while matching grants are expected to be increased for the G1 round winners to ~$4 to $5 million

Ñ  In case of each start-‐‑up, the maximum amount of non-‐‑refundable public grant is ~$500,000, thus requiring ~$100,000 in private funds and up to an additional $100,000 in necessary liquidity

Ñ  Although the non-‐‑refundable matching grants are disbursed directly to start-‐‑ups, Gazellas have complete discretion in their selection of recipients and will act as private investors, using customary private investment processes and corporate control techniques

Ñ  Finally, Gazellas are allowed to acquire up to 20% stakes in the start-‐‑ups in exchange for the above services

The Gazella program (cont.)

Ñ  Do or do not. Don’t try. Ñ  Continuous presence, no ‘pop-up stores’ Ñ  Local companies, American leaders Ñ  Local business propositions Ñ  THROW A BETTER PARTY* Ñ  Success

The way to get traction in the Valley * The answer to the question: What is the best way to get access to best young business leaders and the most connected VCs and business angels in the Valley?

Ñ  “Uncle Cali - Your portal to The Valley”

Ñ  B. Laszlo Karafiath Ñ  Barnabas Gero

Ñ  [email protected]

Join us in Cali!