Alta Group's Emerging Market Research - "Why Mexico?"

ALTA VENTURES MEXICO IGNITING INNOVATION

Summary of Emerging Market Research ROGELIO DE LOS SANTOS, MANAGING DIRECTOR, ALTA VENTURES MEXICO PAUL AHLSTROM, MANAGING DIRECTOR, ALTA VENTURES MEXICO

Q2 2012

2

Outline: Emerging Market Research

¨  AVM Research Timeline and Team

¨  Emerging Market Research

¨  Investment Hypothesis - Mexico

¨  Drill down Primary Market Research

¨  Investment thesis is working…

¨  Behind the Scenes at Alta

¨  Appendix

3

Alta Market Research Timeline 2005-2010

Emerging Market

Research Started

Select Mexico as Top Choice, Research PE

Market

Indentify Partners and Launch Alta

Growth Capital

Industry Advocacy-

Capital Formation and Innovation

Report; International

Investor Summit; Key Relationships

2005 2006 2007 2008

4

Alta Market Research Timeline 2005-2010

•  U.S. Ecosystem Tours and Best Practice Transfers

•  Rogelio and Paul Partnership •  What about VC? VC Market

Drill Down and Strategy Formulation

•  Key Partner Identification •  Open Office in Monterrey, U.S.

Team Moves to Mexico

Build sustainable deal flow systems, distribution and exit paths.

•  E|100, MVCC, iTuesday, WIN Kickstart, etc.

•  Building the team

2/11/11

Launch Alta Ventures Mexico

2009 2010

5

Alta Ventures - Team

Paul Ahlstrom, Managing Partner l  Co-Founder & Managing Partner, Alta Ventures l  Co-Founder, Alta Growth Capital and Kickstart Seed Fund, Co-Founder vSpring Capital l  Business Dev. Director Folio Corporation division of Lexis-Nexis/Reed Elsevier l  Founder/CEO of Knowlix sold to Peregrine Systems 1999 (now HP NYSE: HPQ) l  Other Exits include: MyFamily.com/Ancestry.com (NASDAQ: ACOM), GlobalSim www.globalsim.com sold

to Kongsberg Maritime (KOG - Oslo Stock Exchg), Senforce sold to Novell (NASDAQ: NOVL) Altiris IPO (NASDAQ:ATRS) Altiris was then bought by Symantec (NASDAQ: SYMC), Aeroprise sold to BMC (NASDAQ: BMC), Rhomobile sold to Motorola Solutions (NYSE: MSI)

l  Advisory boards: Univ of Utah Tech Commercialization, (Previously Motorola VRB), Endeavor Mentor l  BA, Brigham Young University, Honorary Doctorate Netanya Academic College l  Venture Investments: The American Academy, Public Engines, Convert.com, Juxta Labs

Rogelio de los Santos Calderon, Managing Partner l  Co-Founder & Managing Partner, Alta Ventures l  Co-Founder, Kickstart Mexico l  Founder of 7 startups; exits Xtreme Cinemas, Dalus l  Co-founder and CEO of Generacion Empresarial Mexicana l  Master in Business Leadership, DUXX Graduate School of Business Leadership l  BS, Instituto Tecnologico y de Estudios Superiores de Monterrey l  Directorships: Energryn, Diverza, Juxta Labs, MFM l  Boards: Babson College, Tech de Monterrey - ITESM, Endeavor, Enlace E+E

6

Rob McMillen, Principal l  VP Sales Rhomobile l  Associate, vSpring Capital l  JD MBA Brigham Young University l  BA Liberal Arts & Sciences Utah State University l  v100 member

Alem Muminovic, Associate l  MBA; International University of Monaco, with Honors l  Experienced entrepreneur; sold to Strategic Buyer l  Managing Director for Guadalajara Angel Investor Network l  Founding member and Team leader for iTuesday and E|100 in the western region of Mexico

Alta Ventures - Team

Christian Aguirre, Senior Analyst l  Founding Member and Team Leader for E|100 Program l  Research and consultancy assistant at SME chair in EGADE l  MS in Finance; EGADE Business School with Honors l  BS Mechatronics; ITESM Magna Cum Laude

Lorenzo Barrera, Analyst l  Consultant at SINTEC l  Experience in the snack & confectionary, processed meats and steel industries l  BS Mechanical Engineering; University of Notre Dame

7








¨  Appendix

8

The Ring of Fire

Source: Data from World Economic Outlook Database 2012, The Ring of Fire, PIMCO, 2009

Macroeconomic Fundamentals (2011)

-15.0%

-12.5%

-10.0%

-7.5%

-5.0%

-2.5%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

0.0% 50.0% 100.0% 150.0% 200.0% 250.0%

Publ

ic S

ecto

r D

efic

it (%

of

GD

P)

Chile

Australia

Sweden

Mexico

Finland

Norway

Brazil

Netherlands

Spain

Germany

UK

Canada

France

USA Ireland

Portugal

Italy

Greece Japan

Public Sector Debt (% of GDP)

Argentina

Denmark

Colombia

9

Gross External Debt as a Percent of GDP: Averages for Selected 59 Countries, 2003-2009 (in percent)

Sources: International Monetary Fund, World Economic Outlook, World, Bank, Quarterly External Debt Statistics (QUEDS).

10

Continued Growth in Emerging Markets Supports Private Equity

Emerging Markets

Source: IMF, World Economic Outlook Database, 2009

GDP Growth In Emerging Markets Predicted to Outperform Developed Countries

GDP Growth Predicted to Remain Positive in Most Emerging Markets

11

Continued Growth in Emerging Markets Supports Private Equity

Emerging Markets

Source: IMF, World Economic Outlook Database, April 2012

GDP Growth In Emerging Markets Predicted to Outperform Developed Countries

GDP Growth Predicted to Remain Positive in Emerging Markets

-2

0

2

4

6

8

2010 2011 2012

Developed vs Emerging Markets

United States

Euro Zone

Emerging & Developing Economies

0

2

4

6

8

10

12

2010 2011 2012

Africa Central & Eastern Europe

Commonwealth of Independent States Developing Asia

Latin America Middle East

12

The centers of rapid wealth creation are shifting from Developed to Emerging Markets

Source: IMF, World Economic Outlook Database, April 2012, Data for years 2012-‐2019 are esBmates

Contribution to Global GDP Growth (Share of World Total)

Key Drivers are: •  Rapid industrialization •  Significant income

growth •  Improved long-term

household financial confidence

Emerging Markets Pace Global Economic Growth

Advanced Economies Emerging & Developing Economies

30% 35% 40% 45% 50% 55% 60% 65% 70%

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

13 13

Albania Chad Grenada Lesotho Papua New Guinea Swaziland Algeria Chile Guatemala Liberia Paraguay Sweden Angola China Guinea Libya Peru Switzerland Antigua and Barbuda Colombia Guinea-Bissau Lithuania Philippines Syrian Arab Republic Argentina Comoros Guyana Luxembourg Poland Taiwan Province of China Armenia Costa Rica Haiti Madagascar Portugal Tajikistan Australia Croatia Honduras Malawi Qatar Tanzania Austria Cyprus Hong Kong SAR Malaysia Republic of Congo Thailand Azerbaijan Czech Republic Hungary Maldives Republic of Yemen The Bahamas Bahrain Dem. Rep. of Congo Iceland Mali Romania The Gambia Bangladesh Dem. Rep. of Timor-Leste India Malta Russia Togo Barbados Denmark Indonesia Mauritania Rwanda Tonga Belarus Djibouti Iraq Mauritius Samoa Trinidad and Tobago Belgium Dominica Ireland Mexico Saudi Arabia Tunisia Belize Dominican Republic I. Rep. of Afghanistan Moldova Senegal Turkey Benin Ecuador I. Rep. of Iran Mongolia Serbia Turkmenistan Bhutan Egypt Israel Montenegro Seychelles Uganda Bolivia El Salvador Italy Morocco Sierra Leone Ukraine Bosnia and Herzegovina Equatorial Guinea Jamaica Mozambique Singapore United Arab Emirates Botswana Eritrea Japan Myanmar Slovak Republic United Kingdom Brazil Estonia Jordan Namibia Slovenia United States Brunei Darussalam Ethiopia Kazakhstan Nepal Solomon Islands Uruguay Bulgaria Fiji Kenya Netherlands SÒo TomÚ and PrÝncipe Uzbekistan Burkina Faso Finland Kiribati New Zealand South Africa Vanuatu Burundi F. Y. Rep. of Macedonia Korea Nicaragua Spain Venezuela Cote d'Ivoire France Kosovo Niger Sri Lanka Vietnam Cambodia Gabon Kuwait Nigeria St. Kitts and Nevis Zambia Cameroon Georgia Kyrgyz Republic Norway St. Lucia Zimbabwe Canada Germany Lao People's D.R. Oman St. Vincent &Grenadines Cape Verde Ghana Latvia Pakistan Sudan Central AfricanRepublic Greece Lebanon Panama Suriname

Countries of the World

14 14

Albania Chad Grenada Lesotho Papua New Guinea Swaziland Algeria Chile Guatemala Liberia Paraguay Angola China Guinea Libya Peru Antigua and Barbuda Colombia Guinea-Bissau Lithuania Philippines SyrianArabRepublic Argentina Comoros Guyana Poland Armenia Costa Rica Haiti Madagascar Tajikistan

Honduras Malawi Tanzania Malaysia Republic of Congo Thailand

Azerbaijan Hungary Maldives Republic of Yemen Dem. Rep. of Congo Mali Romania The Gambia

Bangladesh Dem. Rep. of Timor-Leste India Russia Togo Barbados Indonesia Mauritania Rwanda Tonga Belarus Djibouti Iraq Mauritius Samoa

Dominica Mexico Tunisia Belize DominicanRepublic I. Rep. of Afghanistan Moldova Senegal Turkey Benin Ecuador I. Rep. of Iran Mongolia Serbia Turkmenistan Bhutan Egypt Seychelles Uganda Bolivia El Salvador Morocco Sierra Leone Ukraine Bosnia and Herzegovina Equatorial Guinea Jamaica Mozambique Botswana Eritrea Myanmar Brazil Jordan Namibia

Ethiopia Kazakhstan Nepal SolomonIslands Uruguay Bulgaria Fiji Kenya SÒoTomÚ and PrÝncipe Uzbekistan Burkina Faso Kiribati South Africa Vanuatu Burundi F. Y. Rep. of Macedonia Nicaragua Venezuela Cote d'Ivoire Niger Sri Lanka Vietnam Cambodia Gabon Nigeria St. Kitts and Nevis Zambia Cameroon Georgia KyrgyzRepublic St. Lucia Zimbabwe

Lao People's D.R. St. Vincent &Grenadines Cape Verde Ghana Latvia Pakistan Sudan Central African Republic Lebanon Panama Suriname

*Based on IMF Information

Narrow the Field: Emerging Markets Per capita GDP below $14k in 2009

15 15

Algeria Chile China Peru Colombia Philippines

Argentina Poland

Malaysia Thailand Hungary

Romania Bangladesh India Russia

Indonesia

Mexico Turkey

I. Rep. of Iran Egypt

Morocco Ukraine

Brazil Kazakhstan

South Africa Venezuela Vietnam

Nigeria

Pakistan


Narrow the Field: Larger Economies GDP over $75 billion in 2009

16 16

China Philippines

Thailand

Bangladesh India Russia Indonesia

Mexico Turkey

I. Rep. of Iran Egypt

Brazil

Vietnam Nigeria

Pakistan


Narrow the Field: Larger Populations Population over 50 million in 2009

17 17

Country Population GDP 2009 (billion) GDP per capita

China 1,334.74 $ 4,909 * $ 3,678 India 1,199.06 $ 1,236 * $ 1,031 Indonesia 231.55 $ 539 $ 2,329 Brazil 191.48 $ 1,574 $ 8,220 Bangladesh 165.71 $ 95 * $ 574 Pakistan 163.77 $ 167 * $ 1,017 Nigeria 151.87 $ 173 * $ 1,142 Russia 141.39 $ 1,229 * $ 8,694 Mexico 107.55 $ 875 $ 8,135 Philippines 92.23 $ 161 $ 1,746 Vietnam 87.21 $ 92 * $ 1,060 Egypt 76.70 $ 188 * $ 2,450 Iran 74.10 $ 330 * $ 4,460 Turkey 70.54 $ 615 $ 8,723 Thailand 66.98 $ 264 $ 3,940

Source: International Monetary Fund

Narrowed Field

*Estimated

18

Source: Goldman Sachs

BRICS and N-11 Goldman Sachs Growth Environment Score (GES) 2009

Narrow the Field Goldman Sachs Growth Environment Score

¨  Launched in 2005, GES was developed to capture the factors that crucially affect the ability of an economy to grow.

¨  This tool helps Goldman to predict if their BRIC theory will become a reality in the next 20-40 years. (Variables include inflation, government deficit, external debt, investment rate, penetration of phones, PC’s, and Internet, education, life expectancy, political stability, rule of law and corruption)

19

Analysis of Key Indicators (as of 2005)

20

Source: World Bank; Ease of Doing Business Rank Data for 2011

Country Starting a

Business-Rank

Dealing with Construction

Permits – Rank

Getting Electricity

-Rank

Registering Property-

Rank

Getting Credit-Rank

Protecting

Investors-Rank

Paying Taxes-Rank

Trading Across

Borders - Rank

Enforcing Contracts –

Rank

Resolving Insolvency

- Rank

Brazil 120 127 51 114 98 79 150 121 118 136 China 151 179 115 40 67 97 122 60 16 75 India 166 181 98 97 40 46 147 109 182 128 Russia 111 178 183 45 98 111 105 160 13 60 Mexico 75 43 142 140 40 46 109 59 81 24

Ease of Doing Business Rank 2011 (Higher = worse)

Brazil 126

Russia 120

India 132

China 91

Mexico 53

Ease of Doing Business (updated 2011 Analysis)

21

Source: Frontier Strategy Group, 2010 figures Disposable Income: The amount of money that households have available for spending and saving after income taxes have been accounted for

CONSUMER Personal Disposable Income 2010

Latin American Consumer

22

Other markets we considered…

23

¨  Strengths/Opportunities ¤  Economic stability ¤  Political stability ¤  Market opportunity

n  Demand for Telecom products and services n  Cost reduction

n  Many US businesses use India as tech support/call center

¤  Skilled labor n  SW development Center n  Managerial and manufacturing expertise

¤  Ease to transfer profits back to US headquarters

¨  Weaknesses/Risks ¤  Social issues

n  Poverty level n  Infra-structure n  Corruption

¤  Competitive Market

Summary Analysis: India*

* Snapshot of 2005 analysis

24

¨  Strengths/Opportunities ¤  Market Size

¤  Fast paced economy

¤  Low cost of labor

¤  Time required to start a business (48 days)

¨  Weaknesses/Risks ¤  Political regime

¤  Hostility against US

¤  Social issues

n  Severe human rights issues including child exploitation

n  Corruption

¤  Trade barriers

¤  Severe Intellectual Property/Copyright issues

¤  Competition – local and foreign

Summary Analysis: China


25

¨  Strengths/Opportunities ¤  Improving economy ¤  Political stability ¤  Infra-structure ¤  High literacy rate (99.4%) ¤  Time required to start a business (36 days!)

¨  Weaknesses/Risks ¤  Payment terms and collection risks ¤  Work ethics ¤  High taxes

n  Large corporations not affected as much ¤  Social Issues

n  Corruption still a serious problem n  10% of population suffers from alcoholism n  Violence directly related to alcoholism (33% of violent crime)

¤  Slow decision making process n  Deadline is a foreign concept

Summary Analysis: Russia


26

¨  Overview ¤  Vast territory

n  Each country has a unique set of values n  Two predominant languages n  Two large markets n  Several smaller markets with high opportunities

¤  Fertile Soil n  Rapid Infrastructure build up n  Flourishing IT and Telecom sectors n  Solid US business presence n  Overall economic growth n  Gradual political stabilization n  Commodity markets play well into trends

Latin America Region


27

¨  The Two Giants ¤  Brazil ¤  Mexico

¨  Small Market ROI Opportunities ¤  Chile

¨  Up and Coming ¤  Argentina ¤  Colombia ¤  Peru

¨  Other Options to Be Evaluated ¤  Ecuador, Venezuela ¤  Central America & Caribbean*

n  Panama, Dominican Republic, Guatemala, El Salvador, Costa Rica ¤  *= Puerto Rico not included (US Hispanic market)

Latin America Rank


28

Summary Analysis: Brazil

¨  Strengths/Opportunities ¤  Market Size (largest in LAR) ¤  Economic stability

n  Economic indicators improving considerably ¤  Political stability ¤  Trained IT labor ¤  Strong US business presence ¤  Strong exit markets/liquidity

¨  Weaknesses/Risks ¤  Regulated economy ¤  Bureaucratic government and legal system ¤  Time required to start a business (58 days) ¤  Difficulty to transfer profits back to US headquarters ¤  Trade barriers (high import taxes, etc.) ¤  Cost of capital ¤  Government is the largest IT/Telecom customer – via bids ¤  Social discrepancies and high crime rate


29

¨  Pros ¤  Best ROI, Relatively low competition ¤  Fast-growing IT/Telecom market, Skilled labor ¤  Open to foreign investment, Friendly nation ¤  On par with regional leaders in its tax treatment, corporate governance requirements,

protection of minority shareholder rights and restrictions on local institutional investors ¤  Strong public and private universities ¤  Huge capital gap for small to medium size companies

¨  Cons ¤  Weak framework for fund activity, with larger funds setting up offshore ¤  Bankruptcy procedures & judicial system remains inefficient ¤  Perceptions of corruption and concerns about ongoing drug trade which affect FDI

confidence

Latin America: Best ROI Mexico


30

¨  Strengths/Opportunities ¤  Ease to do business ¤  Very low trade barriers ¤  Economic stability ¤  Political stability ¤  Highly trained IT/Telecom labor ¤  Strong US business presence ¤  US dollar largely accepted ¤  Channel of distribution follows US models ¤  Port of entry for Asian parts, components, products ¤  Great base of operations for South America

¨  Weaknesses/Risks ¤  Small Internal Market ¤  High shutdown costs ¤  Business permitting process

Summary Analysis: Chile


31

¨  Strengths/Opportunities ¤  Market opportunity

n  Demand for technology/telecom products & services ¤  Undergoing positive economic changes ¤  US business presence (although growing leftist leaning sentiments) ¤  World class software and design talent ¤  High level of sophistication and quality of life

¨  Weaknesses/Risks ¤  Relatively small corporate market in spite of US presence ¤  Current economic situation

n  Currency fluctuation n  Government debt & perceived government corruption

¤  Bureaucratic environment ¤  Social Issues

n  Social discrepancies n  High crime rates


Summary Analysis: Argentina

32


n  Demand for technology/telecom products & services n  Government sector offers good opportunities

¤  Channel of distribution ¤  Some US business presence ¤  Dramatically improved public safety (addressed drug cartels)

¨  Weaknesses/Risks ¤  Social issues

n  Social discrepancies ¤  Columbian peso fluctuations ¤  Relatively high cost of labor ¤  Perception of safety (although it is not the reality)

* Snapshot of updated analysis

Summary Analysis: Columbia

33

¨  Strengths/Opportunities ¤  Low competition ¤  Some US business presence ¤  Governments open to foreign investments

¨  Weaknesses/Risks ¤  Small markets ¤  Social issues

n  Social classes discrepancies ¤  Weak economies ¤  Infrastructure

Note: some LAR prospective customers have subsidiaries or sales offices in CA and other smaller markets. In some cases, contracts include support to those offices.


Summary Analysis: Peru, Ecuador, CA&C

34


n  Demand for technology/telecom products & services n  Government opportunities – large deals

¤  Skilled labor ¤  Bright engineering talent ¤  Some US business presence ¤  Proximity to US (Miami)

¨  Weaknesses/Risks ¤  Small market ¤  Foreign exchange controls (Impossible to transfer money in and out of the country) ¤  Social issues

n  Social discrepancies n  Violence, poverty, crime rate

¤  Political instability n  Leftist/dictator president`


Summary Analysis: Venezuela

35








¨  Appendix

36

Top Choices: Mexico + the BRICS

¨  Trending First choice*: Mexico ¨  Second place: Brazil ¨  Solid option: India ¨  Largest market: China ¨  Trending: Russia

* based on market PE/VC attractiveness and underserved capital

37

5500 6500 7500 8500 9500

10500 11500 12500 13500 14500 15500

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

Mexico Market

NAFTA; Central bank

independence

Peso crisis; floats currency; receives

US bail-out;

EFTA; Investment

Grade

OECD entry

First wave of Privatizations

AFOREs; stricter accounting standards;

repays U.S. bailout

Sale of troubled portfolios and

intervened banks

GDP (PPP) per Capita from 1990-2010: 3.32% CAGR

Mexico’s rising GDP is paralleled by an improving political and regulatory environment

MX Stability and Increased Purchasing Power (U

S$)

Source: IMF World Economic Outlook Database, April 2012 Note: Data for 2011 is an estimate

Global Recession

Calderon elected

First PAN governor elected;

PRD created

Independent Electoral Institute

established

PRI loses majority in Chamber of Deputies

PRD wins D.F. vote

Fox elected; PRI loses majority in

Senate

First 30-year fixed rate Peso

bond issue

38

Sovereign Debt Rating (2012)

Source: Fitch analysis

Mexico within the Regional Sovereign Risk Environment

Mexico is tied for the second best Sovereign Debt Rating in Latin America and is also tied for second best among the BRICs

China

India

Russia

Brazil

Mexico

39

Sovereign Debt Ra/ng as of 2012

Source: Standard & Poor’s

Mexico within the Regional Sovereign Risk Environment

Country Debt Rating

Chile A+

Mexico BBB

Brazil BBB

Peru BBB

Columbia BBB-

Uruguay BBB-

Country Debt Rating

Paraguay BB-

Venezuela B+

Bolivia B+

Argentina B

Ecuador B-

Country Debt Rating

China AA-

Russia BBB

India BBB-

Investment Grade Non-Investment Grade

Non-Latin America Countries

40

Source : IMF Outlook April 2011, CIA World Fact book, EIU

Fast and sustainable growth

Growing Population and Urbanization

0.85

1.04

0.88

1.17 1.29

1.43

05 07 09 11 13 15

GDP (USD tr)

4.0% 4.0%

5.3%

3.6%

3.0% 3.0%

05 07 09 11 13 15

Inflation (Avg CPI)

12.5 14.2 13.7

15.1 16.4

17.6

05 07 09 11 13 15

GDP /capita (USD thds)

23.9%

24.7%

23.2%

25.6%

25.8%

25.9%

05 07 09 11 13 15

Savings rate

103 105 107 110

112 114

05 07 09 11 13 15

Total popula/on (million)

2.2 2.3 2.3 2.4 2.4 2.5

05 07 09 11 13 15

Urban popula/on growth (million)

Healthy population pyramid with increased aging

Age

ran

ges

2030 2010

Percentage of total population

10% 5% 5% 10%

6%

55%

39%

11%

59%

30%

Mexico’s Solid Foundation Mexico’s growth expected to continue

0-4 5-9 10-14 15-19 20-24 25-29 30-34 35-39 40-44 45-49 50-54 55-59 60-64 65-69 70-74 75-79 80-84 85-89 90-94 95-99 100+

Increasing Spending Power

41

81%

4% 15%

0%

20%

40%

60%

80%

100%

US Canada Other

Mexico’s export products In %

Commodities Automotive Electronics Other 0%

10%

20%

30%

40%

Mexico’s export partners (2011 in %)

(18%): oil, fruits and vegetables,

coffee, coAon

(22%): vehicles, auto parts

(23%): TVs, mobile phones, refrigerators & appliances

(37%): Other manufactured

goods

Mexico’s New Advantage in three key manufacturing areas (cost-time-quality) Mexico’s export oriented manufacturing industry will continue to fuel growth

Source: Worldbank, 2012

* 2010. 53 foot container from Mexico to Chicago and 40 foot container from China to Chicago

Mexico’s Export Advantages

Transporta/on cost* USDs

Lead /me* Days

Mexico China

$3058

5 22

$5239

Mexico’s Export Products and Partners With Significant Export Upside

Labor Unit Cost USDs $4.40 $4.50

0.00

2.00

4.00

6.00

01 03 05 07 09

China

Mexico

Labor unit cost USDs

42

Source: Emerging Markets Private Equity Association, IMF

Opportunity

0.04% 0.05% 0.14% 0.15% 0.15% 0.16%

0.21% 0.27% 0.29%

0.37% 0.37% 0.41%

0.58% 0.61%

1.03% 1.06%

1.41%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

Private Equity Penetration, 2010

PE Investment / G

DP (%

) 2010 Capital Gap Mexico has low private equity participation compared to the BRIC’s.

43

0.01% 0.01%

0.04%

0.08% 0.09%

0.10% 0.10% 0.10%

0.12% 0.13%

0.14%

0.00%

0.10%

0.20%

0.30%

Mexico MENA S Korea

Russia SSA Brazil Japan Turkey S Africa

Poland China India UK US Israel

Source: Emerging Markets – EMPEA, United Kingdom – Centre for Management Buy-Out Research, United States – PitchBook, Israel – Israel Venture Capital Research Center, Japan – Asia Private Equity Review, All GDP data – International Monetary Fund

Opportunity PE

Inve

stm

ent /

GD

P (%

)

.98% 2.05% .75% .33% … … … …

MX PE Penetration dropped in 2011 Mexico has low private equity participation compared to the BRIC’s.

Private Equity Penetration, 2011

44

E&Y VC/PE Country Attractiveness Score 2011

Source: The Global Venture Capital and Private Equity Country Attractiveness Index 2011, Ernst & Young

0 20 40 60 80 100

Kyrgyzstan (80) Argentina (66) Colombia (47)

Brazil (43) Mexico (42)

India (30) Chile (29) China (20)

South Korea (17) UK (2)

USA (1)

VCPE Country Attractiveness Score 2011

45

2010 AT Kearney FDI Confidence Mexico #8 Jumps 11 Places

* Mexico dropped significantly in 2012 rankings

46

76 74

78 76 76

59

65

75 75 75

35

40

45

50

55

60

65

70

75

80

2006 2007 2008 2009 2010

Tota

l Sco

res

(Max

= 1

00)

Chile

Brazil

Mexico

Colombia

Latam Average

Costa Rica

Peru

Argentina

Total Scorecard ratings (Select Latin American Countries)

2010 LAVCA Scorecard Results Over Time

INT’L BENCHMARKS

UK 93 Israel 81 Spain 76 Taiwan 61

SCORECARD COUNTRIES

Chile 76 Brazil 75 Mexico 63 Colombia 60 Uruguay 57 Trinidad & Tobago 56 Latin America Average 55 Costa Rica 54 Peru 51 Panama 49 Argentina 43 El Salvador 43 Dominican Republic 38

Source: 2010 LAVCA – EIU Scorecard Report.

47

2012 LAVCA Scorecard

Evolution of Select PE/VC Markets

48

38 43 43

49 51

54 56 57

60 61 63

75 76 76

81 93

0 10 20 30 40 50 60 70 80 90 100

Dominican Republic El Salvador

Argentina Panama

Peru Costa Rica

Trinidad & Tobago Uruguay

Colombia Taiwan Mexico

Brazil Chile

Spain Israel

UK

2010 LAVCA Scorecard Results

Rank / Y-o-Y (scores)

International Benchmarks

Latin America

1 a

2 ↔

3 ▼2

4 ↔

5 ↔

6 ▲5

7 ▼2

8 ▲3

9 ▲3

10 ▼7

11 ▲1

12 ▲1

13 ↔

=14 ▼3

=14 ▼3

16 ▲5

Chile, Brazil and more recently Mexico have been able to break out of the pack and get closer to the international benchmarks from more developed markets. Source: 2010 LAVCA – EIU Scorecard Report.

49

2012 LAVCA Scorecard

Click to edit Master title style 50

Structural Transformations and Shifting Consumer Habits Creating Significant Opportunities & Challenges for PE/VC investments in MX

•  Per Capita Income expected to grow at 4% over next 5 years

•  Continued willingness to spend reflected in stable savings rate

•  55% of the population is currently in active economic life

Opportunities: •  Leisure & Lifestyle

•  Advertising •  Consumer goods

•  Logistics/transportation

Opportunities:

•  Non Banking Finance to business

•  Services to manufacturing industry

•  Tech manufacturing

•  Investment expected to remain at 26% of GDP (highest in Latin America after Chile

•  Increased urbanization will drive the need for housing, transportation and infrastructure

•  The 2012 5-year plan includes $88 bn investments in energy

Growing Consumption

Rapid Infra. Development

•  Rapidly growing middle class and upper class

•  Maturing population pyramid (pop. above 65 years old will be 11% in 2030)

•  Technology orientation

•  Growing environmental awareness

Opportunities:

•  Healthcare, Housing

•  Education

•  Non banking Financial Services to consumers

Structural Transformation

51

* Bank credit in Latin America weighted by GDP share. Includes mortgages, credit to consumers and to firms Source: EMPEA, EIU, LAVCA, Banco de México and S&P Ratings Service; Vander Capital Partners analysis;

PE/VC

penetration Avg. 2008-2010

Busi

ness

env

ironm

ent f

or P

E/V

C

Scor

e (0

to 1

00)

Mexico within the Regional PE/VC Attractiveness Environment

Mexico is very underpenetrated despite its overall good business environment to conduct PE and VC

0.00%

0.02%

0.04%

0.06%

0.08%

0.10%

0.12%

0.14%

0.16%

0.18%

0.20%

0

10

20

30

40

50

60

70

80

Chile Brazil Mexico Colombia Uruguay Peru Argentina

Business Environment vs. PE Penetration

** In addition, bank credit* in Mexico is much lower than in the region. Bank credit was 12% of GDP in 2010, vs 51% for Brazil and 37% average for Latin America

52

Business lending has experienced negative growth and has not kept pace with consumer credit. Companies are starved for growth capital to keep up with the market demand.

SOURCE: Comision Nacional Bancaria y de Valores

Significant Business Lending & Investment Gap

53

Companies are starved for growth capital to keep up with the market demand. As a rule consumer lending has far outstripped new business lending save for a short period during the financial crisis.

SOURCE: Comision Nacional Bancaria y de Valores

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Year

-ove

r-ye

ar g

row

th

Loan Growth in the Mexican Banking System

Business

Consumer

Housing

Still significant Lending Gap for SME’s

54

Mexico’s Current Situation – Only large Mexican businesses have access to financing

Source: AMB Report: “Lending in Mexico” February 2011 and Banco de México; Vander Capital Partners analysis.

$-

$10

$20

$30

$40

$50

$60

$70

$80

2006 2007 2008 2009 2010

Other

Large

12%

13%

12%

12%

13%

US$

Bill

ion

BANK CREDIT TO MEXICAN FIRMS BY SIZE

55

No Financing for Small & Medium Mexican Businesses 1% of firms get 87% of the financing

Source: AMB Report: “Lending in Mexico” February 2011 and Banco de México; Base de datos ahorro y financiamiento CNBV, diciembre 2010; Endeavor Mexico; Vander Capital Partners analysis.

12%

13%

12%

12%

13%

$56.07

$74.69

$8.38

$11.16

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

ABM CNBV

Small & Med

Large

408,884 small and med firms

3,033 large firms

BANK CREDIT TO MEXICAN FIRMS BY SIZE $U

S Bi

llion

56

Mexico’s Current Situation

Source: AMB Report: “Lending in Mexico” February 2011 and Banco de México; Base de datos ahorro y financiamiento CNBV, diciembre 2010; Endeavor México; Vander Capital Partners analysis.

BANK CREDIT TO MEXICAN FIRMS BY SIZE IN 2010

Firm size Loan per firm ABM

Loan per firm CNBV

Distribu/on % of GDP Employees

S & M US$20.5K US$27.3k 13% 40% 5-‐499

Large US$18.5Mn US$24.6Mn 87% 54% 500+

57








¨  Appendix

58

On-The-Ground Research

59

There Are Many Mexicos

60 60

Border Issues Obscure America’s view of Mexico

¨  Violence ¨  Drug Cartels

¨  Immigration

61

Market Drill Down Process On-The-Ground Research

•  Federal Competition Commission; Economic Bureau; Undersecretary of the Treasury; ProMexico; Economic Bureau, Foreign Investment; Telecommunications and Transportation Bureau; Mexican Senators; Governor of State of Mexico; Former Ambassador to US; Mayor of Mexico City; Undersecretary of North America; Mexican Legislature; Executive Director, NAFINSA; ProMexico; FOCIR

Government

•  GE Mexico, Cisco, Corporate and Investment Bank of Banamex (Citigroup), Intel Capital Mexico, IXE Grupo Financiero, American Chamber of Commerce—Mexico, Cavlemas, US Hispanic Chamber of Commerce; Banorte Insurance, Deutsche Bank Mexico

Industry

The Alta team has held 100+ meetings that have enabled us to understand the opportunities and challenges of doing business in Mexico. Below are a few representative meetings…

62

Market Drill Down Process On-The-Ground Research

•  Visited with more than 12 Mexican families who are among the most influential in Mexico.

Mexican Families

•  Tecnologico de Monterrey (TEC) , UNAM, CEPII, Conacyt, Pan American Univ (CEPii)

Research/ Universities

• More than 20 limited partners and 3 institutional investors and multilaterals including IFC, NAFIN, CMIC, IADB/MIF

Limited Partners, Financial

63 Tijuana Population: 750,000 Key Industries: beverages, processed foods, metalworking, radio and television manufacture, electrical machinery Hermosillo

Population: 600,000 Key Industries: automotive, meat, cement and derivatives, electrical machinery

Culiacán Population: 600,000 Key Industries: food processing, cereal milling, sugar, beverages, edible oils and fats

Aguascalientes Population: 500,000 Key Industries: electronics, automotive, dairy, textiles, carpets

León Population: 1 million Key Industries: refining, footwear, leather and tanning, bakery goods, beverages

Guadalajara Population: 4 million Key Industries: high-technology, edible oils and fats, plastic products, chemicals, dairy products, processed foods, textiles, footwear

Mexico City Population: 20 million Key Industries: retail, financial services, food, automotive, plastic products, paper and cellulose, chemical derivatives, basic chemicals

Puebla Population: 1.5 million Key Industries: automotive, textiles, iron and steel, bottled water, chemicals, meat processing

Veracruz Population: 450,000 Key Industries: petrochemicals, refining, basic chemicals, iron and steel, sugar, beef, processed foods, tourism, transportation services (maritime)

Ciudad Juárez Population: 800,000 Key Industries: electrical machinery, transport equipment, meat, electronics, dairy products

Chihuahua Population: 650,000 Key Industries: electrical machinery, automotive, meat, electronics, dairy products, timber

Torreón Population: 880,000 Key Industries: automotive, bricks, clay, refractory, general machinery, cement and derivatives

Toluca Population: 850,000 Key Industries: automotive, plastics, paper and cellulose, chemical derivatives, basic chemicals

Monterrey Population: 3 million Key Industries: oil refining, iron and steel, electrical machinery, glass and derivatives, breweries, meat products, cement, banking

San Luis Potosí Population: 670,000 Key Industries: iron and steel, non-ferrous metallurgy, tobacco products, electrical machinery, automotive, livestock

Tampico-Madero-Senderomira Population: 340,000 Key Industries: chemical, industrial machinery, electronic & electrical equipment, oil and refinery, agriculture, cattle, fishing

Source: SE-NAFTA.


Widespread Development

64

Major Oil Suppliers of the United States

¨  1. Canada – 2.53 million barrels per day (bpd)

¨  2. Mexico – 1.26

¨  3. Saudi Arabia – 1.08

¨  4. Venezuela – 1.07

¨  5. Nigeria – 1.05

¨  6. Algeria – .512

¨  7. Iraq – .464

¨  8. Angola – .422

¨  9. Colombia – .360

¨  10. Brazil – .289

Source US Department of Energy: ftp://ftp.eia.doe.gov/pub/oil_gas/petroleum/data_publications/company_level_imports/current/import.html

65

Querétaro VISTAR VITROMATIC (2)

Cuernavaca NEC

Torreón THOMSON

Monterrey PIONNER DANFOSS COMPRESSORS VITROMATIC (3) MABE (2) KODAK NIPPON DENSO (Automotriz) AXA YAZAKI (Automotriz)

Mexicali

SONY DAEWOO (SLRC) MITSUBISHI GOLDSTAR

Aguascalientes WHITE WESTINGHOUSE MEX* TEXAS INTS. XEROX SIEMENS

Querétaro CLARION DAEWOO BLACK & DECKER MABE (2) SINGER SIEMENS

Estado de Mexico MABE BRAUN ELECTROLUX SUNBEAM KOBLENZ ERICSSON ALCATEL/INDETEL AMP

Puebla GESTAR SINGER VITROMATIC

Saltillo MABE HAMILTON

BEACH*

Reynosa

VITROMATIC NOKIA

DELCO (Automotriz) PHILIPS SONY MATSUSHITA (Automotriz)

LUCENT TECHNOLOGIES FUJITSU (Automotriz) CONDURA (Automotriz) DELNOSA (Automotriz)

SanLuis Potosí MABE GE MABE SANYO

Chihuahua MOTOROLA ALTEL KIOCERA JABIL

Juárez

KENWOOD ELECTROLUX 7 ACER

TOSHIBA PHILIPS THOMSON

ELAMEX PLEXUS

Tijuana SANYO SONY HITACHI MATSUSHITA JVC SAMSUNG PIONNER

SANYO ELECTRODOMÉSTICOS PHILIPS CASIO KODAK CANON KIOCERA INTERNACIONAL RECTIFIER

MITSUBISHI SHARP

Guadalajara 7 I.B.M 7 H.P. NEC

LUCENT TECHNOLOGIES MOTOROLA KODAK CUMEX SIEMENS SOLECTRON DE MEXICO FLEXTRONICS JABIL CIRCUIT MTI ELECTRONICS SCI SANMINA

Estado de México

ELECTROLUX FILTER QUEEN HOOVER IMAN KOBLENZ MABE PHILIPS SUNBEAM OLIVETTI

PANASONIC

OLIMPIA

AUDIO & VIDEO

Home Appliance

7 Computer Equipment

( Telecommunications

Other

Electronics Industry in Mexico


66

Mexico’s Dynamic & Growing Industrial Base

•  40+ Home appliance manufacturers •  Dozens of automobile manufacturers and parts suppliers

•  World Class Mexican Companies

Merrytech TIMCO

67

Merging of Consumer Habits

68

The U.S. exports more to Mexico than to any other country besides Canada

U.S Exports in 2007

1.Canada $248.9B

2. Mexico

$136.5B

3. China $65.2B

4. Japan $62.7B

5. U.K. $50.3B

Not in the Top 10 Brazil

$24.6B India

$17.6B Russia $7.4B

69

Mexico, China & Brazil increase purchase of US goods and all others flat

Source: http://www.ustr.gov/countries-regions

U.S Exports in 2010

1.Canada

$248B

2. Mexico

$163B

3. China

$91.9B

4. Japan

$60.5B

5. U.K.

$51B

BRICS 2010 Brazil

$35B

India $19.2B

Russia $6B

70

Heavy Trade and Growing

¨  There is more than $1 billion in trade every single day between the U.S. and Mexico.

¨  $400 billion of imports and exports between the US and Mexico each year.

71

Mexico is the Number One Foreign Market for California Goods

California Exports in 2007

1. Mexico

$18.3B 2.Canada $16.1B

3. Japan $13.5B

4. China $10.6B

5. South Korea

$7.4B

Not in the Top 5 Brazil $2B

India $1.9B

Russia $.5B

72

8 Californian Industries Sold Over $1B in Goods to Mexico in 2007

•  Computers and Electronic Products $4.4B

•  Transportation Equipment $2.1B

•  Machinery Manufacturers $1.8B

•  Fabricated Metal Products $1.1B

•  Processed Foods $1.1B

•  Chemical Manufacturers $1.0B

•  Plastic and Rubber Products $1.0B

•  Electronic Equipment, Appliances and Parts $1.0B

73

Large, stable and growing economy. Mexico’s Huge Potential

¨  Large and growing market ¤  113,000,000 inhabitants, half of the population under the age of 26 ¤  High rate of new family formation and emergent middle class. ¤  GDP (PPP): $1.74 trillion; world’s 11th largest economy ¤  Forecasted to be 6th largest by 2050 (Goldman)

¨  Macroeconomic stability ¤  Stable macroeconomic policies and pro-growth

political leadership ¤  5%+ GPD Growth, Low public sector deficit, debt

and 3-5% inflation rate over the last decade ¤  Goldman Sachs Growth Environmental Score (3 out of

15, BRICS and N-11) and AT Kearney FDI Confidence Index (jumped from 19 to 8 place)

¤  Stability and growing middle class has increased consumer-oriented lifestyles

74

In 2005 Venture Capital in Mexico was almost Non Existent

SOURCE: Capital IQ, country websites *In 2009 limited early-stage VC or seed capital in Mexico (5 VC firms as of 2011 and four in fundraising mode)

100

40 16 1020

20406080100120

China India Brazil Russia Mexico

# of Local VC firms by Country

75

Mexico VC Precedents

2000

Lack of a clear policy

Inadequate legal frame work

Limited industry knowledge within the country and limited number of specialists

Limited impact in the market of the efforts done by development banks

Few institutional investors

Lack of deal flow and venture capital oriented entrepreneurial culture

2010

~ Government innovation committee run by SE

ü  Amendment to Mexican Securities Law in 2006, SAPI structure

ü  Growing interest: University VC Classes, MVCC, Capital Emprendador Conf DF, Incubators/accelerators

ü MIF Inter American Development Bank, IFC World Bank, CAF

ü  Fondo de Fondos, CMIC, NAFIN, AFORES/CKDs, LAFP, & other Int’l Funds

~ Early, but growing interest and sophistication

76

U.S. VC History

¨  Influential Families (1900-1960) ¤  Pre WWII- Wealthy families begin conducting

first PE transactions: Carnegie and Phipps (Bessemer Ventures), Vanderbilts, Whitneys (Whitney and Co.), Rockefellers (Venrock) and Warburgs (Warburg Pincus)

¤  1957- Georges Doriot- “Father of Venture Capital”, Dean of HBS and founder of ARDC invests in DEC which returns 500X

¤  1958- Small Business Investment Act

¤  1959- Rockefeller family (later Venrock) funds Fairchild Semiconductors and launches the integrated circuit industry

77

U.S. VC History

¨  Institutional Capital (1960-2010) ¤  1960s- PE/VC Industry formalizes and develops

fund model

¤  1972- KPCB and Sequoia launch in Silicon Valley, built deal flow, distribution and exit networks and sustainable competitive advantage

¤  1978- Allows pension funds to invest in the asset class; fundraising jumps 14X in one year

¤  1980-2000- Apple, Genentech, FedEx, Cisco, Microsoft, Amazon, Ebay, Intuit, Sun Micro

¤  2000+ Tech bubble bust, beginning expansion to emerging markets in search of growth

¤  1997-2007- Average early-stage venture returns were *40% compounded annually

* Thomson Venture Economics – NVCA (early stage Funds)

78

Impact: VC-Backed Job Creation

Sector Jobs %

Software 817,166 80.99%

Telecom 736,961 74.08%

Semiconductors 309,437 73.85%

Networking and Equipment

392,505 58.75%

Electronics and Instrumentation

271,224

51.35%

1.60%

0.20%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1.40%

1.60%

1.80%

VC-Backed

Total Private Sector

Job Growth ’06 - ’08

• 11% of all private sector jobs Source: NVCA Venture Impact 5th Edition

79

Impact: VC-Backed Revenues

Sector Rev. %

Electronics/Instrumentation

$129.6 B 67.00%

Semiconductors $86.8 B 55.04%

Telecom $256.1 B 51.05%

Biotech $209.4 B 47.15%

Computers and Peripherals

$315 B

44.29%

5.3%

3.5%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

VC-Backed

Total Private Sector

Revenue Growth ’06 - ’08

Source: NVCA Venture Impact 5th Edition

80

Impact: New Industry Creation

¨  Industries Created with VC ¤  Information Technology ¤  Biotechnology ¤ Medical Devices ¤ Network Security ¤ Online Retailing

¨  Newest Creations ¤  Social Media ¤ Clean Technology

81

Impact: U.S. VC in 2008

“Opportunity and Innovation defines America’s advantage”

- David McCullough

82

Impact: U.S. VC in 2008

$1.09

$2.90

$14.30

21%

$-

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

Mexico GDP U.S. VC-Backed Revenue U.S. GDP

USD

(Tr

illio

ns)

Economic Comparison and VC Impact (2008)

Source: NVCA Venture Impact 5th Edition, IMF

83

Source: INEGI Preliminary 2009 results

Enterprises by size and participation (2008)

84

All US Job Growth is from Startups

Source: http://www.kauffman.org/newsroom/u-s-job-growth-driven-entirely-by-startups.aspx

85

Funding Continuum – Mexico’s Funding Gap

SEED/START-UP FUNDING

DEVELOPMENT FUNDING

EXPANSION FUNDING

OPPORTUNITY DEVELOPMENT

CONTINUED GROWTH

ANGELS, FOUNDERS & SEED FUNDS

VENTURE CAPITAL – GROWTH EQUITY

PE - PUBLIC MARKETS

VALUATIONS INCREASE

BUSINESS RISKS DECREASE

MENTORING NEEDS DECREASE

$5M-20M $500K-5M $50K-500K >$20M Sweat

Financing Gap in Mexico

86

Funding Continuum – Filling the Gap

SEED/START-UP FUNDING

DEVELOPMENT FUNDING

EXPANSION FUNDING

OPPORTUNITY DEVELOPMENT

CONTINUED GROWTH

ANGELS, FOUNDERS & SEED FUNDS

VENTURE CAPITAL – GROWTH EQUITY

PE - PUBLIC MARKETS

VALUATIONS INCREASE

BUSINESS RISKS DECREASE

MENTORING NEEDS DECREASE

$5M-20M $500K-5M $50K-500K >$20M Sweat

MEXICO

87

Alta’s Target Investment Region

Alta Growth Capital •  Headquartered in Mexico City •  Regional Office in Monterrey •  Support for Alta Ventures Mexico

Alta Ventures Mexico Fund I •  Headquartered in Monterrey •  Regional Office Mexico City

Kickstart Seed Program •  Headquartered in Monterrey •  Guadalajara program Q3 ’12

MEXICO

Alta Group Americas •  Headquartered in Salt

Lake City, Utah

GROUP AMERICAS

88

Consumer Technology

Security

Clean/Energy

Healthcare Non-banking

Alta Ventures Mexico Focuses on high growth Mexican sectors

89








¨  Appendix

90

Technology Clean/Energy Non-banking Financial

Alta Portfolio by Investment Focus

91

Wave 1: Technology

Mexico Leapfrogging to Next Generation Technologies •  Mobile and internet penetration growing quickly

•  Leapfrog to cloud computing SaaS, other on demand services

•  New Hacienda Electronic Invoice

•  Need to automate in order to reduce corruption

Source: COFETEL. *Penetration rate for Apr-10, self calculated

# of Total Users 14078 21758 25928 30098 38451 47129 55395 66559 75303 83528 85277 88797

Penetration Rate 14% 22% 25% 29% 36% 45% 53% 63% 70% 77% 78%* 80%*

14078 21758

25928 30098

38451 47129

55395

66559 75303

83528 85277 88797

0 10000 20000 30000 40000 50000 60000 70000 80000 90000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 0%

20%

40%

60%

80%

100%

Num

ber o

f Use

rs (T

hous

ands

)

Pene

trat

ion

Rat

e

Mobile Users in Mexico

92

Wave 2: Clean Tech

High Potential in Clean Energy Production •  Current law prohibits private sale of energy •  Pending shift in law will allow for private generation and sale of clean energy. •  President Calderon is pushing for 8% of power to come from renewable sources by 2012 •  Solar potential: 3rd in world •  3rd largest geothermal producer in world •  High potential in wind, biomass & Solar

93

Wave 3: Non Banking Financial

Small and Medium Enterprises (SME) lack access to financial services •  Business lending has been growing negatively and companies are starving for capital to keep up with market demand •  Banks have strict and bureaucratic lending processes •  Specialized financial services entities are offering agile and flexible value propositions to the underserved SME market

94

Wave 4: Consumer

10+ Million entering working in next decade •  Rapid family formation •  Family size dropping •  Disposable income rising •  Growing demand for :

•  Education •  Healthcare •  Housing/appliances •  Consumer products •  Entertainment

95

Wave 5: Healthcare (US Grey Hair Tsunami)

Retiring US Baby Boomers Creating Insatiable Demand for HC Services •  California and Texas alone have over 14

M baby boomers •  Concerned with retirement budgets and

healthcare •  Mexico can deliver services under a more

cost effective system; this will require more nurses and lower cost infrastructure

•  Changes to US healthcare will be a huge win for Mexico

96








¨  Appendix

97

Entrepreneur Ecosystem Support

Entrepreneur activity

1.  E|100 www.e100.mx

2.  Endeavor and Enlace mentor networks www.enlacee.org, www.endeavor.org.mx

3.  NISI – MX Entrepreneur education

4.  Business plan competitions: Clean Tech Challenge, Estudiante Emprendedor

Innovation capacity

1.  iTUESDAY www.ituesday.mx

2.  Western Innovation Network www.sci.utah.edu

Investment capacity

1.  MVCC – Mexico Venture Capital Conference www.mvcc.mx

2.  MX Kickstart Seed Program

3.  Mexican Family Offices & Strategic Partnerships

4.  Strategic Corporate Partnerships: Spin-Ins/Spin-Outs

MEXICO

98

Venture Capital: Version1.0 - Silicon Valley

99

Everyone Wants to be Silicon Valley

¨  Silicon Alley – New York, England

¨  Silicon Sloboda - Moscow

¨  Silicon Gulf – Davao Philippines

¨  Silicon Slopes, Utah

¨  Silicon Oasis- Dubai

¨  Silicon Wadi – Israel

¨  Silicon Beach – Australia, Brighton England

¨  Silicon Glen – Scottland

¨  Silicon Gorge – Bristol, England

¨  Silicon Forrest – Portland Oregon

¨  Silicon Prairie – Illinois, Dallas

¨  Silicon Sandbar – Cape Cod

¨  Silicon etc….

¨  But can Silicon Valley be replicated?

100

What Makes Silicon Valley work?

¨  Innovation Capacity. Significant Intellectual Capital (Stanford, Xerox PARC, IBM Research Labs)

¨  Capital. Robust Investment Capacity (Full Funding Continuum)

¨  Human Capital. Critical Mass (Significant Entrepreneurial Activity & Culture, Deep Bench Strength, Social Dynamics: OK to Fail, OK to be Rich)

¨  Trusted informal Networks (Trusted Service Providers, Shared Community Vision, Predictable & Supportive Government)

1.  Critical Mass of Capital, Human Capital and Innovation Capacity tied together with

2.  Trusted Informal Networks in an 3.  Entrepreneur Friendly Environment

101

Trusted Informal Networks Drive Positive Outcomes (can we bring the best of SV to LA?)

102

MX Entrepreneurial Ecosystem Stakeholders

Industry

Financial

Entrepreneurs

Government

Research Universities

Innovation Capacity

Investment Capacity

Entrepreneur Activity

104

The US VC Industry Correction

105

Alta Ventures Mexico

Rogelio de los Santos Alta Ventures Mexico

[email protected]

Paul Ahlstrom Alta Ventures Mexico

[email protected]

106








¨  Appendix

107

Summary Research of Emerging Markets

108

Mexico & the BRICs

BRICs vs Mexico (2011 Values)

Source: World Economic Outlook Database, April 2012, Alta Ventures Calculations

Country 2011 GDP (PPP) ($bn)

Population (mm)

GDP/POP (usd)

Brazil 2,493 195 12,789

Russia 1,850 142 12,993

India 1,676 1,207 1,389

China 7,298 1,348 5,414

BRIC Mean 3,329 723 8,146

Mexico 1,155 113 14,708

Mexico/BRIC 50% 16% 181%

109

Brazil vs. Mexico

Indicator Brazil Mexico

Population (Millions) 194.0 113.7

GDP PPP Per capita 12,789 14,708

Exports $250B $336B

Unemployment 5.97% 5.23%

Days Required to Start a Business 119 9

Inflation 6.5% 3.5%

Homicide Rates (per 100,000 People) 21.97 11.59

GDP Real Growth Rate 2.7% 3.8%

110

Source: Bloomberg; The Rohatyn Group. Data as February 9,2012

Market Performance

Country 2007 2008 2009 2010 2011 YTD

(2012) 5 Years

MSCI EM -66% -66% -66% -66% -66% 14% -66%

MSCI EMEA 26% -57% 63% 21% -23% 14% -5%

MSCI Asia 38% -54% 70% 17% -19% 13% 14%

MSCI LatAm 47% -53% 98% 12% -22% 15% 35%

Mexico & the BRICs

111

Source: The Rohatyn Group, 2012

Mexico & the BRICs

112

Exits: M&A Sources

36%

33%

21%6% 5%

Acquirers of Mexican Companies (’07-‐’09)

Mexico

U.S./Canada

Europe

Source: Zephyr

113

Other (45)

Food

Specialized Retail

Housing develop.

Mining

Financial

Media

Const. Matls.

RetailBeverage

Telecom

Conglomerates

9

8

6

4

4

7

3

10

61314

# of companies

130 Companies

US$310 bn Market Cap

Publicly Traded Companies by Market Cap

Source: IXE

Publicly Traded Mexican Companies

The Mexican market for traded securities remains relatively small and concentrated: Its largest three companies (America Movil, Walmex and Telmex) account for 37% of the total market capitalization.

114

Exits: Mexico IPO

The Mexican IPO market has traditionally been very limited and not a viable exit option for most PE investments, however… •  Potential for a new small-cap online Mexican stock exchange to provide liquidity to early-stage investors and expansion funds for growing companies

• Triple B rated companies can raise debt on the Bolsa today

115

Build regional innovation capacity and link to global networks

• Mexican business opportunities with local and international distribution partners (Leveraging national & international IP)

•  With limited IP in

Mexico, how do we make Mexican companies more competitive?

116

o  IDC

o  Bloomberg

o  World Bank

o  USDOC

o  AMB Report

o  LAVCA - Latin America Venture Capital Association

o  EMPEA – Emerging Market Private Equity Association

o  CIA World Fact book

o  DOE

o  US State Department

o  CNBV

o  International Monetary Fund

o  IMF

o  Goldman Sachs Economic Research

o  Amnesty International

o  Latin Trade Magazine

o  Core Strategies

o  Taminez Marketing International, The Rohatyn Group

o  Vander Capital Partners, Alta Ventures Mexico, Alta Growth Capital

* All rights reserved. Brands above are trademarks or registered trademarks of their respective companies.

Sources

Economy & Finance

Alta Group's Emerging Market Research - "Why Mexico?"