403 Columbia Street, Suite 500

1
2002 Silicon Forest Forum Current and Future MA
Atmosphere
November 16, 2002
Member NASD
Kevin Cable, Managing Director
403 Columbia Street, Suite 500 Seattle,
Washington 98104 Tel [phone] Fax
206-357-9101
2
The Changing Landscape of Investment Banking
Rapid consolidation
Deal size and pricing pressure
Negative earnings, eventual closure or return up
market
New breed emerges focused on brains, not brawn
3
Introduction to Cascadia Capital
Cascadia Capital, LLC is a national boutique
investment bank providing financial services and
venture capital to emerging growth companies.

• Formed in 1999
• 19 employees
• Focused on emerging growth companies
• In the Greater Northwest, including British
  Columbia and Colorado
• Backed by world class financial investors with
  close ties to Cascadia Capital
• Nationally that are within Cascadia Capitals
  industry focus areas
• Technology
• Security
• Industrial/Consumer
• Interactive Media

4
Industry Practice Groups

• Dedicated Cascadia personnel focused on each
  industry practice
• Constantly in tune with technology trends,
  capital flows, and concepts rewarded by investors
  and Wall Street in each vertical
• Comprehensive effort to identify most promising
  companies in the Greater Northwest
• Comprehensive nationwide effort to identify best
  companies in each industry practice
• Comprehensive effort to build relationships with
  most active investors nationwide in each vertical

5
Cascadia Adds Value Throughout a Companys
Life-Cycle
Private Companies
Public Companies
PIPE Transactions, Corporate Finance, Strategic
Advisory Services and Mergers Acquisitions
Enterprise Value
IPO Advisory Services
Corporate Finance Principal Investment
Mergers Acquisitions
Strategic Advisory Services
Company Life-Cycle
6
Cascadia Capital Products and Services

• Corporate Finance
• Private equity capital raises Series A thru
  Mezzanine financing
• Public company capital raises PIPE transactions
  for emerging growth public companies
• Private and public company debt raises
• Merger Acquisitions
• Buy side representation
• Sell side representation
• Advisory Services
• Restructurings
• Recapitalizations
• Strategic analysis
• IPO Advisory
• Venture Fund
• Cascadia Capital Partners I, LLC

7
Overview of Mergers Acquisitions Services
MA Buyside Process Continuum (Minimum
Transaction 15 million)

• Outline growth strategy market opportunity
• Identify a multi-tiered list of potential
  targets and strategic motives
• Build financial models (merger and valuation
  analysis)
• Perform due diligence

• Advise on price and structure
• Assist with financing requirements
• Negotiate and close
• Assist with public market positioning

MA Sellside Process Continuum (Minimum
Transaction 15 million)

• Identify potential buyers corresponding
  rationale
• Review and advise on positioning clients
  business
• Build financial models (merger and valuation
  analysis)

• Contact qualified buyers facilitate meetings
  process
• Negotiate price, structure, and close
• Assist with public market positioning (if
  applicable)

8
MA Process and Timeline
Standard Sellside Timeline
9
Select Cascadia Transactions Principal
Investments
10
Median Pre-Money Valuation by Year, Private
Equity Financings
Median Pre-Money Valuation (M)
Source VentureOne
11
Mergers Acquisitions vs. Initial Public
Offerings
Venture-Backed Liquidity Shifts Toward MA in 2001
Source VentureOne
12
Transactions and Amount Paid in Mergers
Acquisitions (Annually)
Amount Paid(B)
Number of Transactions
Source VentureOne
13
Transactions and Amount Paid in Mergers
Acquisitions (Quarterly)
Amount Paid(B)
Number of Transactions
Source VentureOne
14
Todays Market

• Very similar to numbers of 1996, but 1996 had a
  much brighter forward picture
• Software continues to lead with 362 deals
  announced in Q3
• 1,015 software transactions in first three
  quarters of 2002 with an aggregate value of 22.2
  B
• Revenue multiple range for private transactions
  is 0.2 6.9 times with a median of 2.0
• Cash continues to be primary consideration
• Most active categories in software include
• Security
• Storage Management
• Entertainment
• Enterprise Software
• Education
• Financial

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Todays Market (continued)

• Shift in the number of middle market deals
  (defined as lt100 mm) is increasing relative to
  other deal sites. i.e. The cost structure of
  bulge bracket banks cannot support deals less
  than 100 mm
• Shift in the realm of buyers
• Strategic buyers dont have the consideration due
  to little cash or depressed stock prices to
  complete transactions
• Number of private equity buyouts is significantly
  up, as cheap assets are available
• Net Financial buyers are much more influential
  in driving transactions to completion
• Shift in valuation perspective
• Companies are being valued on return available to
  debt and equity holders (i.e. free cash flows)
• Market is shifting towards valuing companies
  efficiently and valuations will remain in range
  of P/E and revenue multiples of targets industry
• Ultimately we will see equity being valued on
  what target is able to earn (i.e. P/E ratios)
  like the mid 1990s

16
Crucial Elements of Successful MA

• Vertical market must have reasonable underlying
  health
• The acquisition should be accretive, strategic,
  or best of all, both
• MA is not an exit in this market. It should be
  viewed as an evolution into a stronger security
• Preferred target is small and mid-cap software
  companies targeting vertical markets and mid tier
  enterprises
• Solid customer base
• Recurring revenues
• Earnings

17
Financing vs. Selling (Whats the Right Timing?)
Idea
Seed Financing / Early Stage 500,000 - 1 M
Series A 2 - 4 million
Series C 8 - 12 million
Series B 6 - 10 million
Rev. 0-200K Cust. 0 - 3 Emp. 10 - 20
Rev. 500K-2M Cust. 4 - 6 Emp. 20 - 30
Rev. 0 Cust. 0 Emp. 3 - 8
Rev. 4 - 8 M Cust. gt 10 Emp. 30
Enterprise Value
Company Life-Cycle