Greg Davidson, Partner, Gibson, Dunn & Crutcher LLP

Bill Hambrecht, Founder, Chairman and CEO,

WR Hambrecht+Co

Marshall Hawks, Deal Team Leader, Silicon Valley Bank

Brian Lane, Partner, Gibson, Dunn & Crutcher LLP

Speakers

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What does the JOBS Act do? Why did Congress pass it?

What’s all the fuss about?

What will the JOBS Act mean for early stage startups?

How will it help later stage companies?

Q&A

Agenda

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What Does the JOBS Act Do?

Makes it easier to raise capital from

sophisticated investors

Allows general advertising for

Reg D private placements

Makes it easier to go public

Creates an IPO “on ramp” Revises “Reg A” rules to permit offerings up to $50M annually

Makes it easier to stay private

Raises 500 shareholder “cap”

Makes it easier to raise capital from a broad base

of “normal” investors Allows crowdfunding for

equity raises

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Why Did Congress Pass It? Deal Size 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0-$25 million 9 10 6 7 19 12 9 2 1 3 1 1 $25-$50 million 8 7 4 33 19 22 12 1 0 4 7 2 $50-$100 million 20 16 20 52 44 38 44 7 7 32 17 16 $100+ million 43 35 38 82 79 78 91 13 31 55 66 20Total 80 68 68 174 161 150 156 23 39 94 91 39

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 0-$25 million 11% 15% 9% 4% 12% 8% 6% 9% 3% 3% 1% 3% $25-$50 million 10% 10% 6% 19% 12% 15% 8% 4% 0% 4% 8% 5% $50-$100 million 25% 24% 29% 30% 27% 25% 28% 30% 18% 34% 19% 41% $100+ million 54% 51% 56% 47% 49% 52% 58% 57% 79% 59% 73% 51%

IPO's in the United States by Size - Number of Deals

IPO's in the United States by Size - Related Percentage of Total Number of Deals

Sources: Dealogic, excludes ADRs and foreign issuers. Current as of April 11, 2012.

YearNumber of

ListingsPercentage Decrease

2000 9,100 -2010 6,450 -29%2012 5,165 -20%

US Listing Trend

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Entrepreneurs Care

More than 700 entrepreneurs from more than 200 cities signed a letter to Congress supporting the IPO on-ramp bill*

More than 5,000 angel investors, entrepreneurs and venture capitalists signed a petition urging the Senate to pass the JOBS Act*

Startups who participated in SVB’s 2012 Startup Outlook Survey consistently supported the types of reforms included in the JOBS Act

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* Source: National Venture Capital Association

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What’s All The Fuss About?

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What Will the JOBS Act Mean for Early Stage Startups?

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New Sources of Capital for High Growth Startups

Crowd- funding

VCs

Corporate Investors

Angels

Early Stage Startups

High-End Investors

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Crowdfunding: The JOBS Act’s Biggest Unknown

How is it different from existing sites, such as Kickstarter? Is it real? Will the SEC let it happen? Will it work for high growth companies and professional investors?

CROWDFUNDING BASICS • Can raise up to $1M per year • Must go through “funding portals” • Information requirements vary by amount of

capital raised • Limits on how much each individual can

invest annually, which vary by income/net worth

• One-year restriction on transfer of shares

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Private Placements: Adapting to Modern Communications

New rules focus on who you sell securities to, not who sees the solicitation

You can now make general solicitations and use broad-based advertising, as long you sell securities only to accredited investors (Reg. D) or to those you “reasonably believe” are qualified institutional buyers (Rule 144A) No more password-protected websites or strict restrictions on ads and press releases

Not yet in place until SEC adopts regulations

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What Will the JOBS Act Mean for Later Stage Companies? • Those who want to go public • Those who want to stay private • Those who aren’t sure

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What’s New?

• IPO on-ramp: • Spend more time and money building your business • Increase your probability of a successful IPO

• Reg “A+” reforms: Can they re-create the small cap IPO?

Want to go public?

• Changes to the “500 shareholder” rule give you more control over when and whether to go public

• Revised Reg “A+” and Reg D provide additional alternative sources for growth capital

Want to stay private?

• IPO on-ramp • No need to disclose confidential business info until you’re sure • “Testing the waters” can let you assess demand

• Other provisions make staying private a more viable option

Not sure?

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The IPO On-Ramp: A Quick Tutorial

• Spend more time and money building your business, less paying lawyers and auditors

• Test the waters before committing to an IPO, and keep your business info confidential until you’re ready to go

• Improve communications to bring in the right shareholders and the right coverage for your long term growth

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Financial Disclosure

IPO Filings & Communications

Executive Comp.

SOX Internal Controls

Accounting & Audit

• Two years of audited financials for IPO (instead of three years for full financials and five years for selected financial data)

• More limited financial data for post-IPO filings • Will markets accept the reduced disclosures?

• Longer time to comply with new and revised accounting standards • No audit firm rotation or “auditor discussion and rotation” (if adopted)

• Don’t need to pay auditors to audit SOX 404(b) internal controls • …But yes, you still have to have these controls

• Fewer disclosures, covering fewer execs, for fewer years • No CD&A or say-on-pay

• Confidential preliminary registration statements => greater control over sensitive information

• “Test the water” communications => better insights for pricing, book building, etc. • More flexible rules for research coverage => better investor/analyst

communications

Bottom Line

Who Can Use It?

Less than $1B in trailing annual

gross revenues Public less than 5

years

Less than $1B in non-convertible debt over 3 yrs

Not a “large accelerated filer”

Went public after Dec. 8, 2011

Emerging Growth Companies A new category of issuers, subject to less rigorous regulation

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What’s Left?

All offerings will remain subject to “core” investor protections

Makes things easier, but not easy Doesn’t address other root causes of the IPO decline, such as decimalization Still unclear: How will investors and bulge bracket investment banks react?

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Reg A+: Re-Inventing Small Cap IPOs?

• An alternative path for fundraising • Can offer debt, equity, and convertible debt • More flexible than private placements • Less costly than a true IPO

• Leaner process could mean significantly more proceeds to company • Doesn’t preclude company from later using the IPO on-ramp

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Offering Size

Required Disclosures

State “Blue Sky” Laws

Restrictions on Sale?

Offering Process

• Old limit: $5 million annually • New limit: $50 million annually

• Limited public offerings – essentially a “mini” registration process • An issuer can use Reg A+ and still opt to remain private

• Can use general solicitations and general advertising • Can “test the waters” before incurring significant expenses

• Can sell securities to investors who are not “accredited investors” • Securities are not “restricted securities” – can be freely re-sold

• Revised law makes it more feasible to avoid state-by-state filings • Exempt from state filings if listed on an exchange or sold to “qualified purchasers” • Must file audited financial statements annually • Additional requirements to be determined by SEC (which could impact practical use)

Bottom Line

What If I Want to Stay Private?

Will make it easier to provide liquidity to employees and investors through secondary transactions and use options to compensate a growing employee base … without fear of crossing the line.

• $10M in assets, and • 500 shareholders • Includes employee shareholders

Old Rule

• $10M in assets, and • 2000 shareholders (max. 500 who aren’t

accredited investors) • Excludes employee shareholders and

crowdfunding shareholders

New Rule

You must register with the SEC and begin filing financial statements if you have:

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When Can I Use the JOBS Act? New financial reporting and auditing standards for EGCs

Immediately

Immediately, for most

SEC needs to adopt rules to cover exemption from “pay-for-performance” and “pay-ratio” disclosure obligations

Immediately, as a matter of law

But as a practical matter this may not happen until FINRA/stock exchanges weigh in and the effect of the JOBS Act on the “global settlement agreement” is clearer

New compensation disclosure and corporate governance rules

for EGCs

Pre- and post-filing “test the waters” communications for EGCs

Immediately

Publication of research reports by participating underwriters

for EGCs Immediately

Securities analyst conflict rules for EGCs

Timing of publication of research reports for EGCs and appearances

by broker-dealers

Immediately

But there may be risks until FINRA weighs in

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When Can I Use the JOBS Act? (con’t)

Confidential submission of draft registration statements by EGCs Immediately

Requires implementation rules to be issued by the SEC

Stated deadline for rules: July 4, 2012

Immediately

SEC will need to adopt rules for some provisions

Elimination of prohibitions on general solicitation and

advertising (Reg D)

Crowdfunding

New Reg A rules Requires implementation rules to be issued by the SEC; no deadline established

Increased shareholder limits for public company reporting

Requires implementation rules to be issued by the SEC

Stated deadline for rules: December 31, 2012

Questions?

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Biographies

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Gregory T. Davidson is a partner in Gibson, Dunn & Crutcher's Palo Alto office and Co-Chair of the firm's Emerging Technologies Practice Group. Mr. Davidson's corporate practice includes extensive experience in mergers and acquisitions, private equity, joint ventures, corporate finance and general business law matters. He regularly advises public company clients in connection with SEC filings, public disclosure, corporate governance and other securities laws matters. Mr. Davidson also represents venture capitalists and corporate strategic investors, as well as companies, in connection with private placements of equity and debt, and he counsels start-up and emerging growth companies in all aspects of their corporate legal requirements. In addition to co-chairing the Emerging Technologies Practice Group, Mr. Davidson is a member of each of Gibson, Dunn’s Corporate Transactions, M&A, Capital Markets, and Private Equity Practice Groups. His work also has included significant executive compensation and equity plan matters. Mr. Davidson is named in Chambers USA – American Leading Lawyers for Business as a Leader for his mergers and acquisitions practice and his venture capital practice. Mr. Davidson joined Gibson, Dunn & Crutcher in 1988 after earning his law degree from the University of California at Berkeley (Boalt Hall). He received his Bachelor's degree with distinction in political science and economics from Stanford University in 1985. Mr. Davidson worked for four years in Gibson, Dunn & Crutcher's Orange County office before moving to the San Francisco Bay Area. He is Vice Chairman of the Board of Directors of United Way Silicon Valley.

Gregory T. Davidson Partner Gibson, Dunn & Crutcher LLP gdavidson@gibsondunn.com 650.849.5350

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In 1968, Bill co-founded Hambrecht & Quist, an investment banking firm specializing in emerging high-growth technology companies. He founded WR Hambrecht + Co in 1998, introducing OpenIPO® as a means to level the playing field for both investors and issuers. Bill has served as a director for numerous private and public companies. In October, 2006, Bill was inducted to the American Academy of Arts and Sciences. He was appointed to the board of the Presidio Trust in 2010. Bill graduated from Princeton University.

William R. Hambrecht Founder, Chairman and CEO WR Hambrecht + Co

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Marshall is a deal team leader in growth ($5-$75M in revenues) focused on Hardware and Infrastructure Software companies in the San Francisco Bay Area. Areas of focus include Networking, Security, Cloud Platforms/Infrastructure, EDA, Consumer Devices and Big Data.

Marshall Hawks Deal Team Leader Silicon Valley Bank mhawks@svb.com 415.504.2957

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Brian Lane, a partner with Gibson, Dunn & Crutcher, is a corporate securities lawyer with extensive expertise in a wide range of SEC issues. He counsels companies on the most sophisticated corporate governance and regulatory issues under the federal securities laws. He is a nationally recognized expert in his field as an author, media commentator, and conference speaker. BTI Consulting Group named Mr. Lane as a 2011 BTI Client Service All-Star for delivering “outstanding legal skills enveloped in a rare combination of practical business knowledge, extraordinary attention to client needs and noteworthy responsiveness.” He was also: Listed in the 2012 edition of The Best Lawyers in America® for securities law, corporate governance and compliance law. Selected by Chambers and Partners as a Leading Lawyer in Securities Regulation in its Chambers USA: America’s Leading Lawyers for Business Guide for 2011. Named by Washingtonian Magazine as one of Washington’s Top Lawyers for securities law in 2009. Named the Leading Lawyer for Corporate Governance: Internal Investigations in the Washington D.C. area by Legal Times in 2008. Mr. Lane ended a 16 year career with the Securities and Exchange Commission (“SEC”) as the Director of the Division of Corporate Finance where he supervised over 300 attorneys and accountants in all matters related to disclosure and accounting by public companies (e.g. M&A, capital raising, disclosure in periodic reports and proxy statements). In his practice, Mr. Lane advises a number of companies undergoing investigations relating to accounting and disclosure issues. .

Brian Lane Partner Gibson, Dunn & Crutcher LLP blane@gibsondunn.com 202.887.3646

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Disclosures This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decision. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction. ©2012 SVB Financial Group. All rights reserved. Member Federal Reserve System. SVB>, SVB>Find a way, SVB Financial Group, and Silicon Valley Bank are registered trademarks. Silicon Valley Bank Financial Group is not affiliated with WR Hambrecht & Company and Gibson, Dunn and Crutcher LLP 0612-0077

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