INVESTMENT CRITERIA

BHG Investment Funds provide a variety of funding options. Although BHG prefers to serve as the lead investor, BHG will consider co-investing in a non-lead position. In either case, BHG remains firmly committed to our portfolio companies and will typically participate in subsequent rounds of financing through Bridgehead Ventures and the formation of syndicates.

BHG seeks investment opportunities at the earliest-even conceptual-stage of companies. After providing an initial infusion of capital, the BHG team, together with the entrepreneur, begins to develop the business. This includes:

• Creating business and marketing plans
• Developing financial strategies
• Recruiting executives
• Building teams
• Utilizing industry contacts

The participation of the BHG team at the seed-stage yields a significantly improved investment opportunity. It's at this inception stage that our portfolio companies benefit most from industry and financial expertise. BHG, and its management team, prime seed companies for success through the Venture Prism Strategy to develop working relationships and recognize trouble spots early on.

BHG possess a defined investment criteria by seeking companies within the arena of the core technology sector that have:

• First-rate management
• A superior technical team
• Solid intellectual property positioning
• Clear competitive advantages
• Sustainable market demand
• A compelling business model
• The potential for market leadership in three to five years

Transitional markets, poised to undergo a significant market shift, are particularly attractive. A rapidly changing industry can positively influence market demand for a new technology and strengthen investment opportunity.

Additional Criteria

Candidate companies should be privately-held, and develop technology within BHG's target industries and markets. The founders and management team must bring hands-on, in-depth experience in the company's market sector. Candidate companies must show the potential to quickly establish market leadership, become profitable, and achieve $1 billion plus market capitalization within several years.

Equity and IP Ownership

A candidate company, along with its intellectual property, should be privately held, preferably by just a few stakeholders. Ideally, a company's intellectual property should be defined, documented and in the patent process if appropriate.

Source

BHG prefers to review investment opportunities that are recommended or referred by known sources, including; industry analysts, angel investors, other venture capital firms, financial and legal service providers, and managers of our portfolio companies.

Investment Stage and Range

BHG chiefly invests in early-stage private companies at the first or second round of venture capital financing. BHG often acts as lead investor in the initial venture round, and will typically invest approximately $2 million to $10 million per company over 2-3 rounds of funding.

Market Focus

BHG invests in industries and markets where BHG can contribute the highest level of expertise and value. BHG seeks ventures that can define and dominate major business-to-business areas by leveraging proprietary intellectual property. BHG's target investment areas are: IT, nanotechnology and new industrial technologies. BHG favors ventures that complement rather than compete with our existing portfolio of investments.

Management Team

BHG seeks visionary, high-performance founders and managers with in-depth, hands-on experience in their target markets. BHG has helped our portfolio companies to identify highly qualified candidates to complete their management teams.

Growth Potential

A venture company's business model and growth potential should be such that it can realistically achieve profitability within three years, with a strong potential for earning a $1 billion valuation in the public market within five years. Companies should receive the majority of their revenue from the sale of products, interactive services or technology licenses, rather than from advertising.

Intellectual Property

BHG actively seeks investments that possess significant intellectual property, patentable technologies, software code, proprietary processes and concepts, or other strategic core competencies that can be used to dominate and defend target markets.

Commercial Application

Intellectual property alone isn't enough to secure funding. Successful ventures must be able to leverage core competencies into scalable businesses that deliver lasting value. Technologies or inventions must have marketable, commercial applications. Product concepts must show the potential to evolve into comprehensive solutions.

Timing

BHG focuses on ventures that have products or services that can make an impact on the global market immediately. BHG does not invest in pure scientific inventions where the real-world applications are years away. Nor does BHG have an interest in entering mature markets that are already crowded with competitors.

Exit Strategy

To deliver the highest return for the BHG Investment Funds, BHG seeks ventures with the potential to trade on the public market via a successful IPO, Reverse Merger IPO or to merge with an appropriate parent company within five years of funding.

Return on Investment

Within five years, a portfolio company should be able to deliver a ten to twenty times return on the BHG investment.