INVESTMENT STRATEGY

ProxSoft’s strategy entails investing in projects/companies, which have

• Clear business models;
• Global markets orientation.

ProxSoft prefers to invest in Information Technologies, including:

• Telecom;
• Web;
• Industry-specific solutions;
• Other…

SELECTION CRITERIA

Companies/individuals which meet the following criteria have preference:

• They have completed projects which are at the implementation stage now, promising innovations in the scientific/technical area
• They have circumspect business plan for their project
• They have registered IP rights, patents, or the ability to acquire such rights upon the completion of scientific research
• The timeframe of the project implementation does not exceed 2 years
• They agree that ProxSoft owns blocking or controlling shares in the project/company capital
• They agree that ProxSoft will ultimately provide software development services for the company/project

SELECTION PROCESS

Project selection process consists of several phases. Detailed selection procedure is described below.

1. Receiving initial project information

Project-related information should be presented as follows:

• Executive Summary;
• Presentation, which describes addressed needs, industry trends, technological and financial benefits towards alternative solutions, long-term business model;
• Short business plan (20~30 pages), available for public investigation.

2. Formal examination and initial contact with applicant

Information received by ProxSoft will be carefully examined by ProxSoft experts. At this stage it will be determined if the project matches our formal criteria and the principal goals of ProxSoft’s investment strategy. We guarantee careful and conscientious consideration of all incoming requests. Nevertheless, in case of negative review appeals will not be accepted at such an early stage. After the results of the initial examination, applicant will receive a list of questions and be invited for a face to face meeting, if necessary. During the meeting ProxSoft and the applicant will further discuss the goals and strategies of the project, synchronizing the vision of the project implementation concept, its business prospects, and strengths and weaknesses from the technical and financial point of view. If the result of the initial review is positive, then both parties will sign a mutual NDA (Non-Disclosure Agreement) in order to request all necessary project information for the detailed examination.

3. Preliminary Expert analysis

Preliminary expert analysis may require up to 3 weeks, and in some cases even more time. The time frame for this stage will depend on the project specifications and the expertise required for implementation. Expert analysis includes:

• Validation of the declared project parameters and data
• Analysis of the global trends in the technical area related to the project
• Definition of the main technical and technological parameters of the product, its comparison with competitive products currently on the market
• Investigation of the target market and its projected evolution for several years into the future;
• Analysis of the technical and financial risks
• Testing and verifying the economical model, on which the business plan is based. This usually causes corrections in that model and investment appeal clarification
• Initial review of the intellectual property rights status of the project

4. Preliminary investment agreement (Term Sheet)

Upon completion of the preliminary expert analysis ProxSoft will formulate its vision of the proposed investment deal in the Term Sheet, where the following conditions and parameters are defined:

• Capital spending sights
• Validation of the corporate valuation
• Estimated capital structure and shares
• Schedule and amount of the payments
• Legal aspects of the project organization, implementation, and property rights (including IP rights)

All the requirements and requests of the parties should be settled during this phase in the negotiation process. If such negotiations succeed, then we are ready to approach more a detailed analysis phase. Please note, that from the moment the Term Sheet is signed, ProxSoft should be considered as a first-priority investor, until one of the following conditions is reached:

• Project is approved for investment;
• Project is rejected;
• Project analysis time period has expired.

In most cases, creation and approval of the Term Sheet will take 1-2 weeks, according to our forecast.

5. Detailed Evaluation (Due Diligence)

Technical or scientific evaluation of the Project

In the beginning of the due diligence the Project will be sent for technical/scientific evaluation to determine the following project parameters:

• Validity of the technology/science underlying a product
• The level of originality/uniqueness of an offered product at the international level
• Research of the technology used in creation of a product in terms of industrial scalability (if it is necessary)
• Research of the product’s domain: analysis of technical advantages and defects in comparison with the nearest existing competing products
• Determination of long-term tendencies of development of the economic sphere in which the project lays, and the prospective duration of its life cycle and nature of long-term competitiveness compare to the closest alternatives
• Estimation of the technological risks connected with the advent of other solutions which are capable to replace a prospective product in the target market

At this stage ProxSoft has the right to involve external experts from various areas of fundamental and applied science.

Legal audit

The next step after technical/scientific expertise of the Project is a legal audit of the invested company/applicant which addresses:

• Intellectual property conditions
• Current company liability
• Any foreign or domestic judicial claims to the company and its shareholders

Concerning intellectual property rights, ProxSoft analyses the protection level of the know-how, how the patent/copyright matches the company’s strategy of market expansion, and if any claims for the development exist from third parties. Concerning liability, ProxSoft analyses its nature and value, which has to be considered in the risk analysis of the project and is a subject for discussion in regard to ProxSoft’s share in the company capital. Concerning claims to the company and its shareholders, if they exist, ProxSoft analyses their degree of threat and nature of influence on the company’s future. This is considered as a project risk and affects the decision-making about investments in the company.

Financial review

Financial review begins upon the positive result of the legal audit phase. Investment appeal of the project has to be defined during this phase, which includes:

• Evaluation of the financial and economic condition of the company, cost and status of its key assets, including intellectual property
• Studying the target market and forecast of its further dynamics
• Economic modeling of the Project is prepared, taking into account the amount, purpose and timeframe of investments. Several implementation scenarios are taken under consideration
• Evaluation of the economic risks of investments in the Project and its financial stability
• Strategy of the project implementation is completed, and the plan for forthcoming investments is created with the amount, purpose and timeframe

Due diligence can take a long time – up to 2 months, which means deep and comprehensive analysis of the project to predict, as much as possible, more precisely the product evolution and to avoid excessive risks. We hope for understanding from applicants and we guarantee that all interesting projects, having passed the given stages, will have a high probability to receive required investments! In the case of a positive decision, with the project having successfully passed the investment selection process, all necessary legal documentation will be signed and the investment program implementation will begin.

JOINT BUSINESS DEALING

During the period of ProxSoft sharing in the company capital, its representatives take an active part in the company management process through their membership in the board of directors, and they participate in the making of key decisions, such as approval of large financial decisions and the staffing of key personnel. Concerning day-to-day management of the company, we will work in a consulting capacity, and periodically perform marketing and target domain research. ProxSoft is also ready to participate in seeking other business partners. Company ProxSoft reserves the right to perform audits of the invested companies.

INVESTMENT EXIT

Accurate and clear investment exit strategy is one of the major criteria in the selection process. A preferable option of the investment exit is the redemption of ProxSoft’s stock by management, portfolio or strategic investor. Reserved option of the exit is a public offering of shares by means of listing in a stock exchange or a buy-back of shares by the company. ProxSoft considers the following basic options as the investment exit:

• Management buy-out or management buy-in
• Private Placement or M&A
• Public sales of shares by means of IPO or SPO
• Company recapitalization by means of a buy-back and the further repayment of ProxSoft shares from company’s internal funds, against the bank credit or by the issuing of other debt tools such as bonds (Repo, Leveraged Buy-Back, Recapitalization)
In any case, investment exit strategy should be defined and carefully calculated in advance, during the analysis phase

IMPORTANT

We guarantee confidentiality of any information received from you!