EFTA00609489.pdf

Do Not Copy or Distribute Without Written Permission from Valar Ventures LLC Valar Global Fund III LP $200,000,000 VALAR Limited Partner Interests Confidential Private Placement Memorandum Valar Ventures LLC Copy # 915 Broadway, Suite 1101 New York, New York 10010 Issued to: EFTA00609489 VALAR Private Placement Memorandum Confidential Private Placement Memorandum VALAR GLOBAL FUND III LP $200,000,000 Limited Partner Interests THIS CONFIDENTIAL PRIVATE PLACEMENT MEMORANDUM (THE "MEMORANDUM") HAS BEEN PREPARED SOLELY FOR USE BY THE PROSPECTIVE INVESTORS OF VALAR GLOBAL FUND III LP (THE "FUND" OR THE "PARTNERSHIP") AND SHALL BE MAINTAINED IN STRICT CONFIDENCE. EACH RECIPIENT HEREOF ACKNOWLEDGES AND AGREES THAT (I) THE CONTENTS OF THIS MEMORANDUM CONSTITUTE PROPRIETARY AND CONFIDENTIAL INFORMATION, (II) VALAR VENTURES GP III LLC (THE "GENERAL PARTNER"), VALAR VENTURES LLC (THE "MANAGEMENT COMPANY') AND THEIR AFFILIATES, INCLUDING WITHOUT LIMITATION THE FUND (COLLECTIVELY, THE "FIRM") DERIVE INDEPENDENT ECONOMIC VALUE FROM SUCH CONFIDENTIAL INFORMATION NOT BEING GENERALLY KNOWN, AND (III) SUCH CONFIDENTIAL INFORMATION IS THE SUBJECT OF REASONABLE EFFORTS TO MAINTAIN ITS SECRECY. THE RECIPIENT FURTHER AGREES THAT THE CONTENTS OF THIS MEMORANDUM ARE A TRADE SECRET, THE DISCLOSURE OF WHICH IS LIKELY TO CAUSE SUBSTANTIAL AND IRREPARABLE COMPETITIVE HARM TO THE FIRM. ANY REPRODUCTION OR DISTRIBUTION OF THIS MEMORANDUM, IN WHOLE OR IN PART, OR THE DISCLOSURE OF ITS CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF THE MANAGEMENT COMPANY, IS PROHIBITED. EACH PERSON WHO HAS RECEIVED THIS MEMORANDUM IS DEEMED TO AGREE TO RETURN THIS MEMORANDUM TO THE MANAGEMENT COMPANY UPON REQUEST. THE EXISTENCE AND NATURE OF ALL CONVERSATIONS REGARDING THE FUND AND THIS OFFERING MUST BE KEPT CONFIDENTIAL. THIS MEMORANDUM HAS BEEN PREPARED IN CONNECTION WITH A PRIVATE OFFERING TO ACCREDITED INVESTORS OF LIMITED PARTNER INTERESTS IN THE FUND (THE "INTERESTS"). EACH INVESTOR WILL BE REQUIRED TO EXECUTE A LIMITED PARTNERSHIP AGREEMENT (AS AMENDED, RESTATED AND/OR OTHERWISE MODIFIED FROM TIME TO TIME, THE "PARTNERSHIP AGREEMENT) AND SUBSCRIPTION AGREEMENT AND INVESTOR QUESTIONNAIRE (THE "SUBSCRIPTION AGREEMENT') TO EFFECT ITS INVESTMENT IN THE FUND. THIS MEMORANDUM CONTAINS A SUMMARY OF THE PARTNERSHIP AGREEMENT, THE SUBSCRIPTION AGREEMENT AND CERTAIN OTHER DOCUMENTS REFERRED TO HEREIN. HOWEVER, THE SUMMARIES IN THIS MEMORANDUM DO NOT PURPORT TO BE COMPLETE AND ARE SUBJECT TO AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE ACTUAL TEXT OF THE RELEVANT DOCUMENT, COPIES OF WHICH WILL BE PROVIDED TO EACH PROSPECTIVE INVESTOR UPON REQUEST. EACH PROSPECTIVE INVESTOR Confidential & Trade Secret EFTA00609490 VALAR Private Placement Memorandum SHOULD REVIEW THE PARTNERSHIP AGREEMENT, THE SUBSCRIPTION AGREEMENT AND SUCH OTHER DOCUMENTS FOR COMPLETE INFORMATION CONCERNING THE RIGHTS, PRIVILEGES AND OBLIGATIONS OF INVESTORS IN THE FUND. IF ANY OF THE TERMS, CONDITIONS OR OTHER PROVISIONS OF THE PARTNERSHIP AGREEMENT, THE SUBSCRIPTION AGREEMENT OR SUCH OTHER DOCUMENTS ARE INCONSISTENT WITH OR CONTRARY TO THE DESCRIPTIONS OR TERMS IN THIS MEMORANDUM, THE PARTNERSHIP AGREEMENT, THE SUBSCRIPTION AGREEMENT OR SUCH OTHER DOCUMENTS SHALL CONTROL. THE FIRM RESERVES THE RIGHT TO MODIFY THE TERMS OF THE OFFERING AND THE INTERESTS DESCRIBED IN THIS MEMORANDUM, AND THE INTERESTS ARE OFFERED SUBJECT TO THE GENERAL PARTNER'S ABILITY TO REJECT ANY COMMITMENT IN WHOLE OR IN PART. THE INTERESTS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT), OR ANY UNITED STATES STATE SECURITIES LAWS OR THE LAWS OF ANY FOREIGN JURISDICTION. THE INTERESTS WILL BE OFFERED AND SOLD UNDER THE EXEMPTION PROVIDED BY SECTION 4(2) OF THE SECURITIES ACT AND REGULATION D PROMULGATED THEREUNDER AND OTHER EXEMPTIONS OF SIMILAR IMPORT IN THE LAWS OF THE STATES AND OTHER JURISDICTIONS WHERE THE OFFERING WILL BE MADE. THE FUND WILL NOT BE REGISTERED AS AN INVESTMENT COMPANY UNDER THE UNITED STATES INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "INVESTMENT COMPANY ACT). CONSEQUENTLY, INVESTORS WILL NOT BE AFFORDED THE PROTECTIONS OF THE INVESTMENT COMPANY ACT. THE INTERESTS DESCRIBED IN THIS MEMORANDUM ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE PARTNERSHIP AGREEMENT AND THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. THE FUND'S INVESTMENTS WILL BE CHARACTERIZED BY A HIGH DEGREE OF RISK, VOLATILITY AND ILLIQUIDITY. A PROSPECTIVE PURCHASER SHOULD THOROUGHLY REVIEW THE CONFIDENTIAL INFORMATION CONTAINED HEREIN AND THE TERMS OF THE PARTNERSHIP AGREEMENT AND SUBSCRIPTION AGREEMENT, AND CAREFULLY CONSIDER WHETHER AN INVESTMENT IN THE FUND IS SUITABLE TO THE INVESTOR'S FINANCIAL SITUATION AND GOALS. CERTAIN ECONOMIC AND MARKET INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM PUBLISHED SOURCES PREPARED BY OTHER PARTIES. WHILE SUCH SOURCES ARE BELIEVED TO BE RELIABLE, NEITHER THE FUND, THE GENERAL PARTNER, NOR THEIR RESPECTIVE AFFILIATES ASSUME ANY RESPONSIBILITY FOR THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. NEITHER DELIVERY OF THIS MEMORANDUM NOR ANY STATEMENT HEREIN SHOULD BE TAKEN TO IMPLY THAT ANY INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY STATEMENT CONCERNING THE FUND OR THE SALE OF THE INTERESTS DISCUSSED HEREIN OTHER THAN AS SET Confidential & Trade Secret EFTA00609491 VALAR Private Placement Memorandum FORTH IN THIS MEMORANDUM, AND ANY SUCH STATEMENTS, IF MADE, MUST NOT BE RELIED UPON. PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO RELY ON THE PRIOR RETURN INFORMATION SET FORTH HEREIN IN MAKING A DECISION WHETHER OR NOT TO PURCHASE THE INTERESTS OFFERED HEREBY. THE RETURN INFORMATION CONTAINED HEREIN HAS NOT BEEN AUDITED OR VERIFIED BY ANY INDEPENDENT PARTY AND SHOULD NOT BE CONSIDERED REPRESENTATIVE OF THE RETURNS THAT MAY BE RECEIVED BY AN INVESTOR IN THE FUND. CERTAIN FACTORS EXIST THAT MAY AFFECT COMPARABILITY INCLUDING, AMONG OTHERS, THE DEDUCTION OF FEES AND EXPENSES AND THE PAYMENT OF A CARRIED INTEREST. CERTAIN FACTUAL AND STATISTICAL INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED FROM PUBLISHED SOURCES PREPARED BY OTHER PARTIES AND HAS NOT BEEN INDEPENDENTLY VERIFIED BY THE GENERAL PARTNER OR ANY OF ITS AFFILIATES. OPINIONS AND ESTIMATES MAY BE CHANGED WITHOUT NOTICE. IN CONSIDERING THE PRIOR PERFORMANCE INFORMATION CONTAINED HEREIN, PROSPECTIVE INVESTORS SHOULD BEAR IN MIND THAT PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND THERE CAN BE NO ASSURANCE THAT THE FUND WILL ACHIEVE COMPARABLE RESULTS. CERTAIN STATEMENTS OF PAST PERFORMANCE OF OTHER INVESTMENT FUNDS MANAGED BY THE MANAGEMENT COMPANY OR AFFILIATES THEREOF AND CERTAIN ECONOMIC AND MARKET INFORMATION, CONTAINED HEREIN INCLUDES PROJECTIONS AND ESTIMATES MADE BY THE MANAGEMENT COMPANY AND OTHER PARTIES. THE PROJECTED RETURNS CONTAINED HEREIN MAY BE CALCULATED ON A COMPANY BY COMPANY BASIS, AND ARE BASED ON ESTIMATES OF THE EVENTUAL MAGNITUDE AND THE TIMING OF THE RETURNS FROM EACH COMPANY MADE BY THE MANAGEMENT COMPANY. THE PROJECTED RETURNS AND ESTIMATES OF ECONOMIC AND MARKET INFORMATION CONTAINED HEREIN INVOLVE RISKS AND UNCERTAINTIES AND: (I) ARE BASED UPON ASSUMPTIONS CONCERNING CIRCUMSTANCES AND EVENTS THAT HAVE NOT YET OCCURRED AND (II) MAY BE SUBJECT TO BEING INFLUENCED BY EVENTS BEYOND THE CONTROL OF THE MANAGEMENT COMPANY. ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY. NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE BY THE FIRM AS TO THE REASONABLENESS OR ACCURACY OF THE PROJECTIONS OR ESTIMATES AND, AS A RESULT, SUCH PROJECTIONS AND ESTIMATES SHOULD BE VIEWED SOLELY AS AN ORDERLY REPRESENTATION OF ESTIMATED RESULTS IF UNDERLYING ASSUMPTIONS ARE REALIZED. INVESTORS SHOULD SUBJECT THE PROJECTIONS AND ESTIMATES TO REVIEW BY THEIR OWN PROFESSIONAL ADVISERS. UPON REQUEST, THE MANAGEMENT COMPANY WILL PROVIDE INVESTORS WITH THE ASSUMPTIONS AND METHODOLOGIES USED IN PREPARING THE PROJECTIONS AND ESTIMATES. THE MEMORANDUM, TOGETHER WITH ANY AMENDMENTS AND SUPPLEMENTS THERETO, AND ANY OTHER OFFERING MATERIALS DISTRIBUTED TO THE LIMITED PARTNERS (TOGETHER, THE "OFFERING MATERIALS") CONTAIN CERTAIN STATEMENTS WITH RESPECT TO, AND DISCLOSE CERTAIN INFORMATION WITH REGARD, TO THE THIEL PERSONS (AS DEFINED HEREIN). NONE OF THE THIEL PERSONS MAKES ANY REPRESENTATION OR WARRANTY WITH RESPECT TO THE CONTENTS OF THE OFFERING MATERIALS. NONE OF THE THIEL PERSONS HAS OR ASSUMES ANY RESPONSIBILITY FOR ANY PART OF THE FORM OR SUBSTANCE OF THE OFFERING Confidential & Trade Secret EFTA00609492 VALAR iv Private Placement Memorandum MATERIALS, AND THE OFFERING MATERIALS, IN THEIR ENTIRETY, ARE THE RESPONSIBILITY OF THE GENERAL PARTNER AND THE MANAGEMENT COMPANY. THE THIEL PERSONS ARE RELYING, WITHOUT INDEPENDENT VERIFICATION, ON THE ACCURACY AND COMPLETENESS OF OFFERING MATERIALS. INVESTORS SHOULD MAKE THEIR OWN INVESTIGATIONS AND EVALUATIONS OF THE FUND, INCLUDING THE MERITS AND RISKS INVOLVED IN AN INVESTMENT THEREIN. PRIOR TO ANY INVESTMENT, THE GENERAL PARTNER WILL GIVE INVESTORS THE OPPORTUNITY TO ASK QUESTIONS OF AND RECEIVE ANSWERS AND ADDITIONAL INFORMATION FROM IT CONCERNING THE TERMS AND CONDITIONS OF THIS OFFERING AND OTHER RELEVANT MATTERS TO THE EXTENT THE GENERAL PARTNER POSSESSES THE SAME OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE. INVESTORS SHOULD INFORM THEMSELVES AS TO THE LEGAL REQUIREMENTS APPLICABLE TO THEM IN RESPECT OF THE ACQUISITION, HOLDING AND DISPOSITION OF THE INTERESTS IN THE FUND, AND AS TO THE INCOME AND OTHER TAX CONSEQUENCES TO THEM OF SUCH ACQUISITION, HOLDING AND DISPOSITION. THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, AN INTEREST IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION NOR ANY OTHER FEDERAL, STATE OR FOREIGN REGULATORY AUTHORITY HAS APPROVED AN INVESTMENT IN THE FUND. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS MEMORANDUM, NOR IS IT INTENDED THAT THE FOREGOING AUTHORITIES WILL DO SO. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. YOUR INVESTMENT WILL BE DENOMINATED IN UNITED STATES DOLLARS ($) AND, THEREFORE, WILL BE SUBJECT TO ANY FLUCTUATION IN THE RATE OF EXCHANGE BETWEEN UNITED STATES DOLLARS ($), THE CURRENCY OF YOUR OWN JURISDICTION AND THE CURRENCY OF THE JURISDICTION IN WHICH ANY FUND PORTFOLIO COMPANY OPERATES OR GENERATES INVESTMENT PROCEEDS, AS APPLICABLE. SUCH FLUCTUATIONS MAY HAVE AN ADVERSE EFFECT ON THE VALUE, PRICE OR INCOME OF YOUR INVESTMENT. CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS CERTAIN STATEMENTS IN THIS MEMORANDUM CONSTITUTE FORWARD-LOOKING STATEMENTS. WHEN USED IN THIS MEMORANDUM, THE WORDS "MAY," "WILL," "SHOULD," "PROJECT," "ANTICIPATE," "BELIEVE," "ESTIMATE," "INTEND," "EXPECT," "CONTINUE," AND SIMILAR EXPRESSIONS OR THE NEGATIVES THEREOF ARE GENERALLY INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. SUCH FORWARD-LOOKING STATEMENTS, INCLUDING THE INTENDED ACTIONS AND PERFORMANCE OBJECTIVES OF THE GENERAL PARTNER, FUND, OR ANY PORTFOLIO COMPANY REFERENCED HEREIN, INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES, AND OTHER IMPORTANT FACTORS THAT COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE, OR ACHIEVEMENTS OF THE GENERAL PARTNER, FUND, OR ANY PORTFOLIO COMPANY TO DIFFER MATERIALLY FROM ANY FUTURE RESULTS, PERFORMANCE, OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD- LOOKING STATEMENTS. NO REPRESENTATION OR WARRANTY IS MADE AS TO FUTURE Confidential & Trade Secret EFTA00609493 VALAR V Private Placement Memorandum PERFORMANCE OR SUCH FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING STATEMENTS IN THIS MEMORANDUM SPEAK ONLY AS OF THE DATE HEREOF. THE FUND AND THE GENERAL PARTNER EXPRESSLY DISCLAIM ANY OBLIGATION OR UNDERTAKING TO DISSEMINATE ANY UPDATES OR REVISIONS TO ANY FORWARD- LOOKING STATEMENT CONTAINED HEREIN TO REFLECT ANY CHANGE IN ITS EXPECTATION WITH REGARD THERETO OR ANY CHANGE IN EVENTS, CONDITIONS, OR CIRCUMSTANCES ON WHICH ANY SUCH STATEMENT IS BASED. PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THIS MEMORANDUM AS INVESTMENT, LEGAL, TAX, REGULATORY, FINANCIAL, ACCOUNTING OR OTHER ADVICE, AND THIS MEMORANDUM IS NOT INTENDED TO PROVIDE THE SOLE BASIS FOR ANY EVALUATION OF AN INVESTMENT IN AN INTEREST. PRIOR TO ACQUIRING AN INTEREST, A PROSPECTIVE INVESTOR SHOULD CONSULT WITH ITS OWN LEGAL, INVESTMENT, TAX, ACCOUNTING, AND OTHER ADVISORS TO DETERMINE THE POTENTIAL BENEFITS, BURDENS, AND OTHER CONSEQUENCES OF SUCH INVESTMENT. +++ ANY QUESTIONS REGARDING THIS OFFERING, AND ANY REQUESTS FOR COPIES OF THE MEMORANDUM, THE PARTNERSHIP AGREEMENT AND THE SUBSCRIPTION AGREEMENT SHOULD BE FORWARDED TO: Valar Ventures LLC 915 Broadway, Suite 1101 New York, New York 10010 email: Confidential & Trade Secret EFTA00609494 VALAR vi Private Placement Memorandum TABLE OF CONTENTS 1. EXECUTIVE SUMMARY II. KEY PRINCIPAL TERMS 4 III. INVESTMENT STRATEGY S IV. PARTNERSHIP MANAGEMENT 11 V. INVESTMENT HISTORY 14 VI. FUND PERFORMANCE AND PORTFOLIO COMPANY PROFILES 15 VII. SUMMARY OF PRINCIPAL TERMS 16 VIII. CERTAIN RISK FACTORS 28 IX. CERTAIN TAX AND REGULATORY MATTERS 38 X. ADDITIONAL INFORMATION 49 APPENDIX A: LEGAL NOTICES A-I APPENDIX B: FUND COMPOSITION AND PERFORMANCE B-I APPENDIX C: PORTFOLIO COMPANY PROFILES C-I Confidential & Trade Secret EFTA00609495  VALAR 1 Private Placement Memorandum 1. EXECUTIVE SUMMARY Andrew McCormack, James Fitzgerald and Peter Thiel (the "Founding Partners") formed Valar Ventures (the "Firm" or "Valor") as a venture capital investment firm in 2010, with a mandate to find and fund high-growth, earlier-stage companies located in markets outside of Northern California where the top Silicon Valley-based venture firms historically have not focused. The Firm currently manages $200 million in capital commitments across all its funds and investment vehicles, and is currently investing out of Valar Global Fund 2, a $100 million fund that is more than 75% invested or reserved for follow-on investments in existing portfolio companies. Valar is now raising a larger institutional fund ("Fund 3", the "Fund" or the "Partnership") with targeted capital commitments of $200 million. The Fund is expected to emphasize Series A and Series B stage investments in high-growth technology companies based in first-world economies, with a focus on Europe, Canada, and the US (ex-Northem California), where Valar believes the growth opportunities are highest relative to the availability of smart capital (the "Strategy'). Since inception, Valar has generated significant returns for its investors, exceeding industry and general market benchmarks: Net Multiple Net IRR Valar Fund I 2.5x 41.0% Cambridge US Venture Capital Index (Top Quartile) 2.2x 36.1% Cambridge Global ex US Developed Markets PE/VC Index 1.5x 17.3% S&P 500 Total Return Index 1.9x 13.5% • - Numbers presented for Valar am as of 12/31/2015. - Valar Fund l" refers to all funds and investment vehicles managed by Valar Ventures Management LLC prior to the formation of Velar Global Fund 2, on an aggregate basis. Valar Fund 1 made its first investment on 10/28/2010. Valar Global Fund 2 made its first investment in March 2015 and all investments arc still held at cost. Numbers presented for the S&P 500 Total Return Index are gross results for the period 10/28/2010-1131/2015. The S&P 500 is a stock market index based on the market capitalizations of large, publicly traded companies, whereas Valar generally invests in earlier stage, privately held companies. Because final Cambridge data is not made available for several months after the end of a quarter, Valar has presented the most recent final data available for upper quartile vintage 2010 funds, which is as of 6/30/2015. Valar Ventures' figures are unaudited estimates incorporating all realized and unrealized gains/losses and were calculated by reducing gross profits by a flat 25% for hypothetical management fees, expenses and carry. Past performance may not be an indicator of future performance. Sources: Cambridge Associates; MarketWatch; Valar. Confidential & Trade Secret EFTA00609496 VALAR 2 Private Placement Memorandum Distinguishing Factors A. Performance As of December 31, 2015, Valar has deployed $133.9 million in the Strategy, with a gross asset value of $325.6 million, including realized and unrealized investment gains and losses. Valar Fund 1 (an aggregation of all funds and investments vehicle managed by Valar prior to the formation of Valar Fund 2) has a current gross multiple of 3.0x since October 2010, which, if treated as a single fund, would place its performance within the top echelon of all venture funds (as compared to both internationally or domestically focused funds) and one that has significantly outperformed common public market index references, such as the S&P 500.' Of the five major portfolio companies in Valar Fund 1, two (Xero and TransferWise) have already achieved valuations close to or in excess of a billion dollars. B. Team Dynamic & Experience The Founding Partners have a long, varied and successful working relationship — Andrew and Peter have been working together since PayPal in 2001, with James joining them at Clarium in 2008. Collectively they have structured and managed investments across a range of sectors and geographies through two major economic cycles. In addition to their investing experience, the Founding Partners have operational backgrounds — Andrew founded and ran a restaurant group, James served as General Counsel and COO of Thiel Capital LLC ("Thiel Capital") and Peter co-founded and was CEO of PayPal and is a co-founder and the chairman of Palantir. The Partnership will be managed by Andrew and James. All Fund investment decisions will be made with their unanimous consent, and Andrew and James together will constitute the investment committee of the Fund (the "Investment Committee"). While Peter is not a member of the Investment Committee and is not expected to be involved in the day-to-day management of the Firm, he is generally expected to be available to provide advice and counsel to Valar and its portfolio companies from time-to-time. In addition, in view of his status as a Founding Partner, Peter owns 20% of the General Partner and the Management Company and retains veto rights over certain activities of the General Partner, the Management Company and the Fund. Andrew and James have traveled the world and taken nearly all meetings together for close to five years now, looking for investment opportunities that are off the radar of Silicon Valley's top venture firms. Based on their intensive experience working together with entrepreneurs and portfolio companies on four continents, they have been able to iterate quickly and continuously refine the Strategy to optimize for the markets, stage of investment, founder attributes and firm structure with the highest potential for yielding outsized venture returns. C. Market/Stage Differentiation Venture capital as an asset class has performed well since 2010, a fact that has not been lost of the increasing numbers of investors allocating money to the space. Seed stage investment, on the one end of the capital stack, and later-stage/pre-IPO investment, on the other end, have been particularly popular, as smaller investors (including many new entrants to the market) seek to replicate the 1000x returns Composition of public market indices may not be comparable with composition of Valar's portfolio and past performance may not be an indicator of future performance. Confidential & Trade Secret EFTA00609497 VALAR 3 Private Placement Memorandum achieved by early investors in Facebook, Twitter, Uber, etc., and larger investors attempt to eke out modest returns in the current low interest rate environment by plowing money into later stage companies that are perceived (correctly or not) as largely de-risked. The space between these two extremes has not received as much attention, with Series A and Series B financing rounds (sub-$100 million valuations) in particular being less crowded. Moreover, the vast majority of venture investment continues to be focused on the United States (in particular, Northem California), China and India. By focusing on Series A and B stage investments outside of Northern California, China and India, Valar is operating in a segment of the market that remains significantly less crowded, and where valuations are consequently more attractive. In addition, while limited partners investing primarily through the top Silicon Valley-based venture firms may find themselves ultimately invested in many of the same underlying portfolio companies, in most cases Valar is the first US-based investor to invest in its portfolio companies, providing a segment of diversification to its investors. D. Reputation Valar and the Founding Partners enjoy a strong reputation as venture investors across the world and are particularly prominent in the US, Europe, Canada, Australia and New Zealand, where the Firm has made approximately 40 investments in 20 portfolio companies since 2010. Moreover, Peter is known worldwide in technology circles (and otherwise) and has been recognized repeatedly as one of the most successful venture capital investors in history, building on his first investments in PayPal and the very first outside investment in Facebook. The best founders understand the importance of receiving investment from the most reputable venture firms. As such, Valar's reputation drives extraordinary deal-flow at attractive prices to the Firm, as entrepreneurs compete to have access to Valar's experience and the imprimatur of its Founding Partners. Confidential & Trade Secret EFTA00609498  VALAR 4 Private Placement Memorandum II. KEY PRINCIPAL TERMS The following information is presented as a summary of certain of the Fund's key principal terms only and is qualified in its entirety by the more detailed information contained in "Section VII. Summary of Principal Terms" herein and by the Partnership Agreement, which will be circulated to investors prior to closing. To the extent that this summary conflicts with the Partnership Agreement, the Partnership Agreement will control. Target Size $200 million General Partner At least I% of fee-bearing capital Commitment Term 10 years, subject to two, one-year extensions at the General Partner's discretion and thereafter with the consent of a majority in interest of the Limited Partners Commitment Period 5 years Management Fee 2.5% of Limited Partners' capital commitments until the end of the Commitment Period; reduced thereafter by 0.1% annually, but not below 1.5% of the aggregate capital commitments of the Limited Partners Management Fee 100% of all directors, consulting, management services, transaction, Reduction advisory, break-up or broken deal fees Carried Interest Carried interest is not payable until 100% of capital contributions have been returned to the Partners, and thereafter will be 20% of net profits until the Fund distributes to each Limited Partner an amount equal to 300% of its capital commitment; thereafter 25% of net profits until the Fund distributes to each Limited Partner an amount equal to 600% of its capital commitment; thereafter 30% of net profits Clawback Yes, with a guaranty by each managing member of its share on a several, but not joint, basis Investment Committee / lames Fitzgerald and Andrew McCormack Key Persons No Fault Termination Yes, at any time by the election of eighty percent (80%) in interest of the Limited Partners Organizational Expenses Capped at $500,000 Confidential & Trade Secret EFTA00609499  VALAR 5 Private Placement Memorandum ill. INVESTMENT STRATEGY A. Core Strategy The Fund's core strategy is to use its strong brand and execution-oriented structure to invest in high- growth earlier-stage technology companies located in first world markets outside of Northern California. Stage: Valar's typical initial investment is generally sized at $5-$10 million in a company that has an enterprise (pre-money) value of between $20 and $100 million. Geography: Valar seeks to identify great companies that are founded in first world, developed economies outside of Northern California, where Valar believes the opportunity to build a globally significant technology company is high, while the competition from top-branded venture firms investing at the Series A and Series B stages is relatively low. For historical reasons, many of the most prestigious venture firms still remain largely focused on Silicon Valley and San Francisco. However, as a result of the powerful effects of Moore's Law, the information sharing culture of the startup ecosystem, and the operating leverage the Internet creates, an increasing share of the world's most valuable technology companies are being started outside of Northern California. Startup costs have fallen by orders of magnitude over the past 15 years, business and engineering talent is easier to find globally, knowledge is shared in real time, distribution channels are both more open and powerful and deal terms are increasingly standardized to Silicon Valley models. As long as the Internet remains open for business, Valar believes these tailwinds will continue. Examples of geographies Valar intends to focus on for investment in the Fund include: • Western Europe (e.g., UK, Ireland, Germany, France, Netherlands) • Northern Europe (e.g., Sweden, Finland, Denmark, Estonia) • North America (e.g., Canada, US (ex-Northern California)) Examples of geographies where Valar is open to inbound deal flow through its networks, but where it does not plan to travel extensively for the Fund: • Israel, Japan, South Korea, Singapore, Australia, New Zealand and Northern California Examples of geographies Valar does not intend to focus on for the Fund: • China, India, Russia, Brazil, Turkey, Africa, Latin America, the Middle East, Southeast Asia Investor Value Add: As noted above, the best founders understand the importance of receiving investment from the most reputable venture firms. Unlike public companies or even later-stage private firms, information about early-stage startup companies is not readily available. As a result, many of the key contributors to a startup's ultimate success (e.g., potential employees, prospective customers and downstream investors) rely heavily on the signaling effect that results from a company receiving investment from a highly respected investor. Setting this virtuous circle in motion is of paramount concern to early-stage founders, and is arguably the single most important "value add" a venture investor can offer. In that regard, the imprimatur of Valar choosing to invest in one company over others has significant and immediate reputational and branding benefits to the chosen company. Confidential & Trade Secret EFTA00609500 VALAR 6 Private Placement Memorandum Beyond that social proof, the Firm adds value initially by aligning the core terms of the company's governing documents towards growth and removing founder-unfriendly structures that constrain a startup's flexibility and growth. Post-investment, Valar practices a high-availability, low-touch style of working with founders; connecting management with the Firm's networks in the US and abroad and offering strategic advice and mentoring as needed. Valar receives and monitors all board materials and Andrew and James participate in most board meetings of the Firm's larger investments. B. Thesis The technology business worldwide is growing at an exponential rate as even the most offline industries and business verticals are being disrupted by the rapid adoption and continued evolution of Internet, cloud-based and mobile technologies. Valar believes that the best technology companies being founded outside of Northern California are mispriced due to their distance from Sand Hill Road and there is an opportunity for Valar to establish itself as the funder of first choice for the very best of these companies. The Firm believes that innovations in technology will fuel a rapidly increasing supply of massive companies in the geographies Valar is focused on, while the willingness and ability of the best venture brands in Silicon Valley to travel to access these opportunities is not growing at anywhere close to the same rate. The venture capital industry's bias toward investing in Silicon Valley - despite steeply rising US valuations and operating costs - creates compelling opportunities elsewhere, where competition for markets, employee talent, and funding is much lower. Within that universe of opportunities, Valar believes that its reputation affords it access to the best companies, access which serves as the primary driver of returns. These hypotheses rest on three beliefs: i. Silicon Valley Does Not Have A Monopoly On Entrepreneurial Talent Or Market Opportunities VC tends towards regional bias: the US in general and Silicon Valley in particular command the majority of venture capital funding and the common misconception is that Silicon Valley is not just the best place to look for start-up opportunities, but in many ways, the only good place to look. However, the rest of the world has become a much more fertile place for start-ups as the success of companies like Skype, Spotify, Zendesk, Atlassian, Shopify, Xero, TransferWise, Klama, HootSuite and others demonstrate. Moreover, the pool of talent abroad is deep — interestingly, many of the top founders in Silicon Valley are immigrants or children of immigrants, including Max Levchin (PayPal), Larry Page, Sergei Brim (Google), and Elon Musk (Testa, SpaceX). By investing abroad ahead of an entrepreneur's or company's arrival in the US, Valar believes it can operate in a context where industry bias against ex-Silicon Valley investment creates significant pricing opportunities. ii. Silicon Valley-Style Venture CapitalInvesting Adds Value To Non-Valley Start-Ups Valar believes that venture firms with Silicon Valley experience can add value to non-US start- ups in ways that local investors generally cannot: Confidential & Trade Secret EFTA00609501 VALAR 7 Private Placement Memorandum a. Large pools of capita!: Silicon Valley remains the single largest non-state source of start-up funding in the world and even smaller Valley-based funds are significantly larger than developing market funds (for example, NEA's most recent fund exceeds the stage-sponsored venture programs of most developed countries combined). Silicon Valley firms also have established syndication mechanisms in place to leverage their proprietary capital, including syndication directly to their limited partners. This dynamic has become especially important as the capital requirements of many startups have once again begun to rise. Valar's network in Silicon Valley and the US are valuable to companies looking for downstream capital. Indeed, the Firm's two largest investments from Fund I, Xero and TransferWise, recently received significant growth investments from Accel Partners and Andreessen Horowitz, two of the largest and most respected Silicon Valley venture firms. b. Patience: Silicon Valley investors are accustomed to longer liquidity cycles than regional financiers; Peter Thiel, in particular, has a record of well-rewarded patience: e.g., Palantir (which grew over ten years from a $35 million valuation to $20 billion); SpaceX (sub $300 million to over $10 billion in nine years); and Facebook (less than $10 million to nearly $300 billion in just over a decade). Valar has demonstrated a willingness to reinvest in its portfolio companies as they grow and the Firm's relative informational advantages compound: Xero is a notable example, with successive waves of investment by Valar reaping larger and faster returns. Reinvestment from the existing syndicate makes subsequent financings more efficient for portfolio companies, and Valar reaps the rewards of inside access and improved information. c. Founder-friendliness: Valar emphasizes founder-investor alignment, believing that it maximizes value for both parties. The concept of allowing companies a freer hand in their own development rather than imposing frequently value-destroying "adult supervision" has gained currency in Silicon Valley since its introduction by Peter Thiel's Founders Fund, but remains distinctly unorthodox in other tech hubs, especially outside the US, where investors insist on a variety of "private equity style" terms that the Silicon Valley investment community has come to realize are of generally negative utility (e.g., participation rights, highly restrictive spending oversight, routine vetoes, super pro rata rights, etc.). The Founding Partners' record of pioneering founder-friendly terms (both at Founders Fund and more recently through Valar Ventures) is both a competitive advantage in sourcing deals and a value- creating mechanism post-investment. d. Experience: The pool of venture investors with long, significant and successful track records outside Silicon Valley — especially coupled with prior operational experience — is not deep. Valar brings Founding Partners who not only have an excellent track record as investors but who have operational experience in a variety of sectors. e. Brand: The US is, and for the foreseeable future is expected to remain, the largest unitary, sovereign market for new goods and services and is thus important to many companies founded outside the US. Large corporate partners, investment banks, Confidential & Trade Secret EFTA00609502 VALAR 8 Private Placement Memorandum potential acquirers and other US counterparties tend to be somewhat parochial in their approach and rely on their impression of the venture capitalist's brand when making decisions. In addition to credibility based on Valar's own top-tier performance, Peter Thiel enjoys a reputation as one of the most successful venture capitalists in history. iii. Only Top Its Produce Excess Returns Because Only Top VCs Have Access To The Best Deals Industry data suggest that only the top quartile of venture capital firms produce significant excess returns and that these returns tend to persist over the lifetime of a fum's core partnership as reputational assets and experience produce self-reinforcing effects. Because top venture capitalists can arrogate the best opportunities to themselves on the basis of reputation (as the best deals tend not to be price-competitive, but driven by interpersonal and philosophical compatibility between venture capitalists and founders), venture capital firms try to minimize transactional costs when doing deals. In practice, this means that most top tier venture capitalists invest near Silicon Valley and thus the best venture capital brands — which create the most value for the companies in which they invest — have less incentive to operate outside of Silicon Valley. Furthermore, because private equity investing is not a readily scalable discipline, efforts to extend venture capital culture and brands via country-specific managers or satellite offices have not been notably successful, providing additional reasons for most venture capital firms to invest in companies founded closer to their Sand Hill Road homes. This creates a vacuum that Valar, with a primary emphasis on non-Valley investing, but with strong Silicon Valley connections, occupies. C. Deal Flow Sources of deal flow include: i. Reputation Valar and its Founding Partners already enjoy a strong reputation as venture investors in the geographies they have operated in, particularly in the UK, Germany, New Zealand and Canada, where the Firm has made significant investments, and increasingly in other parts of Europe and the US, where Andrew and James have spent significant time but have not yet invested. In addition, Peter's brand is highly visible and affords the team access to entrepreneurs globally. ii. Local connections Valar seeks to develop deep relationships with local entrepreneurs and investors in the core cities in which it operates. Most of the major capitals of Europe (e.g., London, Berlin, Stockholm, Paris, Amsterdam), as well as the largest cities in North America outside of Northern California (e.g., New York, Toronto, Montreal) have fairly well established accelerator programs, angel investors and seed-stage investing communities. In particular, seed-stage venture firms that are not positioned to be lifecycle investors are attractive local partners for Valar, as those firms tend to be highly incented to share their best deal flow with deeper pocketed US venture funds that can provide Series A, B and later financing to their portfolio companies. These relationships serve to channel deals to Valar as the investor of first choice when companies are looking to raise new financing rounds. Confidential & Trade Secret EFTA00609503 VALAR 9 Private Placement Memorandum iii. "It's a series of tubes" The Internet, it turns out, is a powerful source of information sharing, and the past few years have seen an explosion of technology-focused news outlets, blogs and daily email circulars surfacing even the earliest and geographically most remote of startup financings. Because Valar is not generally the first money invested in a company, and because the best entrepreneurs are often highly attuned to building their online presence early, Valar can identify and monitor startups, even in distant geographies, before they reach an appropriate stage of investment for the Fund. Valar has recently added two associates to the investment team, among other things, in order to more systematically track companies identified through its in-house research. Once a potential portfolio company is identified, Valar can use its local networks in the relevant market to obtain an introduction, or directly contact the company's management team, relying on the Firm's global reputation to access to the best companies. iv. Pre-existing relationships The Founding Partners already have considerable deal flow from their prior investments and related networks (including the "PayPal mafia" and their other relationships developed while working with Peter Thiel over the past decade). These relationships have historically yielded high quality deal flow (e.g., Max Levchin was an early investor in London-based TransferWise and helped introduce Valar to TransferWise's founders). D. Diligence The Fund expects to undertake its own diligence for most investments. As seasoned investors and operators, the Founding Partners believe they can conduct most diligence in-house. In certain cases, the Fund may employ outside experts to assess matters specific to a given investment and legal diligence may be sourced to the Fund's outside counsels. The Fund's level of diligence is expected to correspond to the relative importance of a given investment to the portfolio and Valar's previous experience with the entrepreneur, and may range from brief (in cases where an investment is small or the entrepreneur or market are well known to the team) to extensive (in the case of larger, more complex investments). The Fund can also utilize the diverse talents of its advisory board to assist with diligence. E. Portfolio Construction On a capital-deployed basis, Valar intends to run a relatively concentrated portfolio, continuing to support successful companies in subsequent rounds. Subject to the availability of strong opportunities — which does not, given the Firm's current deal flow, appear to be a major constraining risk - Valar expects to complete primary capital deployment within two to three years of the Fund's close. Valar intends to reserve capital for initial follow-on investments in Fund portfolio companies, although later follow-on investments, including those at significantly higher valuations, may be made by separate co-investment vehicles or subsequent funds. Valar also intends to increase invested capital, measured as a percent of the Fund's overall Capital Commitments, by recycling investment proceeds where available (a practice sometimes referred to as Confidential & Trade Secret EFTA00609504 VALAR 10 Private Placement Memorandum "recycling fees"). Valar believes this strategy will be beneficial for Fund investors by helping converge net and gross performance of the Fund. Confidential & Trade Secret EFTA00609505  VALAR I1 Private Placement Memorandum IV. PARTNERSHIP MANAGEMENT A. Voting Process and Control The Partnership will be managed by Andrew and James with Peter providing advice and counsel from time-to-time as appropriate. Investment decisions will be made with the unanimous consent of James and Andrew (the "Investment Committee"). If either James or Andrew is affected by a conflict of interest, the additional consent of the Fund's Advisory Board regarding the proposed transaction will be sought. The General Partner anticipates appointing an advisory board of three to five members, to be selected in its discretion following the closing of the Fun