Useful Capital Strategy Options for 2015 and Beyond

Solving the Value Equation
www.ephorgroup.com ©Copyright 2015 Ephor Group, LLC. All Rights Reserved. 2
When considering expansion, this is what you need to know:
Strategic Alternatives
Strategic Communities
State Government Initiatives, Programs
M&A Forecast & Valuations Forecast
Founder Financing Recapitalization Options
Financing Unit Economics
Growth Capital Options
Global Expansion
Distribution Channel Partners
Workforce Competencies
Workforce Labor Supply
Local Tax Rules & Implications
Labor Costs Market Analysis
Job & Local Community Contacts
Industry Macroeconomic Factors
Human Capital Supply Chain
Corporate Development Options
Business Development Resources
For a detailed overview of your growth options, contact Ephor
bedard@ephorgroup.com
214.702.6427
24 E. Greenway Plaza, Ste. 400
Houston, TX 77046
www.ephorgroup.com
What Do I Need
To Know To
Expand & Why?

Founder Friendly Capital Financing
Options for Growth, Restructuring and Succession from Ephor Group partners.
What is your plan?
After a decade at Ephor Group, advising entrepreneurs and the institutional investment community on
their business models and capital deployment strategies, I've come to the realization that the
development of the company founders and leaders “skill sets” is the most important factor.
Additionally it is well known that the institutional investment community has come to the same
realization especially in technology enabled and labor intensive service businesses. Simply stated
technology-enabled, asset light services businesses are “perform” oriented business and thus strategic
leadership and strategic management are a prerequisite for wealth creation.
As I am sure you have come to realize and observe, the ability to create growth and a good business does
not necessarily coincide with the creation of wealth for its leaders. It requires a highly planned and
executed business strategy, coupled with a knowledgeable and experienced skill set, and “useful capital”.
Did you know that there is a 90% failure rate for lower middle market companies who get stuck when
management decides to make it a lifestyle company versus an institutional business? Since the
recession of 2008/2009 there are a plethora of middle market emerging technology service businesses
which face the decision of planning for a lifestyle company or to become an institutional business.
What is your plan to create wealth?
¾ A Pattern of Consolidation. Industry in America as a
whole is undergoing significant consolidation as leaders turn
to inorganic growth to boost revenue and expand
geographic footprints. Leaders are doing both: building
their distribution footprint and portfolio to improve market
share and strengthening their operational capabilities with
presence in lower cost areas. M&A activity in the coming
year will depend on a number of factors, including the slow
growth economic conditions. Gradual improvements in
economic conditions and stable debt markets should help
sustain growth in the overall M&A market, although economic uncertainty will dampen global
consolidations. With interest rates at historic lows and companies looking for revenue growth

opportunities, acquisitions are a natural avenue to bolster market share, build out brands and fuel
longer-term strategic initiatives. Uncertain economic growth means greater competition for market
share, greater focus on retaining customers. It's a " Buyer's Market" and a diversified portfolio
is key to serving the maximum number of customers.
¾ The majority of market leaders have invested in knowledge-based employee teams. This works
well with the overall trend of creating talent pools of junior and senior teams with increased focus
on customer-centric, value-add, knowledge-oriented analytical services.
¾ Founders whom can manage the company beyond its startup and growth phase to successfully
maximize the market opportunity have numerous capital financing options to recapitalize the
business. Founders ready to recap &/or restructure can position the business for the long-term (either to
become the sector or regional market share leader)3
, and financing can create wealth for founders, staff a
talented team, and ensure a strategy for the long-term.
It’s an old but true cliché: Business is either growing or dying. The challenge of positioning your company for long-
term success requires long-term fiscal responsibility coupled with capable leadership. The definition of success
is creating the best business model in your sector which includes at a minimum a unique portfolio of
products/services, the best performing workforce, and the best leadership team.
For more information contact us: bedard[at]ephorgroup.com
3
Recapitalization structured investments typically combine both a debt term loan and equity component with the lending
amount equivalent to EBITDA. Recap lenders currently seeking double digit returns.
Ephor Group, founded in 2002, is a strategic advisory firm exclusively focused on creating technology
service sector leaders. Since its inception, the firm has provided outsourced corporate development services
and growth capital acquisition advisory services. This set of capabilities and expertise has resulted in
approximately 5,500 new jobs created over the past decade.

Entrepreneur Useful Capital Strategies for 2015 and Beyond
Historically growth capital was only available to early stage startups via venture capital. Sources of
capital for growing companies was limited to angel investors, startup lending, and personal guarantees.
But today, both family office investments and structured debt and equity instruments have become
available to entrepreneurs. These entrepreneur friendly useful capital sources are bridging the gap
for companies looking to jump the chasm from a small and medium sized business to a market
leading enterprise.
And jumping the chasm creates the opportunity for wealth creation for founders that is not readily
available via other financing instruments.
The Availability of Useful Capital
For startups driven by innovative founders venture capital can be the perfect marriage of funding coupled
with ongoing management support necessary to transform the company into a market leader. But for
most entrepreneurs venture capital (VC) is simply not available as the company focus is too narrow1
as
annually there are 300,000 new businesses created in the USA, but only 600 companies receive venture
capital funding. For most businesses venture capital is simply not available.
1
See Exhibit A1 and Exhibit A2
Entrepreneur Useful Capital is a flexible investment loan that preserves equity.

The Importance of Scale on Enterprise Value
There exists large pools of un-invested capital in
the United States (>$4B) and abroad which are
seeking the safe investment returns of growth
capital. Companies that qualify for growth
capital instruments have a low risk of failure
and above market growth.
For entrepreneurs, the value of their business
significantly jumps from a subscale valuation to
scaled enterprise valuation as they cross the
chasm from a single location, product, or
customer segment to national or global
enterprise.
For software, outsourcing, and technology-
enabled businesses valuation multiples increase
with size and scale.
[Contact bedard@ephorgroup.com for a list of Market Comparables Valuations for your business]
Creating Wealth Through Growth
Did you know that from 1995 to 2009, funded
capital backed companies grew sales by
133%, while the average United States company
only grew sales by 28%2
?
Growth capital is required to scale business
operations, to pay for the transition from a small
subscale company to a large scaled enterprise, and
to create wealth for founders.
2
Capital backed companies grew jobs by 82%, while all other companies in the U.S. economy grew jobs by 12%.
These emerging companies are incredibly important to the economy as they represent well over 4X the average American
company’s sales growth and nearly seven (7) times their new job growth.
"Growth capital, whether for market
expansion, to consolidate, or to create
a market leader is an opportunity to
create wealth for founders."

Founder Friendly Capital
www.EphorGroup.com | 24 E. Greenway Plaza Suite 440 Houston, TX 77046 | 1
Founder Friendly Capital Strategies
While private equity growth and mezzanine capital is readily available for large, profitable
enterprises; venture capital is focused on a narrow segment of industry sectors1
.
Alternatively, "Founder Friendly Capital" bridges the gap for companies looking to jump the chasm
from a small business with limited financing options to a market leader. And jumping the chasm
creates the opportunity for wealth creation for founders that is not readily available via other
financing instruments.
Summary: Private Company Capital Financing Options: Debt Risk
with Equity Returns: An Attractive Financing Structure for Growth
Oriented Companies
 Capital appreciation through public equities, public bonds, and private equity are limited in
desirability by yield, risk, illiquidity, fee structures, and availability.
 Annually in the U.S. over 100,000 private companies have $5M-$15M in revenue, are
profitable (>$1M EBITDA), and have a CAGR >15%.
 Ephor Group's team has a 10-year track record of creating proprietary deal flow (identifying,
qualifying, and engaging desirable companies) in asset-light technology enabled business
services markets that seek growth capital, and do not have investment bank representation.
Creating Wealth by Overcoming the Chasm and Growing to
Scale
Did you know that from 1995 to 2009, privately funded capital backed companies grew sales by
133%, while the average United States company grew sales by 28%2
?
Clearly capital is needed for growth. The problem is it takes a lot to transition from a small
subscale company to a large scaled company. These emerging fast-growth companies are
incredibly important to our
economy as they represent
greater than 4x times the
average American company’s
sales growth and nearly 7x
times their new job growth. For
founders that want to create
wealth for themselves and their
employees and not only their
investors they must choose a
capital funding solution which
preserves equity as they grow.
1
life and bio sciences, high tech and software, and energy.
2
Capital backed companies grew jobs by 82%, while all other companies in the U.S. economy grew jobs by 12%. Source:
GrowthEconomy.org
Founder friendly capital is a flexible investment loan that preserves equity.

Private Investor Options
Private investors achieve capital
appreciation through four primary areas:
public equities, public bonds (debt),
manager-directed private investments
(i.e. private equity, venture capital,
mezzanine debt), and self-directed private
investments (i.e. “angel”). Below are
relevant performance data since 2000.
S&P 500: 1.5% (Avg Ann Growth)
U.S. Bonds: 6.5% (Avg Ann Growth)
Venture Capital: 2.0% (pooled, end-to-
end) / 0.33x (pooled, cash on cash)
Private Equity: 11.4% (Avg Ann IRR) /
0.25x (pooled, cash on cash)
Private Debt: No U.S. data available
Options for Investing in Private
Companies
Professionally managed funds for
investment in private companies – venture
capital (VC) and private equity (PE) – are
most alluring for the possibility of
unlimited returns. Over the last 15 years,
>50% of VC funds have a negative IRR,
and as an industry, venture capital has
invested more cash than it has returned.
Without the top 25 realized investments
out of >20,000 in that time period, the VC
industry as a whole would have a negative
IRR.
As noted in the performance data, >60%
of return values used for IRR calculations
for active funds over the last 13 years are
comprised of still illiquid assets with
“mark-to-market” valuations. While a
desirable final cash return is possible, the
illiquidity and exit risks are unfavorable to
investors.
Data on U.S. private mezzanine debt fund
performance is largely unavailable.
European fund performance, for which
there are data, is not complete. It is
based primarily on large leveraged
buyouts (“LBO”), with >75% of returns
based on illiquid “mark-to-market” asset
valuations.

Private Company Market Overview
According to the latest data by the U.S.
Census Bureau, there are approximately
6.05 million companies with employees.
94% of companies (≈5.7M) generate
<$5M in annual sales. While most of
these companies do not receive equity
financing and “bootstrap” growth through
operating cash flow or personally
guaranteed debt via bank loans or credit
cards, a robust market of capital providers
exists to serve this market in the form of
VCs and angels. Annually, approximately
60,000 of these companies receive $20
billion of new capital from 250,000 angel
investors. Another 2,500 of these
companies receive $20B of new capital
from 750 VCs every year.
2-3% of U.S. companies (≈135K)
generate >$15M in annual sales. 500 of
these companies receive $50B of capital
from 2,800 PE, mezzanine, and buyout
firms annually. The remaining companies
are eligible for commercial lending
instruments.
4% of companies (≈237K) generate $5M-
$15M in annual sales. Private and public
financing institutions do not focus on this
segment. The primary sources of capital
for these companies are operating cash
flow and personally guaranteed debt.
These companies are “too big” for VCs and
angels, and “too small” for PE, mezzanine
debt, and commercial banks.

Characteristics of Desirable Private
Companies
The following company characteristics are
“desirable” for private capital investors:
 Meaningful revenue (i.e. >$5M)
 Profitable with high gross margins
 Past and projected growth (>15%
CAGR)
 Majority management/founder-owned
 Not represented by an investment bank
 Investment desired is structured to
align interests of owners and investors
 Participate in a market segment that is
robust enough to accommodate growth
and value
These characteristics maximize the
following favorable investment attributes:
 Low risk – statistically less likely to go
out of business or lose money
 Maximal return – highest valuation
multiples, greatest growth potential
 Greatest liquidity – a competitive
market segment maximizes M&A and
IPO possibilities
Where are Desirable Private
Companies?
The greatest number and density of
desirable private companies exist in the
$5-$15M revenue range. This is due to
two primary factors:
Size: Businesses that are <$5M are high
risk; >70% fail via insolvency, and >90%
of the remainder never exceed $5M in
revenue. Businesses that are >$15M
require a) more capital to execute growth
plans, and b) have higher prices due to
size and competition – a large market of
financial sponsors exist specifically to
allocate capital to the larger companies.
Businesses $5M-$15M are big enough to
have a low failure rate (<15%) and small
enough to have a high growth rate.
Markets: Companies $5-$15M in revenue
must have large enough markets to
support their business and competitors,
but still have room for growth. <$5M
companies can exist in niche markets
perpetually, and >$15M companies do not
have as much room for growth, even if
they are in robust markets.

Ephor Group Introduction
Ephor Group | www.ephorgroup.com | 24 Greenway Plaza Suite 440 | Houston, TX 77046
Are you at your
maximum value?
We help sector leaders become
market leaders via the
methodologies created by Garry E.
Meier and his associates over the
last thirty-two years.
About Our Name: Ephor
Ephors were supervisors of ancient
Sparta who swore to uphold the
rule, preside over meetings of the
council and assembly, and provide
expertise and counsel to the king.
Ephors were responsible for the
execution of all decrees.
About Ephor Group, LLC
Ephor Group's mission is to provide
the resources required to enable
entrepreneurs to achieve their
shareholder wealth objectives.
Founded in 2002, Ephor Group has
deployed approximately $450M of
capital on behalf of institutional
investors and for our own portfolio,
representing 19 companies,
resulting in creating nearly $2B in
shareholder value.
functional expertise, intellectual
capital
“Creating value is the
alignment of all
stakeholders with the
effective combination of
strategic initiatives and day-
to-day execution.” –- Garry E.
Meier, Ephor Group Chairman.
Top Ten Reasons to Work with Ephor
1. Our mission is to create wealth for our clients.
2. Our value is that we increases earnings, refine business
models, implements sustainable long-term infrastructure,
and create strategic alternatives for value realization.
3. Our people are industry experienced, results-oriented
former owners and operators of businesses with c-level
experience, multi-functional, backgrounds, and extensive
technology and service industry experience.
4. Our philosophy is holistic, metrics driven, accountability
based, and in alignment with the objectives of Board of
Directors, institutional investors, and capital markets.
5. Our approach develops organizations wherever they are
situated in their business lifecycle - with an advisory scope
that covers operating support to strategic positioning.
6. Our capabilities include full spectrum scope of services
with expertise in operational improvement, change
management, market development, capital sourcing and
financial structuring, and strategic planning.
7. Our approach is pragmatic and performance based. We
fill-in the gaps for functional resources and capital that are
not internally available.
8. Our objective is to create wealth for all stakeholders by
creating market leaders.
9. Our track record to date includes having created over $2B
in shareholder value as well as leading numerous
companies from early stage development to emerging
growth to exit.
10.Our process initiates with a pragmatic assessment of your
business which includes a roadmap for improvement.

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Use of Information
The contents of this document are provided to you for general information only and should not be used as a recommendation or
basis for making any specific investment, business or commercial decision. These pages should not be construed as a
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investment products, mentioned herein, or, in any jurisdiction to any person to whom it is unlawful to make such an invitation or
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arising whether directly or indirectly as a result of you acting based on this information. All Limited Partner commitments must be
made via fund subscription agreements. You should read the subscription agreements before deciding to subscribe for units in the
respective fund. A copy of the agreements can be obtained from Ephor. Investments are subject to investment risks including the
possible loss of the principal amount invested. The value of the units in any fund and the income from them may fall as well as rise.
If the investment is denominated in a foreign currency, factors including but not limited to changes in exchange rates may have an
adverse effect on the value, price or income of an investment. Past performance figures as well as any projection or forecast used
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contained in these pages is not intended to provide professional advice and should not be relied upon in that regard. It also does
not have any regard to your specific investment objective, financial situation and any of your particular needs. You may wish to
obtain advice from a qualified financial adviser, pursuant to a separate engagement, before making a commitment to purchase any
of the investment products mentioned herein. In the event that you choose not to obtain advice from a qualified financial adviser,
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The contents of this document, including these terms and conditions, are subject to change and may be modified, deleted or
replaced from time to time and at any time at the sole and absolute discretion of Ephor.
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www.ephorgroup.com 1 ©Copyright 2015 Ephor Group, LLC. All Rights Reserved.
For an introduction of the options in your sector, contact Ephor
bedard@ephorgroup.com
214.702.6427
24 E. Greenway Plaza, Ste. 400
Houston, TX 77046
www.ephorgroup.com
What Are My Best
Growth Strategy
Options?

Useful Capital Strategy Options for 2015 and Beyond

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