What VC’s are Looking For:�Inside the Primordial Investor Brain

Framing

A great pitch to an investor is an �authentic, �highly compelling, �well-supported �story

Set Up & Storytelling�Your story should start with an anchor�that the investor agrees with�and then build logically step by step�and lead to the inevitable answer that�your company is the answer to a big opportunity�

The Narrative Must Be �Simple, Logical, and Clear��(Should Feel Obvious/Inevitable)��You must be able to talk through your �deck using 1-2 sentences for each slide�to tell your inevitable narrative

Top Level Criteria

Inside the Primordial VC Brain

1.) Can they create a lot of value?

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2.) Can they capture a lot of value/make money?

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3.) Can they execute?

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4.) Can I (The VC) make my target return?

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More Detailed Criteria

What are VC’s looking for?

#1: Best Team in the World

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#2: Big and Timely Opportunity: Market Size, Impact Potential, White Space, Megatrends

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#3: Third Party Validation: Are serious people taking this company seriously?

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#4: Technology/Solution Entitlement: In best case, can this achieve required specs for very widespread adoption?

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#5: Competition: Best company/solution in the space?

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What are VC’s looking for?

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#6: Defensibility: Can this company maintain a competitive advantage after

this actually works?

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#7: Business Model: Does this company have a business model that will

allow it to sustainably capture a large portion of the

value it creates?

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#8: Execution Plan/Go-to-Market Strategy:

Do they have a good game plan for executing the company? Right team to execute?

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#9: Financial Return Potential: How can I make 10x in ~10 years or less?

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Investor Question #1:�“Is this thing worth spending�some time on?”

#1: Best Team in the World

• Investors expect you to be, or to intend to build, the best team in the world to address the problem you are working on. Not best people you know, the best people in the world. Think big.

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• Investors like to back people with a track record of success

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• Investors are looking for “signaling” that you are a great team (e.g. top university, top companies, top people know you)

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• Build a world-class Advisory Board covering all of your key challenge areas

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We have built a team and partnerships from the best of shale innovation and geothermal development.

F e r v o E n e r g y 2 0 1 9 . C o n t e n t i s c o n f i d e n t i a l .

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ADVISORY BOARD

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Doug Hollett

Former Director, Geothermal

Technology Office

Richard Chow

Former CEO, Thermasource

Ann Roberston-Tait

BD Manager, GeothermEx

Dave Watson

Former CEO, EnergySource

Dan Reicher

Director, Steyer-Taylor Center,

Stanford University

Dr. Roland Horne

Director, Geothermal Program,

Stanford University

Christian Gradl

Completions Manager, Hess

Dr. Vik Rao

Former CTO, Halliburton

Dr. Mark McClure

CEO, ResFrac

Dr. Ernie Majer

Senior Geophysicist, LBNL

T EA M

#2: Big and Timely Opportunity

• Is this a credible Multi Billion Dollar opportunity?
• Why is it specifically an opportunity now? vs something that’s always been an opportunity, but no one has been able to solve
• Takes advantage of fast moving or recently arrived megatrend?
• Major new technological breakthrough?

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SHALE O&G HAS DRIVEN RAPID INNOVATION

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Less proppant (frac sand) concentration 500 lb per ft

Low frac stage count (8) and loose spacing

between stages

Horizontal US shale well with a short lateral 5,000ft

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400

600

800

1000

1200

1400

1600

Shale Productivity

Productivity

2008 2018

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2009

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2019

Further higher proppant concentration 2500 lb per ft

Further higher frac stage count

(100) and further tighter spacing

Further longer lateral 13,000ft

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Higher proppant concentration 1500 lb per ft

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Longer lateral 7,000 ft

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Higher frac stage count

(27) and tighter spacing

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2014

T EC H N O LO GY CO N T E X T

A NEW APPROACH TO EGS

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Traditional EGS is a vertical, single zone approach.

Fervo Energy EGS is a new, MMS based design.

Reservoir contact – 10X

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Multi-zone – 10X

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Targeted – tight flow control

Sustainable propping – proven approach Consistent – no more “drill and pray”

Advantages-

T EC H N O LO GY CO N T E X T

Why hasn’t the incredible innovation progress of the Shale Revolution led to breakthroughs in EGS?

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THE MMS BREAKTHROUGH

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T EC H N O LO GY CO N T E X T

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Mixed-Mechanism Stimulation uses both natural fractures and new fractures to dramatically improve performance in EGS.

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This is a radical departure from every EGS project to date.

For decades, EGS projects have been designed using only shear stimulation, ignoring the necessity of new fractures for effective enhancement.

#3: Third Party Validation

• Quotes from leading people and companies validating the market opportunity, urgent customer need, the uniqueness and value of the solution.
• Advisors who have signed on to be involved with company
• A customer taking you seriously, spending time with you, showing interest in signing a deal…

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“There is effectively zero operational risk in extrapolating the results of the Proof of Concept field trials to the full-scale commercial pilot.” – Dr. Vik Rao, Former CTO, Halliburton

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OUR COLLABORATION PARTNERS

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Geology and Seismic

Top geothermal research institution.

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Geomechanics

Top university in geomechanics and geothermal.

Tools and Services

Largest global oil field service provider.

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Operations

Leading European enhanced geothermal systems developer.

We have established formal partnerships with the leading global research and industry geothermal entities.

GLOBAL PARTNERSHIP

Big Win #1:�“Wow, this really is a great team going �after a big and timely opportunity.��This is worth spending time on.”

Next Question:�“But do they have a solution that actually solves the problem? And are they the best team with the best solution?�

#4: Technology/Solution Entitlement

• What are the quantitative specs that the solution must achieve to be adopted at scale? (table)
• What is the best realistic performance the solution can achieve in the long run?
• TEA
• Are these specs realistically achievable?
• Due diligence with experts

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#5: Competition

• Is this solution better than continued improvements in the incumbent solution?
• Is this solution better than other emerging solutions/companies?
• Usually you show a table or x-y plot that shows you are the best solution on the key performance parameters
• You need to tell a story in which you are the best solution

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Big Win #2:�“They definitely have a solution that has a real shot at hitting the required specs for the big target use case & they have the best solution out there.”�(Create Value)

Next Question:�“But can they make money?”�

#6: Defensibility

• Can the company be profitable on a sustained basis once the solution is recognized by others to work and be profitable?
• What are the factors that enable defensibility of market share and margin?

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#7: Business Model

• How does the company make money?
• Does the company have a business model that allows it to sustainably capture as much of the value it creates as possible? (profit margin, return on capital)
• Does the company have an optimal business model to providing me (investor) with the highest risk-adjusted return potential?

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• Calculus:
• Raise a lot of money, get a lot of profit, own less of a big thing?
• Raise little money, get a medium amount of profit, own more of a small thing?

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Big Win #3:�“I think they can make a lot of money on a sustained basis.”�(Capture Value)

Next Question:�“But can they execute?”�

#8: Execution Plan/Go-to-Market

• Do they have a well-defined and achievable plan for building out the business step-by-step?
• Do they know how much money they need and for what?
• Do they have the right people to successfully execute on the plan, or the plan/ability to get the right people at the right time

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DERISKING ROADMAP

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Phase 0 Phase 1 Phase 2 Phase 3

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Desktop Validation Field Demonstration Commercial Pilot Scale

VA L I DATI O N ROA D M A P

Technical feasibility and full system advanced simulation.

Completed 2018.

Stimulation technology validated at the field level.

2019 trials in prep.

Multi-well commercial validation, including drilling.

Executed 2020.

Scale results to multiple geologies and locations.

2021 and beyond.

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100

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Technology Validation Level

#1: Best Team in the World

• Right team to execute all elements of the plan?

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• Or at least understand what kinds of people they will need to bring in when to successfully execute?

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ADVISORY BOARD

F e r v o E n e r g y 2 0 1 9 . C o n t e n t i s c o n f i d e n t i a l .

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Doug Hollett

Former Director, Geothermal

Technology Office

Richard Chow

Former CEO, Thermasource

Ann Roberston-Tait

BD Manager, GeothermEx

Dave Watson

Former CEO, EnergySource

Dan Reicher

Director, Steyer-Taylor Center,

Stanford University

Dr. Roland Horne

Director, Geothermal Program,

Stanford University

Christian Gradl

Completions Manager, Hess

Dr. Vik Rao

Former CTO, Halliburton

Dr. Mark McClure

CEO, ResFrac

Dr. Ernie Majer

Senior Geophysicist, LBNL

T EA M

Big Win #4:�“I think this is an awesome company that is going to win big.”

Next Question:�“But can I (the VC) make money?”��(3x-5x+ Cash-on-Cash Fund Return,�10x+ possible for every investment)�

#9: Financial Return �(Can I make 10x in 10 years)

Company Exit Value

• How valuable will the company be 10 years from now?
• Projected Financials in Year 10 (Revenue, EBITDA)
• Company Value = Multiple of Profit or Revenue (use comparable public companies, acquisitions)
• Year 10 Value = Discounted Value in Year 10 of Projected Future Cash Flows
• Discounted Cash Flow (DCF) of Years 11-20 using 10% Discount Rate
• Asset Valuation
• How will the company become liquid 10 years from now? “Exit”: IPO, acquisition
• How valuable are/were analogous companies?
• When will the company “Exit”?

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#9: Financial Return �(Can I make 10x in 10 years)

What % of Company Will I Own?

• How much outside capital will the company have to raise up to Exit?
• How much raised by round and at what valuation?
• How much money will I invest in each round?

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Exit Valuation: Comparables/Multiples

Exit Valuation: ~10-20x EBITDA

(e.g. $1B company value = $50M-$100M EBITDA)

VC Financing Definitions

• Series A - Pre-Money Valuation: $20M
• Series A - Investment: $10M
• Series A - Post-Money Valuation: $30M ($20M+$10M)

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• New Investors own: $10M/$30M = 33%
• Existing Owners own: $20M/$30M = 67%

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Total Owned:

16.8%

for

$27M invested

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Company Exit: $1.5B

BEV Return = $252M (16.8%)

BEV Exit Multiple = $252M / $27M = 9.3x

Wrap Up

A great pitch to an investor is an �authentic, �highly compelling, �well-supported �story

Set Up & Storytelling�Your story should start with an anchor�that the investor will accept�and then build logically step by step�and lead to the inevitable answer that�your company is the answer to a big opportunity�