HALL OPPORTUNITY FUND 1...Jul 17, 2020 · Grant Prideco EXIT: 2005 Electromechanical drilling...

PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 FOR INSTITUTIONAL USE ONLY

PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 3

Table Of Contents

HALL FAMILY

II HALL VENTURE PARTNERS

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OPPORTUNITY FUND 1 III

APPENDIXIV

EXECUTIVE SUMMARYA

PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 FOR INSTITUTIONAL USE ONLY

PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1

Executive Summary An exclusive opportunity to partner with Hall Labs, leveraging a proven process to identify, patent, incubate, co‐invest and accelerate industry changing technology companies. This strategic co‐invest blueprint has resulted in a track record of 7.9x return (112% IRR) over the past 20 years. In addition, The fund qualifies for tax advantaged investment incentives created through the Qualified Opportunity Zone program, a dedicated growth VC fund.

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OPPORTUNITY FUND 1

Early growth companies identified through Hall Labs Incubation on a state‐of‐the‐art innovation campus in Provo, Utah located within an Opportunity Zone.

Companies currently at an inflection point, leveraging a shared services model to best extract IP value and accelerate company growth.

Evaluation criteria established to specify key factors to invest in companies best positioned for growth and exit potential. Through this vetting process there are 8 target portfolio companies and 5 current investments.

HALL VENTURE PARTNERS

A multifaceted management team combining financial expertise with world class operators and entrepreneurs.

Management is responsible for over $6B in transactions, across multiple portfolios and sectors, including with The Carlyle Group, General Electric and some of the worlds leading family offices.

Directly aligned with LP's through investment by managing partners and affiliates of $10M (10%) on the same terms.

HALL FAMILY

A 60+ year legacy of innovation, utilizing proprietary IP and a process‐driven infrastructure to unlock company value, leading to over $650M in lifetime exits.

Over the past 20 years, the Hall family and its strategic co‐investors have invested over $40M into Hall Lab’s portfolio companies which has produced $317M of successful exits (7.9x ROIC).

Located on a 200+ acre innovation campus, with an experienced management team and staff harnessing expertise in various sectors, stages and sizes of innovation, IP generation and successful exits.

FOR INSTITUTIONAL USE ONLY


Hall Family Timeline:

1978First PCD for drilling

1955H. Tracy Hall invents belt apparatus and man‐made diamond while at GE

1960H. Tracy Hall invents cubic press and polycrystalline diamond (PCD)

1980Network communications

2008Medical toilet and radio technology

2013Smart garage and smart home technology

2018New method for effective heating and cooling

2015Advanced automotive sensing

2010Autocycle

2000‐2005Intelligent drill pipe, steering and sensors

60+ years' proven track record of experience in technology and innovation. Unlocking company value with more than 1,000 patents filed and multiple company exits with combined lifetime value of $650M+.

1955The Beginning

1956 ‐ 1985The Diamond Age

1986 ‐ 2005Building on Strengths Beyond Materials Science

2006 – 2015 The Golden Age

2015 – 2019 The Art of InnovationCommercialization across multiple portfolio companies

ERAS

EXITS

INNOVATIONS

1985 Exit

2010Exit

2005Exit

2012Exit

2015Exit

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2000 Exit


2019Exit

Past performance is not a guarantee of future results.


Hall Family External Return of Capital

Over the past 20 years, the Hall Family has consistently returned capital from external investors.

Strong Hall Co‐Invest Strategy

Hall has invested alongside strategic, financial or industrial partners to help Hall Lab companies grow and create exits

$40M pool created 7.9X ROIC, 112% IRR, and $317M of exits

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DIRECT StrategyCO‐INVEST Strategy

RETURN ON INVESTED CAPITAL


Current & Historical Hall Portfolio

HALL REALIZED EXITS

Hall has developed and supported diverse companies across multiple stages of commercialization.

Diamond drilling tech.

ACQUIRED BY: Smith Bits EXIT: 1985

Intelligent down hole pipe.

ACQUIRED BY: Grant PridecoEXIT: 2005

Electromechanical drilling tech.

ACQUIRED BY: SchlumbergerEXIT: 2010

Diamond road milling.

ACQUIRED BY: CaterpillarEXIT: 2012

Diamond press & related tech.

ACQUIRED BY: SchlumbergerEXIT: 2015

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Diamond manufacturing.

ACQUIRED BY: Reed HycalogEXIT: 2000


Towing products

ACQUIRED BY: CurtEXIT: 2019


Provo, Utah Opportunity ZoneInnovation & Growth Campus

More than 130 total acres for expansion, nearly all contiguous

650,000 square feet of buildings

Operating businesses employ over 700 people

As companies grow, they may occupy their own building

8FOR INSTITUTIONAL USE ONLY


Located within minutes of Sundance Ground breaking with Governor Gary Herbert and then‐Mayor (now Congressman) John Curtis for 180,000+ sq ft Vanderhall building 80,000+ sq ft campus headquarters Located in Provo, UT, identified as one of the Top 3 Opportunity Zones in the US

Campus Highlights

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VANDERHALL GROUNDBREAKING WITH GARY HERBERT & JOHN CURTIS

CAMPUSHEADQUARTERS

CAMPUS HEADQUARTERSIN PROVO, UTAH



Hall Venture Partners Management Team

DAVID HALLManaging Partner

Hall Venture Partners is led by world‐class managing partners supported by an exceptional executive team.

FIRM MANAGEMENT

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DEREK WEBERManaging Partner

MATT VAN DYKEManaging Partner / CFO

PORTFOLIO MANAGEMENT & INVESTOR RELATIONS

David is a Family Office Principal and serial entrepreneur Exits of organically‐grown companies in excess of $450M and over 850 patent filingsDavid Hall has a degree in mechanical engineering from Brigham Young University (1972), an MBA from Rider College (1976), and an honorary doctorate from Weber State University (2016)Under his leadership hundreds of millions in new technology has been developed and sold to the benefit of society

DAVID KUNZManaging Partner

CARL BELLISTONLegal

WENDY COPLENCompliance

SKY EVANSManagement

ANNA JENSENAdministration

BRETT WILKEYInvestor Relations

JEFF DUNCANIntellectual Property


Derek has 25 years of extensive experience in investment banking, private equity, venture capital and corporate developmentLeadership roles with General Electric, The Carlyle Group and Saxon Weber GroupHas participated in more than $6B worth of collective transactions across public and private marketsFounder of and advisor to recognized technology firmsAppointed by the Secretary of Commerce as a United States Trade Delegate

Matt is a CPA with experience in fund‐raising, tax strategy, M&A, and growth of early‐stage companiesPrior to joining Hall Venture Partners, Matt served as CFO for Hall Labs and its portfolio companies where he led exits in excess of $100MPrior to Hall Labs, Matt worked for PwC in their tax department. Matt earned his masters’ in accountancy from Brigham Young University

CHARLESKERNERPartner

David is an experienced investor, advisor and corporate development executive in both the public and private markets20 years of business development experience, with trusted relationships across Institutional, UHNWI, and Family Office InvestorsSenior leadership roles as CEO, Principal, Board Member, Corporate Development, Managing Director of SalesGenerated over $125M in revenue, raised more than $80M in contributed equity invested capital

STEVE NORTONAccounting


GROWTHPortfolio companies enter a commercial growth‐phase and require outside capital and expertise

CRITERIA

Commercial ProductHigh Value IP Market AcceptanceReady Dedicated Team Dedicated Opportunity Zone Space2‐5 Year Window for Exit

Tax Advantaged Largely Growth Stage FundingINTERNAL STARTUPS

EXTERNAL STARTUPS

EXTERNAL IDEAS

INTERNAL IDEAS

Hall Venture Partners supports companies at a critical early‐stage inflection point.

TRANSFER/EXITINCUBATION GROWTHACCELERATION

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“Hall Venture Partners Fund was developed based on investor demand for access and participation in the upside of companies within and outside of Hall Labs through a tax‐advantaged structure.”

DAVID HALLFounder, Hall Labs and Hall Venture Partners

Hall Venture PartnersApproach

OPPORTUNITY FUND 1



CURRENT INVESTMENT

CURRENT INVESTMENT

CURRENT INVESTMENT

CURRENT INVESTMENT

CURRENT INVESTMENT

Hall Opportunity Fund 1 Initial Target Companies

Initial target portfolio companies located in an Opportunity Zone.2019 Combined Revenue $27M; 2020 Combined Revenue $42M.

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Vanderhall develops and manufactures conventional and electric roadsters that provide a truly unique motoring experience. Exceptional aesthetics and effortless performance.

Medic is developing advanced health monitoring systems and hardware that provide meaningful information for individuals and their healthcare team.

Smarterhome is a first‐of‐its‐kind system that seamlessly integrates smart products for thehome. Includes smart automation of blinds, windows, lighting, security, storage, and more.

Bacon is creating a new way to staff teams by connecting companies to pre‐qualified available workers who will work on‐demand for as little as one shist.

Sure‐Fi has developed the world’s first radio designed to connect reliably through heavy obstruction. Its patented radio features one‐mile range with obstructions and 50+ miles line of sight.

RelChip offers reliable integrated circuit solutions for extreme environments, ranging from ‐55 to 300 degrees Celsius (‐67 to 572 degrees Fahrenheit).

Comfort Wall reinvents heating and cooling comfort through polished, multi‐purpose, radiant tech‐infused products that seamlessly slot into residential or commercial spaces.

Hall Logic’s Near Field Perception Technology provides signals that support Autonomy, ADAS, and Driver Information Systems. The product derives novel sensor data from existing hardware.




Opportunity Fund 1 Terms

Innovative companies on an opportunity zone campus.

NAME: Hall Opportunity Fund 1, LP

ENTITY TYPE: Delaware Limited Partnership

FUND SIZE / MINIMUM INVESTMENT:$100 million / $1 million

MANAGEMENT FEE: 2.0%

CARRY: 20%

HALL LABS / GP PARTICIPATION(as limited partner):$10 million (10%)

GEOGRAPHY:Provo, Utah USA

FUND LIFE:10 years

CO‐INVESTMENT OPPORTUNITY:Co‐investment rights for LPs with over $5 million commitment

LAST CLOSE ON EXTERNAL CAPITAL:Q4 2020

STRUCTURE: General partner controls fund; LP investor committee (3)



Fund GovernanceIndependence and a benchmarked robust structure.

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VALUATION OF INVESTMENTS

Actively seek for 3rd party co‐investment for each portfolio business and invest at the same valuation

If there is no co‐investment, a 3rd party valuation on investment will be completed and fund will invest at the valuation established

STRUCTURAL

Hall managing partners and affiliates will commit $10M to the fund, on the same basis as other LPs

All investments into the portfolio companies will be made for senior convertible preferred stock with a 12% hurdle rate (absent external co‐invest)

On 3rd party co‐investment, the fund will invest at same terms as co‐investor

INVESTMENT CRITERIA

Commercial Product

2‐5 Year Window for Exit

Ready and Dedicated Team

Transition from shared services to dedicated services and team

High Value IP



Provo, Utah FocusedUtah is attracting early stage investment capital and companies.

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WHY INVEST IN UTAH?

Salt Lake City ranked #2 of the “50 Best Places in America to Start A Business (Inc., 2018)

Forbes #1 State for Business Ranking 2010, 2011, 2012, 2014 & 2015 (Forbes, 2015)

#1 for Economic Outlook Rankings 9 years running (ALEC, 2016)

Salt Lake City ranked in the “15 Best Cities to do Business Globally” (Fortune, 2014)

5 FACTS ABOUT INVESTING IN UTAH

Utah has ranked #1 on Forbes “Best States

for Business” four out of the last five years

Utah has some of the best rates for upward mobility in the country

“Silicon Slopes” is now a commonly used term to refer to Northern Utah

U.S. Chamber of Commerce recognizes Utah as the leader for its “Enterprising States” project

Utah is at the top of the nation for job creation



Silicon SlopesUtah is exploding with growth and it’s through relationships like Silicon Slopes that HVP can identify potential target portfolio companies currently outside the Hall campus. HVP will leverage the same process, honed and developed over 60+ years, that will supplement our sourcing of opportunities as we look to identify companies that can benefit from the process and structure Hall Labs provides.

With more than 6,500 startup and tech companies in Utah, Silicon Slopes is home to entrepreneurs and leaders who have earned global recognition through hard work, and a focus on building exceptional companies. Dollar‐per‐deal, Utah leads the nation in venture capital tech funding, and for 3 years in a row, Forbes named Utah as the best state in the nation for business.



The following are tax benefits of investing in a Qualified Opportunity Fund (QOF) :

A temporary tax deferral for capital gains reinvested in a QOF. The deferred gain must be recognized on the earlier of the date on which the QOF investment is sold or December 31, 2026.A step‐up in basis for capital gains reinvested in a QOF. The basis of the original investment is increased by 10% if the investment in the QOF is held by the taxpayer for at least 5 years.A permanent exclusion from taxable income of capital gains from the sale or exchange of an investment in a QOF, if the investment is held for at least 10 years. (Note: This exclusion applies to the gains accrued from the investment in the QOF, not the gains on the original investment.)

Opportunity Zone Overview

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The 2017 tax revision temporarily authorized tax incentives for investments into a Qualified Opportunity Fund (“QOF”)

A QOF is a vehicle organized for the purpose of making qualified investments within a federally designated Opportunity Zone.



Assume that on March 31, 2020, an investor sells an asset (stock, real estate) to an unrelated 3rd party with a basis of $2M for $3M, resulting in a capital gain of $1M.On August 30, 2020, the investor invests the $1M original capital gain in an opportunity fund within the 180‐day election period.On January 1, 2030 Fund 1 liquidates the $1M investment for $2.5M, resulting in a $1.5M gain in the opportunity fund investment.

Opportunity Fund Investment Example

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Investment Example Facts


Tax on gain deferred in 2019.Original gain is permanently reduced by 10% ($100K) due to holding investment 5+ years in Fund.Investor must recognize the $900K gain ($1M ‐$100K) in its December 31, 2026 tax filing and pay the resulting tax.

No tax recognized for federal income tax purposes due to investor holding opportunity fund investment for 10+ years.

$1M Original Capital Gain $1.5M Gain in Fund 1 Investment

Tax Consequences of InvestmentThe above example encompasses two separate capital gains:

PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 PROPRIETARY AND CONFIDENTIAL H A L L O P P O R T U N I T Y F U N D 1 FOR INSTITUTIONAL USE ONLY

HALL OPPORTUNITY FUND 1...Jul 17, 2020 · Grant Prideco EXIT: 2005 Electromechanical drilling...

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