2004 1st Half

In this issue:

New Developments
  • Bob Saunders Honored with E&Y Entrepreneur Of The Year® 2004 Award
  • Irv Bailey Named to Two Public Company Boards
  • Todd Higgerson Joins Chrysalis as Analyst
  • George Emont Joins Chrysalis as Executive-in-Residence
  • David Doctor and Bob Bunker Depart Chrysalis Executive-in-Residence Program

New Investments
  • Compliance and Ethics Learning Solutions, Inc. (CELS)
  • Connecture, Inc.

Portfolio Company Developments
  • Construction Software Technologies, Inc.
  • Ygnition Networks
  • bCatalyst, Inc.

New Developments

Bob Saunders Honored with E&Y Entrepreneur Of The Year® 2004 Award

In June 2004, Chrysalis Managing Director Bob Saunders was honored with the Michael J. Burke Award for Supporter of Entrepreneurship as part of the Southern Ohio and Kentucky Ernst & Young Entrepreneur Of The Year® 2004 Awards ceremony. The Entrepreneur Of The Year awards program honors entrepreneurs through regional, national, and global award programs in over 100 cities and 35 countries. We are proud of Bob's efforts, which exemplify our mission to help entrepreneurs build great businesses and deliver, as a result, outstanding returns to our investors.

Other Chrysalis affiliates receiving awards included Appriss, Inc., winner in the category of social responsibility, and Advanced Imaging Concepts, Inc., winner in the category of realizing business potential. Congratulations to all the 2004 award winners!

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Irv Bailey Named to Two Public Company Boards

In April 2004, Chrysalis Managing Director Irving W. Bailey was appointed member of the AEGON N.V. (NYSE: AEG) Superadvisory Board for a four year term. Upon this appointment, Irv resigned as Chairman and member of the board of AEGON USA Inc.

From 1988 until its 1997 sale to AEGON N.V., Irv served as Chairman and Chief Executive Officer of Providian Corp., a Fortune 200 company. After 1997, he became a non-executive member of the board of AEGON USA Inc. and later Chairman.

Also, in May 2004, Hospira Inc. (NYSE: HSP), a hospital-products company recently spun off by Abbott Laboratories, named Irv to its board of directors. Hospira is a global specialty pharmaceutical and medication delivery company dedicated to Advancing Wellness™ by developing, manufacturing, and marketing products that help improve the safety and efficacy of patient care. Created from the core global hospital products business of Abbott Laboratories, Hospira has 70 years of service to the hospital industry. With approximately $2.5 billion in annual sales, Hospira is headquartered in Lake Forest, Illinois, north of Chicago, and has more than 14,000 employees and 14 manufacturing facilities worldwide.

David A. Jones, Sr., a limited partner in Chrysalis' venture capital funds and the father of Chrysalis Chairman and Managing Director David A. Jones, Jr., is Hospira's non-executive Chairman.

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Todd Higgerson Joins Chrysalis as Analyst

In June 2004, Todd Higgerson joined Chrysalis Ventures as an Analyst. Todd, who earned a BS in Economics and Engineering Sciences (Electrical) from Yale University in May 2004, interned at Chrysalis during the summer of 2003.

At Chrysalis, Todd will provide analytical support to the investment team for Chrysalis' three primary investment sectors: healthcare information and services, media and communications, and education and training.

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George Emont Joins Chrysalis as Executive-in-Residence

George Emont, formerly of Vital Venture Capital and Humana Ventures, has joined Chrysalis as Executive-in-Residence. In this role, George will help the investment team evaluate opportunities in the healthcare information and services sector.

George has over 17 years of experience in the healthcare industry. His career includes the successful start-up of a biotechnology company and extensive venture capital investing in medical device, biotechnology, and healthcare services companies. While at Humana Ventures, George worked closely with David A. Jones, Jr., who served on his investment committee.

George has a BA from Oberlin College and an MBA from the University of Chicago.

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David Doctor and Bob Bunker Depart Chrysalis Executive-in-Residence Program

In early 2004, David A. Doctor, former President and CEO of Chrysalis portfolio "graduate" Genscape, Inc., left Chrysalis’ Executive-in-Residence program to start a new venture, Interaction Integrity International, Inc. (3iinc).

3iinc is pioneering technology that will be introduced in early 2005 to enhance the integrity of various types of business interactions, thereby improving a company’s productivity and earnings. The company plans to convert human behavior analysis tools to real-time, online technology that can be used by transactional staff to incorporate their own and a counter-party's behavioral influence on a transaction in the same manner as they do financial, economic, market, entertainment, and weather information.

In March 2004, Bob Bunker, former Chairman, President, and CEO of Chrysalis portfolio "graduate" Aperture Credentialing Inc., also left Chrysalis' Executive-in-Residence program to be named President and CEO of Medical Services Company Inc. (MSC).

Jacksonville, FL-based MSC is a leader in providing medical products and services to the workers’ compensation industry. Its customers include the nation’s leading workers’ compensation insurers, third-party administrators, and self-insured employers. Focusing exclusively on workers’ compensation cases, MSC has fine-tuned the process to provide to its customers the most cost-efficient experience in the industry.

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New Investments

Compliance and Ethics Learning Solutions, Inc. (CELS)

In May 2004, Chrysalis co-led, with KB Partners, a $6.45 million equity investment in Compliance and Ethics Learning Solutions, Inc. (CELS). Other co-investors in the financing included CID Equity Partners and OCA Ventures.

CELS is a Chicago-based holding company formed by experienced corporate training professionals, who used proceeds from this initial financing to acquire Midi, Inc., a Princeton, New Jersey-based provider of compliance and ethics eLearning programs to corporate enterprises.

Midi, a nearly 20 year old company with dozens of blue-chip corporate clients, designs and develops high-end, online interactive multimedia compliance training software. The company produces both custom and off-the-shelf online training programs, and offers a core suite of 30 compliance and human resources courses covering over 100 topics including areas such as Sarbanes-Oxley, anti-bribery, anti-money laundering, Federal Acquisition Regulations, harassment, insider trading, and diversity. Tracking and reporting capabilities also allow companies to monitor employees’ progress and completion rates.

Chrysalis Managing Director Bob Saunders has joined CELS’ board of directors.

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Connecture, Inc.

In March 2004, Chrysalis led a $6 million equity investment in Atlanta-based Connecture, Inc. Chrysalis’ co-investors in the financing included the company’s principal existing investors SSM Ventures, Live Oak Equity Partners, Total Technology Ventures, and Encubate Technology Ventures. In July 2004, Connecture acquired, in a merger, Wisconsin-based Riverwood Solutions, Inc., its leading competitor.

Today Connecture is the clear industry leader in providing integrated web-based sales and service automation solutions for the health insurance industry. The company has automated elements of the insurance sales process for a wide range of health and life insurance organizations, and its solutions currently support the sales and servicing of over 30 insurers. The company’s clients include six of the nation’s top 10 health plans and consist of large multi-state organizations such as Aetna, Health Net, PacifiCare, Premera, and Oxford Health Plans as well as regional health plans such as ConnectiCare and Health Alliance Plan (MI).

David A. Jones, Jr., Chrysalis Chairman and Managing Director, has joined Connecture’s board of directors.

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Portfolio Company Developments

Construction Software Technologies, Inc.

In June 2004, Cincinnati-based Construction Software Technologies, Inc., an emerging construction industry leader in providing online tools designed to streamline bidding processes and eliminate inefficiencies, announced that it had acquired two companies, BuildPoint and US Projects, to expand its geographic coverage and enhance its iSqFt product offerings. Chrysalis participated in the company's $5.5 million Series A financing in June 2002.

BuildPoint, headquartered in Redwood Shores, California, is a well-known provider of online bid management services for general contractors, including more than 50 customers from The Engineering News-Record's list of the Top 400 Contractors in the nation. Omaha-based US Projects is an online provider of construction planning news and information with a customer base of major contractors, subcontractors, and suppliers in the North Central United States. The acquisition makes US Projects’ data on commercial construction projects, representing more than $12.7 billion of business opportunity, available to iSqFt subscribers.

The iSqFt product provides online connectivity so that general contractors, subcontractors, suppliers, and manufacturers can access project information and use a variety of work tools to find more work and manage the bidding process effectively, saving both time and money in the process. We expect that merging the respective data and technology strengths of BuildPoint and US Projects onto iSqFt’s platform will deliver increased speed and efficiency to users and further differentiate this promising company.

Chrysalis Managing Director Bob Saunders serves on Construction Software Technologies' board of directors.

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Ygnition Networks

In April 2004, Chrysalis invested an additional $2.5 million in Seattle-based Ygnition Networks, a leading provider of broadband services to the multi-family real estate industry, as part of a $7.5 million bridge financing led by ComVentures of Palo Alto, CA. The proceeds from this financing were used to purchase U.S. OnLine's (USOL) cable TV and high-speed Internet business in Houston and Ft. Worth, TX. Chrysalis previously led the company's $5 million Series B financing in July 2003.

Since it was founded in September 2001, Ygnition has grown its service base to over 140,000 apartments in approximately 420 apartment communities in nine states. The USOL acquisition included the Service Agreements and equipment serving approximately 18,000 apartment units in 59 properties and added over 10,000 active customers, providing the company a critical mass of properties concentrated in markets where it currently has infrastructure and support capabilities. By enhancing economies of scale and strengthening market position, the company believes this strategic acquisition will provide a platform for growing their bundled service triple-play of high-speed Internet, Digital Voice (VOIP), and cable television.

Chrysalis Managing Director Bob Saunders serves on Ygnition's board of directors.

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bCatalyst, Inc.

In April 2004, S. Andrew McKay joined bCatalyst, Inc. as CEO. Formerly a lawyer with the Atlanta office of Miller & Martin PLLC, Mr. McKay will lead bCatalyst's new business brokerage, merger and acquisition assistance, technical due diligence, and financial advisory services.

Originally founded in 2000 as a business incubator, bCatalyst began to evolve in early 2002 when it launched business brokerage services to fill a local need for middle-market mergers and acquisitions advice, a niche that complemented the company's existing incubation and technical due diligence offerings. The company has since completed several transactions.

Chrysalis Managing Director Bob Saunders and Chrysalis Senior Associate Wright Steenrod serve on bCatalyst's board of directors.

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Chrysalis Ventures
101 South Fifth Street, Suite 1650
Louisville, KY 40202
(502) 583-7644 phone
(502) 583-7648 fax
Web site : www.chrysalisventures.com
E-Mail: info@chrysalisventures.com

© 2004 Chrysalis Ventures, LLC

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