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Investing in TT / Acceleration
October 2015 – ISTANBUL
J DARCY
LowerMid-Market
Expansion/Development
Capital
EarlyStage
Business Angels
Involved throughoutthe business cycle
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EIF
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Inve
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Technology TransferProof of ConceptBusiness Angels
Seed Stage
TechnologyTransfer Accelerator
Catalyse hybrid debtfinance for growth
Support VCecosystemand decreasedependencyon public finance
Fill funding gap left by institutional investors
Instruments to stimulateinnovation, competitivenessand cross-border investment
Investing inVC funds
Investing inGrowth Capital Mezzanine
European Commission Resources EIB / EIF Resources Member States / Private Sector Resources
EIF resources
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EIF manages resourcesfrom different stakeholders“ ”
European Investment Bank
Risk Capital Mandate(RCM) EUR 5bn
Mezzanine Facility for Growth (MFG) EUR 1bn
European Commission
Competitiveness and Innovation Framework Progr. (CIP) EUR 1bn allocated to equity and guarantees
Risk-Sharing Instrument (RSI) EUR 120m
Progress Microfinance EUR 200m
National & Regional Funds
20 European and regional Funds-of-Funds including Germany, Portugal, Spain, Turkey, UK
14 Holding Funds supported by structural funds EUR 1.3bn
Bridging the gap between research and the market
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R&DTechnology Transfer
“technology IP”Marketable Product
“prototype IP”
University / Research
Organisation
Market
IP / Idea
Spin-out
Licensing
Collaboration(contract research)
Catalysing commercialisation
Engage with industry, develop partnerships, and encourage contract research
Build networks to meet economic reality; inward looking vs. outward
Research organisations / TTOs are key counterparts
Become active participants in long-term TT vehicles / funds
Research organisations to provide commitments for participating in TT structures, financially and / or with other resources
Outsource with qualified and experienced partners willing to work in close collaboration
Identify and work with trusted (fund) managers who can help select the best opportunities with commercialisation potential
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UK: IP venture fund UK
UK: UMIP Premier Fund
Sweden: Chalmers Innovation
Belgium KU Leuven CD3
Latvia: Imprimatur Capital, Seed and VC fund
Sweden: Karolinska Development
3T (Telecoms Institutes)
EIF TT Transactions
France: Inria IT2: Digital technologies
Bulgaria : LaunchUpStart-up accelerator
Greece: Openfund, Seed Fund
UK: Cancer Research Technology
Elaia (Applied Maths – ENS, Dauphine, Collège de F, X)
Business Creation and Acceleration
Research commercialisation / TT
Bulgaria : Eleven Start-up accelerator
Greece: Piräus Fund, Seed Fund
Lithuania: Practica Incubator and follow-on fund
Lithuania: Strata/Mes Business Angel Co-investment fund
Belgium: NausecaBusiness Angel fund
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Norway: Sintef
Turkey : Diffusion - ICT
Research Commercialization / TT
• Based on innovative / disruptive technologies
• Partnering with Research
• Projects and IP licensing
• Spin-out funds
TT Fund
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Fund-of-Funds managed by EIF
Private Investors
TT FundPrivate Investors
[90%] funding
[10%] funding
TT FundManager
Deal sourcing
Expertise contribution
University 1
University 2..
Tech Park 1
Science Lab 2..
Industry Contacts
IP / patent experts
Test Labs Corporates
Patents Licenses
Spin-offs Start-ups
Business incubation and acceleration
• Development of innovative businesses
• Bases on innovative ideas and business models
• Incubators
• Accelerators
• With Business Angels
Acceleration and Seed Fund
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Pre-Seed Seed Start-up
Fund-of-Funds managed by EIF
Fund Manager
AccelerationCompartment
Seed Compartment
Max [90%] contribution
Private Investors
Min [10%] contribution
Acceleration and Seed FundAcceleration and Seed Fund
Selection
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Snapshot
BA Co-investment Facility Structure
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Fund-of-Funds managed by EIF
SMEs
50/50%
BA Co-investment Facility(e.g. EAF nationalcompartment)
Business Angel 1 (Trustee)
Trust
50/50%Selection
Co-Investment AgreementsFull delegation of investment decisions, monitoring, exit; definition of co-inv. terms & guidelines
Business Angel 2 (Trustee)
Trust
In case of EAF:(a) EIF as advisor to umbrella structure(b) Local Advisor if needed
• Find the appropriate counterpart (linked with knowledge provider / acceleration)
• Small amounts, legal framework, time spent…
• High added-value!
• Contribute to a system
• Get 2014 – 2020 EU Funding!
EIF challenges
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BACK UP SLIDES
EIF TT investments
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Vintage Year Investment CountryFund Size (EUR m)
EIF investment (EUR m)
% Fund
TT Funds
1 2001 T-Source France 38 4.3 11%2 2003 Louvain Vives I Belgium 15 4.5 30%3 2006 Leuven CD3 (Centre for Drug design and Discovery) Belgium 8 4 50%4 2006 IP Venture Fund UK 37 18 49%5 2008 Chalmers Innovation Seed Fund Sweden 17 9 53%6 2008 Manchester UMIP Premier Fund UK 38 11 29%7 2009 Karolinska Development Sweden 36 27 75%8 2010 Leuven CD3 II (Centre for Drug design and Discovery) Belgium 16 8 50%9 2011 Louvain Vives II Belgium 43 15 35%10 2011 Telecom Technologies Transfert (3T) France 21 10 49%11 2012 Demeter Cleantech seed fund France 35 15 43%12 2012 Elaia Alpha fund France 45 20 44%13 2012 Cancer Research Tech (CRT) Pioneer Fund UK 30 15 50%14 2013 Rockspring UK 31 10 32%15 2013 INRIA IT Translation France 30 10 33%16 2013 IP Venture Fund II UK 36 24 67%17 2013 Grand Ouest d'Amorcage Sante France 57 15 26%18 2013 Auriga Bioseeds IV France 40 12 30%19 2013 SINTEF Venture IV Norway 27 12 44%20 2013 "TT Fund" (confidential) in progress EU 44 20 45%21 2014 "TT Fund" (confidential) in progress EU 60 30 50%22 2014 "TT Fund" (confidential) in progress EU 55 22.5 41%23 2014 "TT Fund" (confidential) in progress EU 50 20 40%24 2014 "TT Fund" (confidential) in progress EU 25 10 40%25 2014 "TT Fund" (confidential) in progress EU 30 12 40%
….2014 ……………..TOTAL 864 358 42%
Business Incubation / Acceleration Funds
26 2009 Strata/Mes Lithuania 8 7.6 95%27 2010 Imprimatur Latvia 12 9 75%28 2012 Nauseca Belgium 18 6 33%29 2012 Practica Lithuania 11 8.5 77%30 2012 Eleven Bulgaria 11 11 100%31 2012 Lauchub Bulgaria 9 9 100%32 2012 Openfund Greece 10 7 70%33 2012 Piraeus Greece 14 9.3 66%
TOTAL 93 67.4
TOTAL 957 426
Manager OperationFund size
(mEUR)EIF invest
(mEUR)Spinouts Licensing IP
Single Research centers
Multiple Research
center
Proof-of-Concept Funding
Location
Chalmers Innovation Seed Fund 17 9 v v v Sweden
Karolinska Development 36 27 v v v v Sweden
Louvain Vives I v v Belgium
Louvain Vives II 43 15 v v v Belgium
Leuven CD3 I (Centre for Drug design)
8 4 v v v v Belgium
Leuven CD3 II (Centre for Drug design)
16 8 v v v v Belgium
External Manchester UMIP Premier Fund 38 11 v v v UK
IP Venture Fund I 37 18 v v v UK
TT Fund 30 … v v v UK
T-Source v v v France
Demeter Cleantech seed fund 35 15 v v v France
Elaia Alpha fund 45 20 v v v France
Rockspring 31 10 v v v UK
CRT 30 15 v v v v UK
Embedded in University
Selected EIF Transactions: Research Commercialization and TT
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IP markets
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Selected Transactions: Business incubation and acceleration
OperationFund size (mEUR)
Business Angel
Incubator Accelerator Seed FundFollow-on
Funding
Institution Building/Developing
marketCountry
Strata/Mes 8 v v Lithuania
Imprimatur 12 v v v Latvia
Nauseca 18 v Belgium
Practica 11 v v v v Lithuania
Eleven 11 v v v v Bulgaria
Lauchub 9 v v v v Bulgaria
Openfund 10 v v Greece
Piraeus 14 v v Greece
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Accelerators
• Starting companies from scratch• Small investments (about EUR20k) in a large number of start-
ups• Incubation phase to elaborate BP or build prototype • Demo day: present businesses, find investors, mentors,
business partners, exchange experience….• Follow on financing from the Accelerator (up to EUR 200k)• Organization and investment lead by experienced entrepreneurs
and investment professionals• International setup• Creates an environment of entrepreneurship with mutual support• Attracts plenty of interests at large corporates
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Acceleration & Seed Fund - Process
Application Window
Selection & Funding
Accelerati
on
Graduation day
SEED Portfolio
AC
CE
LE
RA
TIO
N S
TAG
ES
EE
D S
TAG
E Application process: Fully
online, held every 3 – 4 months or continuous
Indicative investment: EUR [25,000 – 50,000]*
Equity share: ~10% Stage term: 3-12 months Goal: Working prototype, beta
version*Depending on the sector focus and market characteristics
Indicative investment: up to EUR [xx] (including follow on investments). Substantial portfolio share in start-ups from acceleration stage
Equity share: 30 - 49% (on aggregate)
Stage term: 12-24 months Goal: Commercialization,
internationalization
Seed investments in other companies
Incubators
• Starting companies from scratch• Small investments (about EUR10k to 30k) in start-ups• Incubation phase to elaborate BP or build prototype • Specialized support organized by the Incubator (funding, legal,
accounting, marketing,…)• Network of entrepreneurs, located in the incubator• Follow on financing by the incubator (up to EUR 200k)• Connected to a VC fund, managed by the same manager• Organization and investment lead by experienced entrepreneurs
and investment professionals• International setup• Creates an environment of entrepreneurship with mutual support• Attracts plenty of interests at large corporates
Co-Investment Funds
• Managed by experienced managers with full alignment of interest (substantial investment by the fund manager <5%)
• Co-investments with Business Angels and other qualified investors
• Investments in early stage companies or start-up companies• Specialized support organized by the Co-investor (funding,
strategic advice, marketing,…)• Network of entrepreneurs, managed by the fund manager• Leverage of fund monies with qualified third party funds• No fundraising necessary for the fund manager• Fund investment strategy for relatively short fund terms
Co-Investment Fund Structure
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Fund-of-Funds managed by EIF
Co-Investment Fund
SMEsPrivateCo-investors
Selection
[50%] of the capital in a transaction
-Sourcing of co-investors-Compliance check on co-investors
[50%] of the capital in each transaction
Ca. [95%] committed by the FoF Ca. [5%] committed by the Fund Manager
Fund Manager
Indicative Timelines
Understandconcept
Based on preliminary questionnaire / concept note
Investment readiness
Physical meeting (typically in Luxembourg), opportunity to articulate investment opportunity, understand EIF
Stress testing and verification
EIF team conducts on site visits (min. 2 days). May, or may not lead to term sheet
Legal documentation
After EIF BoD approval, legal docs drafted on behalf of Manager. EIF review Importance of legal counsel
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First Screening
Second Screening
Due Diligence
Board Approval
12 mths
Long-term, sustainable vehicles with like-minded investors
Close collaboration of investment vehicle with TTO
Access to good science
Adequate incentives to management team
Governance - no investor involvement in investment decisions
Independence and non-competition of management team
No direct financing of research
Alignment of interests with long-term focus, up to 15-20yrs
IP adequately protected under relevant legislation
Min critical size ca. EUR 20-30m. EIF can fund up to 50%
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■10 year Limited Partnership. ■Managed by VC firm: MTI
partners■GBP 32 m raised. 18 months
between first pitch to EIF and first closing in 4/2008
Manchester: Largest UK University Research Budget
Manchester University / UMIP Premier Fund
CD3 PHARMA/BIOTECH COMPANIESUNIVERSITIES
CD3 (K.U.Leuven) - Next Generation Licensing - Empowering Universities
Drug development process steps
CD3 portfolio • Chemical libraries
• Structural biology
• …
• Bench synthesis
• Parallel synthesis
• Early toxicology
• …
CD3 addresses a demand from both ends of the chain■ from Universities: be able to offer more finished drug candidates to the industry
■ from the Industry: enrich their pipeline with more proven candidates
■Partnership with university■Managed by TTO■Invests in drug
development projects
Target IDTarget validation
ScreeningLead ID
Optimisation Pre-clinical development
Clinical I Clinical II Clinical III
Leuven CD3 (Centre for Drug Design and Discovery)
IP Group: Bringing together 12 Universities - 26 Spin-Outs in Three Years
■Co-investment fund (seed, post-seed financing)
■Critical mass reached through a network of universities
■Liquidity vs listing
Deal flow and critical mass
IP Venture Fund UK
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Due diligence
Taking the lid off EIF’s Due Diligence process (1/5)
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First Screening Second Screening Due Diligence Board Approval
Partner institutions Market Investment
strategy Dealflow
Potential Investors
Investment process Team Track record
Governance Management co. Economics Remuneratio
n / incentives
Taking the lid off EIF’s Due Diligence process (2/5)
Partner Institutions Market / competitors
Metrics: research budget, peer group comparisons, invention disclosures, IP filed, IP awarded, growth rates, commercialisation income, encumbrances, 3rd party agreements
Structure: organigramme of TTO, roles, ownership of TTO
Policies: IP policy, rules, regulations, ownership rights
Activities: industry co-operations, advisory services, contract research, etc.
Financials: for TTO, revenues, royalty income, grants, licenses, cost of sales, gross profit, operating costs, gift aid, dividends
Investment strategy
Trends: in targeted sectors, challenges faced, evolution in previous years
Competitors: for financing, other sources of finance, private / public
Demand side economics: analysis and evidence of demand for targeted projects
Licensing / spin-outs: proposed route for commercialisation
Strategy: geographical focus, stage focus, sectors, investment sizes, follow-on and reserve policy, holding periods, role in financing rounds
Fund size: justification for size through bottom-up analysis, min / target / max size, modification to strategy according to size scenarios
Target profiles: criteria for investment targets (company profiles)
Co-investors: envisaged co-investors at different stages of investments
Exits: strategies based, for example on previous examples
32
Taking the lid off EIF’s Due Diligence process (3/5)
Origination: source of projects, networks (formal and informal), privileged / preferential access, rights of first refusal, option rights
Fees: payments in lieu of access to pipeline
Historical analysis: e.g. 3-5 yrs evolution of dealflow by source, sector, etc.
Selectivity ratio: historical examples / experience
Pipeline: of current and future opportunities
Sponsors: main investors , anchor investors , special rights (e.g. fees, carry, information, co-investment, etc.)
Names / profiles: like-minded, long-term investors with soft and hard commitments
Team investment: investment to fund, e.g. 1%, 2%, 5%, absolute amount, split between team members (see also remun. / incentives)
Fundraising strategy: list of other potential / targeted investors, status of contacts, potential commitments
Process: origination, screening, project / deal review, due diligence, deal approval, deal structuring, negotiation, deal completion, contracting third parties
Decision-making bodies: which bodies, or individuals take final decisions at each stage, delegations foreseen
Potential investors Investment processDealflow and pipeline
33
Taking the lid off EIF’s Due Diligence process (4/5)
Composition: envisaged team responsible for managing fund, key individuals from TTO / other, secondees, new recruits (profiles)
Profiles / CVs: Full CVs of team members and key individuals, specific dates, positions held, achievements
Experience: collective team experience in IP management, licensing, creation of companies, investing,, strategy, consulting, etc.
Team collaboration: yrs worked together, prior collective working relationships
Workload: time commitment to fund vs. other activities, activity allocation, other board seats
Board members: CVs
Previous funds: metrics, vintage, total size, fund cash flows, net and gross IRR, LPs, amounts
Companies: for previous / current funds, dates of investment, investment at cost, FMV (EVCA), gross multiples, forecast exit dates, exit scenarios
Individuals: Track record of individuals, other investment / relevant activity (e.g. licensing deals)
Partner institutions: licensing and spin-out company creation, notable success stories (e.g. nobel prizes), products developed
Structure: e.g. UK-LP, SCR, FCR, NV, SPRL, SICAR, KB, etc.
Relationships: Overall structure and relationships between governing and decision-making bodies. Role and function of each of the bodies. Specific individuals involved and respective voting powers and rights
CoI: Conflict of interest management, for example with (other) investors in fund, any investor (LP) involvement in decision-making
Advisory board: composition, largest investors, etc.
Team Track Record Governance
34
Taking the lid off EIF’s Due Diligence process (5/5)
History: evolution, founders, key dates and events in development, significant changes in organisation, strategy, ownership
Legal status: capital structure, ownership
Regulation: how management company shall be regulated, adherence to AML/KYC
Budget: detailed forecast budget for management company over lifetime of fund, under different scenarios, e.g. min / target / max size
Management fee: justification for level of management fee, use of fees, fee offsets
Alignment of interests: team investment to fund aligns with investors, long-term time horizon, team stability / instability
Remuneration: detailed breakdown of remuneration for all team members including base salaries, bonuses
Evolution: historical evolution of remuneration for individual team members in previous years
Incentives via carry: repartition of carry to individuals, unallocated carry if applicable, carry to partner institution(s)
Management co. Economics Remun. / incentives
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EXAMPLES
Technology TransferFinancial Facility (TTFF)
37
provide support for attainment of proof of concept, help prototyping and initial development, through to growth
“”
PoC +
Up to EUR 750k
Co-investment 30%
Seed
Up to EUR 3m
Co-investment 60%
Operation
Available to TTOs
Evaluation 4-5wks
Pilot EUR 60m
PoC
EUR 100 – 250k
No co-investment
http://ec.europa.eu/programmes/horizon2020/en/h2020-section/access-risk-finance
• European Investment Facility (not a subsidy programme)
• Imperative of commercialisation: industry/investment community involved from the earliest stages
• Rigorous governance: professional, independent decision-making at every step
• Legal robustness, simple, cost-effective
Key features of TTFF
38
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EAF mandates as of today
EAF Germany:
Virtual structure within ERP/LfA mandates managed by EIF
Volume 70m€ (ERP/EIF 60m€, LfA/EIF 10m€)
Top-up to 135m€ (ERP/EIF +60m€, LfA/EIF +5m€) about to be signed/in final negotiations
EAF Austria:
Compartment of EAF SICAR structure advised by EIF, AWS supporting as sub-adviser
Volume 22.5m€ (AWS 15m€, EIF 7.5m€)
EAF Spain:
Compartment of EAF SICAR structure advised by EIF
Volume 30.0m€ (Axis/ICO 10m€, Neotec 10m€, EIF 10m€)
New compartments to be set-up early 2015
EAF Netherlands: 45m€ (DMEA/PPM Oost and EIF via DVI),
EAF Irelands: 20m€ (Enterprise Ireland 10m€, EIF 10m€)
Mandators / Investors
LP Commitments
Umbrella Structure with
national Compartments
EAF Co-Investment under CFAs
Intermediaries
Portfolio Companies PU nPU 3
InstitutionalInvestor
InstitutionalInvestor
* Structure is currently being set-up and not operative yet.
European Angels Fund- Structure*
InstitutionalInvestor 1
European Angels FundEAF
Compartment 1EAF
Compartment 2EAF
Compartment n
EIF /EIB
PrivateInvestor
PrivateInvestor
PrivateInvestor 1
Public Mandator
Public Mandator
Public Mandator 1
…EAF
Compartment X
BA 1 (Trustee)
…
PU 2PU 1
Trust
PU nPU 3
BA n (Trustee)
PU 2PU 1
Trust…
