WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

CDFA //

BNY MELLO

N DEV

ELOPM

ENT FINAN

CE W

EBCA

ST SERIES

Introd

ucing Inno

vatio

n Bo

nds

The Broadcast w

ill Begin at 1

:00p

m EDT

Subm

it your que

stions in

 advance usin

g the GoToW

ebinar

control panel

View

 previou

s web

cast re

cordings online at www.cdfa.ne

t

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Are you a CD

FA M

embe

r?

Hello! W

elcome to th

e web

cast.

Mem

bers re

ceive exclusive access 

to th

ousand

s of re

sources in the 

CDFA Online Resource Database.  

Create you

r uniqu

e login today at

www.cdfa.net 

Katie

 Kramer

Director, Edu

catio

n & Program

sCo

uncil of D

evelop

ment F

inance Agencies

Columbu

s, OH

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Join th

e Co

nversatio

n

Listen

 through the teleph

one for b

est a

udio quality.

Subm

it your que

stions to

 the pane

lists here.

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Wha

t are you

 read

ing?

Your develop

ment finance to

olbo

x isn

’t complete with

out a

 set o

f CD

FA re

ference guides. M

embers 

save 15%

 on every pu

rchase. 

Order to

day at www.cdfa.net.

Introd

ucing Inno

vatio

n Bo

nds

Rena

 Nakashima

Senior Produ

ct M

anager

BNY Mellon

Los An

geles, CA

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Introd

ucing Inno

vatio

n Bo

nds

CDFA

 Training Institu

te

11 cou

rses in develop

ment finance

desig

ned for a

ll skill levels. Learn 

more and register to

day at 

www.cdfa.net

Panelists

Rena

 Nakashima, M

oderator

BNY Mellon

Brennan Klose

Olivia Hun

tInno

vatio

n Financing Ro

undtable

Inno

vatio

n Financing 

Roun

dtable

Leslie Platt

Samuel M

oyer

Leslie Platt a

nd Associates L

LCInno

vatio

n Financing 

Roun

dtable

Tina

 Neal

Perseverance Capital Adviso

rs

Inno

vatio

n B

onds

:In

trodu

ctio

n

For D

iscu

ssio

nO

ctob

er 2

013

Cop

yrig

ht ©

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

2013

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

1

•In

trod

uctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

AM

ERIC

A N

EED

S A

NEW

INN

OVA

TIO

N F

INA

NC

ING

EC

OSY

STEM

Lega

cy R

&D

fu

ndin

g sy

stem

New

mod

ern

Am

eric

an

inno

vatio

n fin

anci

ng

ecos

yste

m

Am

eric

a’s

choi

ce

•In

nova

tion

stru

ggle

s•

Inno

vatio

n th

rives

Goa

ls•

Est

ablis

h 21

st c

entu

ry m

arke

t-bas

ed in

nova

tion

finan

cing

sy

stem

−O

pen

stan

dard

s fo

r tec

hnol

ogy

trans

actio

ns−

Inno

vatio

n de

als

& a

sset

cla

sses

−E

cosy

stem

of p

artic

ipan

ts, s

ervi

ce p

rovi

ders

and

stru

ctur

ed

trans

actio

ns c

atal

yzed

by

CD

FA a

nd c

olle

ague

s•

Mod

erni

ze d

eliv

ery

of g

over

nmen

t R&

D fu

nds

via

−C

omm

erci

al a

gree

men

ts−

Sta

ndar

d tra

nsac

tion

tem

plat

es−

Exi

stin

g le

gal a

utho

ritie

s−

Sys

tem

atic

eng

agem

ent w

ith th

e ca

pita

l mar

kets

Sou

rce:

Cur

rier &

Ives

; tea

m a

naly

sis

2

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

3

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Glo

bal R

&D

: ~$1

.5 T

•US

A O

vera

ll R

&D

: ~$4

00 B

•US

Gov

ernm

ent R

&D

: ~$1

50 B

R&

D S

PEN

DIN

G, 2

013

Sou

rce:

Bat

telle

, NS

F

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Cas

h flo

w 1

: R&

D p

roje

ct s

tage

sup

port

−Sou

rces

: priv

ate

com

pani

es, N

GO

s, g

over

nmen

t−U

ses:

pay

for R

&D

pro

ject

sta

ges

−Sec

uriti

zabl

e

•Cas

h flo

w 2

: pro

duct

reve

nues

afte

r pro

duct

reac

hes

mar

ket

−Sou

rces

: pro

duct

sal

es

−Use

s: c

ompa

ny re

venu

es a

nd p

rofit

s−N

ot e

asily

sec

uriti

zabl

e

CA

SH F

LOW

S IN

R&

D P

RO

JEC

TS

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

6

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•The

con

cept

is to

sec

uriti

ze th

e go

vern

men

t co

mm

itmen

t for

fund

ing

thro

ugh

issu

ing

taxa

ble

bond

s, in

clud

ing

via

cond

uit i

ssue

rs

•The

fede

ral c

omm

itmen

t will

be

pled

ged

to a

co

rpor

ate

trust

ee o

n be

half

of b

ondh

olde

rs

•The

com

mitm

ent o

f app

ropr

iatio

ns w

ill b

e su

ffici

ent

to p

ay in

tere

st a

nd p

rinci

pal o

n th

e bo

nds

•Eac

h bo

nd w

ill b

e cu

stom

ized

to m

eet t

he n

eeds

of

the

Bor

row

er’s

cas

h flo

w c

onsi

dera

tions

and

ex

pect

ed c

ompl

etio

n of

mile

ston

es

INN

OVA

TIO

N B

ON

D F

INA

NC

ING

: TA

XAB

LE

SEC

UR

ITIZ

ATIO

N

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Bon

dhol

ders

will

look

onl

y to

the

assi

gnm

ent o

f the

fe

dera

l con

tract

and

any

rese

rve

fund

s to

repa

y th

e bo

nds

•Bon

dhol

ders

adv

ance

the

fund

s in

to a

pro

ject

fund

ad

min

iste

red

by th

e tru

stee

•Bor

row

er a

cces

ses

fund

s on

ly a

fter s

ucce

ssfu

l co

mpl

etio

n of

spe

cific

sci

entif

ic m

ilest

ones

•If s

cien

ce fa

ils, t

he d

eal i

s co

llaps

ed a

nd fe

dera

l go

vern

men

t mus

t mak

e a

term

inat

ion

paym

ent t

hat

will

mak

e bo

ndho

lder

s w

hole

SEC

UR

ITY

FOR

TH

E TA

XAB

LE IN

NO

VATI

ON

BO

ND

S

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Tax

able

due

to fe

dera

l rep

aym

ent s

tream

•No

exem

ptio

n fro

m re

gist

ratio

n

•Reg

iste

red

or P

rivat

e P

lace

men

ts O

nly

•Rul

e 14

4a Q

ualif

ied

Inst

itutio

nal B

uyer

s

•Sho

rt M

atur

ities

Lik

ely

< 10

yea

rs

PRO

POSE

D S

TRU

CTU

RE

OF

INN

OVA

TIO

N B

ON

DS

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Fed

eral

gov

ernm

ent a

ppro

pria

tes

no m

ore

than

wou

ld h

ave

unde

r FA

R ru

les,

and

mos

t lik

ely

less

as

the

priv

ate

sect

or

will

inve

st in

a m

ore

certa

in o

utco

me

and

com

pany

will

co

ntrib

ute

at le

ast 1

0%

•The

ava

ilabi

lity

of fu

nds

allo

ws

borr

ower

to m

ove

at th

e sp

eed

of s

cien

ce a

nd w

ithou

t bur

eauc

ratic

del

ays,

has

teni

ng

the

deve

lopm

ent o

f the

end

pro

duct

•Sci

entif

ic m

ilest

ones

are

del

inea

ted

and

agre

ed to

by

the

scie

ntifi

c re

view

com

mitt

ee, w

hich

will

incl

ude

a m

ajor

ity o

f go

vern

men

t sci

entis

ts, s

o no

loss

of c

ontro

l

•Im

porta

nt c

atal

yst f

or ju

mps

tarti

ng jo

bs a

nd in

nova

tion,

le

adin

g to

pro

duct

s th

at b

enef

it pu

blic

hea

lth a

nd s

afet

y

FED

ERA

L G

OVE

RN

MEN

T A

ND

INN

OVA

TIO

N B

ON

DS

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

11

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts

via

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Wha

t is

the

Fede

ral A

cqui

sitio

n R

egul

atio

n?

•Def

initi

on o

f the

Oth

er T

rans

actio

n A

utho

rity

•His

tory

of t

he O

ther

Tra

nsac

tion

Aut

horit

y (e

.g.

NA

SA

, DA

RPA

)

•The

Oth

er T

rans

actio

n A

utho

rity

perm

its

com

mer

cial

agr

eem

ents

, with

out b

urde

nsom

e le

gacy

sys

tem

•Oth

er T

rans

actio

n A

utho

rity

is fe

asib

le th

roug

hout

al

l Fed

eral

age

ncie

s

OTH

ER T

RA

NSA

CTI

ON

AU

THO

RIT

Y A

ND

CO

MM

ERC

IAL

AG

REE

MEN

TS

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

TRA

NSL

ATIO

NA

L FI

NA

NC

ING

OB

STA

CLE

S A

ND

SO

LUTI

ON

S

13

Phase 1 ‐ R

esearch

(Fun

ding

 Gap)

Phase 2 ‐ Tria

ls(Fun

ding

 Gap)

Phase 3 ‐ Tria

ls

IF (A

ll Ph

ases)

30.1

20.1

2IF (P

h1 & Ph2)

30.2

21

3IF (P

hase 1 only)

3.45

12.3

13

Tradition

al Fun

ding

 Mod

el4

13

13

02

46

810

1214

IF (A

ll Ph

ases)

IF (P

h1 & Ph2

)

IF (P

hase 1 only)

Trad

ition

alFund

ing Mod

el

TIme to Com

mercia

l Availability (Yrs)

Phase 1 ‐ R

esearch

(Fun

ding

 Gap)

Phase 2 ‐ T

rials

(Fun

ding

 Gap)

Phase 3 ‐ T

rials

•A

dmin

istra

tive

burd

ens

•Fu

ndin

g ga

ps•

Unc

erta

in m

arke

t co

mm

itmen

tsLe

gacy

ob

stac

les

Inno

vatio

n Fi

nanc

ing

solu

tions

•C

omm

erci

al

agre

emen

ts•

Fund

ing

cont

inui

ty li

nks

•M

ilest

one

succ

ess

paym

ents

•A

dvan

ce m

arke

t com

mitm

ents

•Li

mite

d co

inve

st-

men

t*

•Ex

tens

ive

coin

vest

-m

ent*

*Ava

ilabl

e C

o-in

vest

men

t = n

et p

rese

nt v

alue

(NP

V) o

f mile

ston

es a

nd a

dvan

ce m

arke

t com

mitm

ents

, adj

uste

d fo

r con

tinui

ty li

nk ri

sk

and

adm

inis

trativ

e bu

rden

/del

ay ri

skS

ourc

e: T

eam

ana

lysi

s

NP

V c

ash

flow

sou

rces

??

?

??

??

?

?

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Why

not

just

refo

rm th

e Fe

dera

l Acq

uisi

tion

syst

em?

•NA

SA

and

DA

RPA

dea

l with

com

plex

pro

blem

s, a

nd

com

mer

cial

izat

ion

intro

duce

s ev

en m

ore

stak

ehol

ders

•Com

mer

cial

agr

eem

ents

allo

w fo

r col

labo

rativ

e fin

anci

ng –

cruc

ial i

n th

e R

&D

spa

ce

•Com

mer

cial

agr

eem

ents

rais

e th

e ce

iling

on

deal

co

mpl

exity

, a q

ualit

ativ

e, d

ynam

ic c

hang

e

THE

DYN

AM

IC P

OTE

NTI

AL

OF

CO

MM

ERC

IAL

AG

REE

MEN

TS

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

15

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•It t

akes

tim

e to

dev

elop

new

ass

et c

lass

es to

fin

ance

pro

ject

s in

new

mar

ket s

egm

ents

•Fin

ance

able

pro

ject

s ca

n cr

eate

new

leve

ls o

f liq

uidi

ty a

nd c

atal

yze

fast

er, l

arge

r dea

l flo

w

•Con

vent

iona

l pro

ject

fina

ncin

g to

ols

depl

oyed

for

the

first

tim

e in

the

inno

vatio

n sp

ace

can

grea

tly

acce

lera

te A

mer

ican

inno

vatio

n in

the

21st

cent

ury

MA

RK

ET G

RO

WTH

AN

D A

CC

ELER

ATIO

N

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

17

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Prod

ucts

, Job

s, a

nd

Econ

omic

Gro

wth

•Q

&A

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

•Eas

ier p

roje

ct fi

nanc

ing

will

incr

ease

inno

vatio

n pr

ojec

t dea

l flo

w

•Inn

ovat

ion

proj

ects

are

big

job

crea

tors

of h

igh

valu

e jo

bs

•If R

&D

mov

es 2

x fa

ster

, with

2x

priv

ate

coin

vest

men

t, th

en R

&D

sec

tor e

cono

mic

gro

wth

ca

n in

crea

se b

y up

to 4

00%

IMPA

CT:

INN

OVA

TIO

N P

RO

DU

CTS

, JO

BS

AN

D

ECO

NO

MIC

GR

OW

TH

Inno

vatio

n Fi

nanc

ing

Rou

ndta

ble

CO

NTE

NTS

19

•In

trodu

ctio

n

•R

&D

Bus

ines

s Fr

amew

ork

•In

nova

tion

Bon

ds

•Va

lue

Cre

atio

n: C

omm

erci

al A

gree

men

ts v

ia

Oth

er T

rans

actio

n A

utho

rity

•M

arke

t Gro

wth

and

Acc

eler

atio

n

•Im

pact

: Inn

ovat

ion

Pro

duct

s, J

obs,

and

E

cono

mic

Gro

wth

•Q

&A

•Que

stions, answers a

nd disc

ussio

n

For f

urth

er in

form

atio

n:

•Tin

a N

eal,

Prin

cipa

l, P

erse

vera

nce

Cap

ital A

dvis

ors

LLC

tnea

l@pe

rsev

eran

ce-c

apita

l.com

804-

334-

2507

•Sam

uel M

oyer

, Ana

lyst

,In

nova

tion

Fina

ncin

g R

ound

tabl

esa

mue

l.moy

er91

@gm

ail.c

om70

3-77

2-12

84

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Audien

ce Que

stions

Subm

it your questions to

 the panel now

 by using the GoToW

ebinar

control panel.

Fund

amen

tals

of D

evel

opm

ent F

inan

ceB

ond

Fina

nce

Tax

Incr

emen

t Fin

ance

Tax

Cre

dit F

inan

ceR

evol

ving

Loa

n Fu

nd F

inan

ceFe

dera

l Fin

anci

ng P

rogr

ams

Sta

te &

Loc

al F

inan

cing

Pro

gram

s

Ene

rgy

Fina

nce

Inno

vatio

n Fi

nanc

e –

See

d, A

ngel

& V

entu

re C

apita

lB

row

nfie

ld F

inan

ceTr

ansp

orta

tion

Fina

nce

Acc

ess

to C

apita

l Fin

ance

Spe

cial

Dis

trict

Fin

ance

Pub

lic-P

rivat

e P

artn

ersh

ip F

inan

ce

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Upcom

ing Events at C

DFA

Intro Tax Increm

ent Finance W

ebCo

urse

Novem

ber 1

2‐13, 2013

Daily: 12‐5p

m (E

ST)

Intro Energy Finance W

ebCo

urse

December 1

1‐12, 2013

Daily: 12‐5p

m EST

Fund

amentals WebCo

urse

Janu

ary 29

‐30, 2014

Daily: 12‐5p

m EST

Register Online at www.cdfa.ne

t

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Join Us for Future Web

casts

CDFA //

BNY MELLO

N DEV

ELOPM

ENT FINAN

CE W

EBCA

ST SERIES

Topic An

noun

ced Soon

Tuesday, Novem

ber 1

6 @ 1:00p

m EDT

WWW.C

DFA

.NET

//

WWW.BNYM

ELLO

N.C

OM

Rena

 Nakashima

Senior Produ

ct M

anager

213‐630‐61

71rena.nakashim@bn

ymellon.com

The

mat

eria

l con

tain

ed h

erei

n is

for i

nfor

mat

iona

l pur

pose

s on

ly.

The

cont

ent o

f thi

s is

not

inte

nded

to p

rovi

de a

utho

ritat

ive

finan

cial

, leg

al, r

egul

ator

y or

oth

er p

rofe

ssio

nal

advi

ce.

The

Ban

k of

New

Yor

k M

ello

n C

orpo

ratio

n an

d an

y of

its

subs

idia

ries

mak

es n

o ex

pres

s or

impl

ied

war

rant

y re

gard

ing

such

mat

eria

l, an

d he

reby

exp

ress

ly d

iscl

aim

s al

l le

gal l

iabi

lity

and

resp

onsi

bilit

y to

per

sons

or e

ntiti

es th

at u

se th

is re

port

base

d on

thei

r rel

ianc

e of

the

info

rmat

ion

in s

uch

repo

rt. T

he p

rese

ntat

ion

of th

is m

ater

ial n

eith

er

cons

titut

es a

n of

fer t

o se

ll no

r a s

olic

itatio

n of

an

offe

r to

buy

any

secu

ritie

s de

scrib

ed h

erei

n.

Contact U

s

Katie

 Kramer

Director, Edu

catio

n & Program

s614‐224‐13

16kkramer@cdfa.net