Technology Transfer Accelerator Turkey

(“TTA Turkey”)

Information Session

1

5 August 2014

Istanbul

Agenda

2

1. About EIF

EIF Resources, Governance and Investments

Equity Highlights

EIF Technology Transfer: History and Characteristics

2. About TTA Turkey

Background, Structure and Objectives

TTA Turkey Fund

Targets, Investment Criteria, Investment Process and Structure

Main Terms & Conditions, Flow of Funding, Time Frame and Process

Investment Considerations and Assessment Criteria

What is the EIF?

3

The leading developer of

risk financing for entrepreneurship

and innovation across the EU

“ ”

Fulfilling

our dual goal and

pursuing EU

policy objectives as

well as financial

sustainability

Addressing

market needs by

acting as a

countercyclical

investor in tough

economic times

Working

with financial

intermediaries across

the 27 EU countries,

EFTA and all

Accession countries

Helping

SMEs, micro-

enterprises and

European regions

innovate and grow

by making finance

more accessible

Lower

Mid-Market

Expansion/

Development

Capital

Early Stage

Business Angels

Involved throughout the Business Cycle

4

EIF

C

urrent

Investm

ent Focus

Strate

gic

C

hallenges

Technology Transfer

Proof of Concept

Business Angels

Seed Stage

Technology

Transfer Accelerator

Catalyse hybrid debt

finance for growth

Support VC

ecosystem

and decrease

dependency

on public finance

Fill funding gap left by

institutional investors

Instruments to stimulate

innovation, competitiveness

and cross-border investment

Investing in

VC funds

Investing in

Growth Capital Mezzanine

European Commission Resources EIB / EIF Resources Member States / Private Sector Resources

EIF’s Resources

5

EIF manages resources

from different stakeholders “ ”

European Investment

Bank

Risk Capital Mandate

(RCR) 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

Equity Highlights

6

2012 2011 2010 2009 2008

Equity Signatures

PE Assets under

Management

1 350 1 126 930 733 409

6 952 5 919 5 367 4 103 3 535

(EUR / m)

2013

1 468

7 904

EIF’s Governance

7

Committed to the highest standards

of governance and integrity “ ”

Audit Board

and both in- and

external auditors

oversee Chief Executive

and Board of Directors

Risk

Management,

Legal

and compliance units

Chief

Executive

is responsible for

the day-to-day

management of

the EIF

Board of

Directors

has a supervisory

role and approves all

EIF transactions

EIF Technology Transfer

Aims to Bridge the Gap between the Research and the Market

8

R&D Technology Transfer

“Technology IP”

Marketable Product

“Prototype IP”

University /

Research

Organisation

Market

IP / Idea

Spin-out

Licensing

Collaboration

(Contract Research)

EIF Technology Transfer

History and Characteristics

History of EIF Technology Transfer Investments

Scale-up of activities since TTA study (2005)

No dedicated mandate

Investments so far with own resources, the European Commission and the EIB

33 operations in total

Characteristics of Technology Transfer Operations

Different shapes and sizes

Long lead times and low transformation ratio

Key point: Scale

Difficult fundraising periods

9

Close collaboration with TTOs

Access to good scientific research

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 10-20 years

IP adequately protected under relevant legislation

Minimum critical size ca. EUR 20-30m

10

Long-term, Sustainable Vehicles

With Like-Minded Investors

Agenda

11

1. About EIF

EIF Resources, Governance and Investments

Equity Highlights

EIF Technology Transfer: History and Characteristics

2. About TTA Turkey

Background, Structure and Objectives

TTA Turkey Fund

Targets, Investment Criteria, Investment Process and Structure

Main Terms & Conditions, Flow of Funding, Time Frame and Process

Investment Considerations and Assessment Criteria

TTA Turkey

12

This project is co-financed by the European Union

and the Republic of Turkey

This financing is provided from IPA funds allocated to Regional

Competitiveness Operational Programme which is supported by EU and

Republic of Turkey. The Contracting Authority of this Project is the Ministry of

Science, Industry and Technology, DG for EU and Foreign Relations, IPA-PO,

and final beneficiary is the Scientific and Technological Research Council of

Turkey.

TTA Turkey – Project Level

Background

13

Funded by IPA monies

Deadline for Project Implementation: 31 December 2017

End Beneficiary: The Scientific and Technological Research Council of Turkey

(TÜBİTAK)

Project Amount: EUR 30.5 million

Project Components:

1. Cornerstone TTA Turkey Fund – EUR 26.3 million

2. Advisory Services and Networking for TTOs and TÜBİTAK – EUR 1.35 million

3. Visibility – EUR 200,000

4. Impact Evaluation – EUR 100,000

2012 2013 2014

Market Needs Assessment carried out

Business Plan for the Project submitted

Negotiations and Approval

Signature Date: July 2014

2015 2016 2017

14

TTA Turkey

Project Structure and Main Objectives

TTA Turkey’s main purpose is to:

Establish an independently managed Technology Transfer Accelerator Fund that invests in commercialisation of

technology intensive research coming out of universities and research centres

Increase the R&D commercialisation capacities of TTOs so that they can play a successful interface role between the

industry and the university

IPA Resources

EIF as Advisor & Project Manager

IPA Commitment

to

TTA Turkey Fund

Advisory

Services and

Networking

(Technical

Assistance)

TTOs

TÜBİTAK

Visibility

Impact

Evaluation

proceeds

15

TTA Turkey Fund

Target Investments and Region

TTA Turkey to invest in:

proof of concept generation projects

university / research center spin-offs,

start-ups

intellectual property (IP) assets /

projects

return for equity into start-ups, spin-

offs, and SMEs

100% of the investments to be made in

Turkey

A minimum of 30 projects to be

selected by the Fund Manager by

31 December 2017

At least 15 projects shall be identified

and invested in the Target Region (12

NUTS II, 43 provinces)

16

TTA Turkey Fund

Envisaged Structure

17

Target Fund Size

Indicative Maximum Amount of Funding

EUR 30 million

EUR 40 million

Maximum Contribution from IPA Funds

Minimum Third Party Capital (Private Investors)

Applicant’s Own Commitment in the Fund

EUR 26.3 million

EUR 2.8 million

1-5% of the total Fund size

Maximum Investment Amount to a Single

Company/Project

EUR 2.5 million

Over 12 months

Maximum Duration of the Fund 10 years

Possibility of extension for 1+1 years 12 years

Deadline for the Fund’s Investment / Selection

Period

Deadline for Disbursements by the Fund

31 December 2017

31 December 2017

Portfolio Diversification Minimum of 30 projects/companies

Target Industry Sectors Generalist with preferred and excluded sectors

as covered in details in the Call for EoI

Main Terms & Conditions

18

Envisaged Flow of Funding

IPA Contracting Authority

EIF Special Account

TTA Fund

Co A Co B Co C Co D Co D Start

up

1 2 3 4 5 6

1 2 3 4 5 6 1 2 3 4 5 6

1 2 3 4 5 6

Monies to Special Account

Monies to Fund on Capital Calls from Fund Manager based on establishment of Companies once start up invested

Monies to Companies once Projects identified – before 31 Dec 2017

Monies to projects on milestone basis during the Term of the Fund

Monies to Contracting Authority from Special Account – after 31 Dec 2017 Thereafter from whomever transfer of holding has been made to (if anybody)

Monies to Special Account on receipt from TTA Fund

Monies to Fund due to project spin-outs, licensing, contract research with consequent dividend payment

Monies to Companies from successful projects on spin-outs, licensing, contract research, other

Co D Start

up

Time Frame and Process

19

Next Steps Deadline

Requests for Clarifications from Applicants Accepted Friday, 15 August 2014

EIF to Reply to Clarification Requests Friday, 22 August 2014

Call for EoI Open for Applications Thursday, 11 September 2014

First Screenings September 2014

Scoring and Second Screenings October 2014

Due Diligence of Shortlisted Applicants October 2014

Legal Negotiation & Execution December 2014

Assessment Criteria & Scoring

20

QUALITY ASSESSMENT CRITERIA WEIGHTING

1

Project Relevance, Quality and Coherence

• Evaluation of the Fund focus and proposed investment strategy, including viability of Fund’s size.

• Evaluation of the Fund Manager’s team profile, including but not limited to:

(i) Team stability and dynamics.

(ii) Its ability to implement the Financial Instrument

(iii) Operational, financial, technical and VC competences. Capabilities as members of Boards and/or

committees of an investment and/or advisory nature.

(iv) Prior experience in technology transfer field, commercialisation of research and development, business

development, IP law.

• Evaluation of Applicant’s investment processes, including deal flow generation, ability to invest, ability to add value to

companies and exit strategy.

40 points

2 Project Maturity, Investment Readiness

• Demonstration of ability to raise at least EUR 2.8 million of the Fund from private investors.

• Demonstration of ability to source deals in Turkey (SMEs/projects).

• Investment readiness of the proposed structure like maturity of the proposed legal structure, including internationally

proven best market practices; outline of any different legal entities required; planned establishment costs and details

thereof; detailed term sheet; proposed law firm etc. in order to execute the closing of the fund timely and efficiently.

40 points

3 Institutional Capacity & Sustainability

• Fund Manager organisation, structure and long-term viability.

• Assessment of the corporate governance in place.

• Assessment of legal structures and independence.

• Terms and Conditions, including management fee and profit share arrangements.

• Assessment of the alignment of interests between the Fund Manager and the Investors.

• Assessment of Reporting and Control Procedures.

20 points

Investment Process and Indicative

Timelines

Understand

concept

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

reviews importance of

legal counsel

21

First Screening Second

Screening Due Diligence

Board

Approval

12 months

22

First Screening Second Screening Due Diligence Board Approval

Partner

Institutions Market

Investment

Strategy Deal flow

Potential

Investors

Investment

Process Team Track Record

Governance Management

Company Economics

Remuneration

/ Incentives

Investment Considerations

Criteria (1/4)

Partner Institutions

Metrics: Research budget, peer group

comparisons, invention disclosures, IP

filed, IP awarded, growth rates,

commercialisation income,

encumbrances, 3rd party agreements

Structure: Organisation structure 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

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 on previous

examples

23

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 years

evolution of deal flow by source, sector,

etc.

Selectivity Ratio: Historical examples /

experience

Pipeline: Current and future

opportunities

Deal flow and pipeline

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

remuneration / 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: Bodies, or

individuals take final decisions at each

stage, delegations foreseen

Potential Investors Investment Process

24

Market / Competitors

Trends: Targeted sectors, challenges

faced, evolution in previous years

Competitors: Financing, other sources of

finance, private / public

Demand Side Economics: Analysis and

evidence of demand for targeted projects

Criteria (2/4)

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: Years 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: 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

25

Criteria (3/4)

History: Evolution, founders, key dates

and events in development, significant

changes in organisation, strategy,

ownership

Legal Status: Capital structure,

ownership

Regulation: How the management

company shall be regulated, adherence

to AML/KYC

Budget: Detailed forecast budget for

Management Company over lifetime of

the 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 investments

to fund align 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 Company Economics Remuneration / Incentives

26

Criteria (4/4)

Contacts

27

Open Call for Proposals

For Communication:

tta_turkey@eif.org

European Investment Fund

37B, Avenue J. F. Kennedy

L-2968 Luxembourg

Tel.: (+352) 42 66 881

Fax: (+352) 42 66 88 200

www.eif.org

Technology Transfer Accelerator Turkey

(“TTA Turkey”)

Information Session

28

5 August 2014

Istanbul