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September 2011 - Michigan Pre-Seed Capital Fund and Microloan Update Brown Bag Lunch Presentation
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September 2011 - Michigan Pre-Seed Capital Fund and Microloan Update Brown Bag Lunch Presentation

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Join Ann Arbor SPARK for an update on the Michigan Pre-Seed Capital Fund and Microloan programs from Senior Vice President, Skip Simms. The update will include details concerning eligibility, tips for …

Join Ann Arbor SPARK for an update on the Michigan Pre-Seed Capital Fund and Microloan programs from Senior Vice President, Skip Simms. The update will include details concerning eligibility, tips for a positive outcome as well as a process overview and timeline.


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  • 1. MICHIGAN PRE-SEED CAPITAL FUND
    A collaborative effort of the Michigan SmartZones
  • 2. Michigan SmartZones
    7
    12
    1.Ann Arbor SPARK
    2.Automation Alley
    3.Rochester Hills/Oakland University Incubator
    4.Battle Creek Aviation
    5.Detroit/Woodward Technology Corridor – TechTown
    6.Grand Rapids
    7.Houghton/Michigan Tech Enterprise
    8.Kalamazoo
    9.Lansing Regional
    10.Mt. Pleasant/Center for Applied Research & Technology
    11.Muskegon Lakeshore
    12. Sault Ste Marie
    13. Jackson Technology Park
    14. Macomb INCubator
    10
    11
    6
    2
    3
    9
    14
    5
    1
    8
    4
    13
    http://www.michiganadvantage.org/Michigan-SmartZone-Network/
  • 3. Michigan Pre-Seed Capital Fund
    The Michigan Pre-Seed Capital Fund supports emerging high-tech companies by providing access to early-stage capital investment or micro loans to accelerate company development, bringing innovative technologies to the marketplace more quickly. The Michigan Pre-Seed capital Fund is funded by the Michigan Strategic Fund and supported by the Michigan Economic Development Corporation.
  • 4. Funding Amount
    The Pre-Seed Fund will invest
    $50,000 to $250,000
    per company
    alongside an investment partner
    who will provide a minimum 1:1 match.
    New Micro Loan Fund will provide loans between $10,000 and $50,000
    per company.
    No match requirement.
  • 5. Pre-Seed Definition
    Less than $1 million outside investment
    Less than $1 million trailing 12 months sales
  • 6. Criteria/Eligibility for Pre-seed Investment
    Companies must meet the following criteria:
    located in or moving to Michigan
    company must have the rights (ownership or license) to innovative technology
    must be a small business (per the SBA)
    cannot be a publicly held company, but may be a spin-out as a new private entity
    have a plan for attracting additional funding or become cash flow positive
    pass the due diligence review of a SmartZone
    submit their match term sheet or grant approval
    The match must be new money into the company.
    The following do not qualify as matching funds:
    Other State monies
    Anticipated or current company revenues
    In-kind salary deferrals
    Other trade partner exchanges or trades
  • 7. Other Investment Matters
    Use of funds could include but are not limited to:
    intellectual property investigation and protection
    partnership relations
    first/next customer attraction
    building out management team
    Background checks will be made on founder(s)/CEO paid by fund administrator.
    A company can only be approved for funding once.
    A company may reapply once.
    A convertible note will be the default investment instrument for companies without a term sheet.
  • 8. Application
    The submission package must include:
    Business plan (maximum 30 pages counting financial pages)
    Company overview
    Market information
    Operations
    Product description
    Management
    Use of funds – milestones
    Financial history and projections
    5 year proforma
    Cash flow, P&L and Balance sheet forecasts
    List of assumptions
    Financial statements
    Matching source Term Sheet, proposal, grant approval, subscription agreement
    Certificate of Good Standing with the State of Michigan
    http://www.annarborusa.org/business-accelerator/funding-incentives/pre-seed-fund/due-diligence
  • 9. Investment Review
    The Pre-Seed Fund has an Investment Review Board (IRB) made up of experienced investment professionals from around the state.
    The IRB will review deal submissions continuously and provide constructive feedback to applicants whether or not they recommend funding.
    The IRB will look for the best opportunity to fund.
    from any community in the state
    no quotas
    The review criteria will assess the Company’s potential to be:
    self sustaining
    create jobs in Michigan
    ultimately repay the investment
    http://www.annarborusa.org/business-accelerator/funding-incentives/ann-arborypsilanti-ldfa-microloan-program
  • 10. Deal Acceptance
    The Investment Review Board will accept the deal in whole or not at all.
    The co-investing organization or angel terms and investment instrument will be used.
    The following information will be required of each successful company, in addition to any specific milestone information required by the matching investor:
    Number of new patents, copyrights, trademarks applied for and issued
    Annual sales/revenues
    Number of new jobs, existing jobs, and projected new job growth
    Follow-on investment figures and other metrics to gauge the positive effect on Michigan's progress toward building a competitive edge technology economy
  • 11. Timeline
    The Pre-Seed Fund will accept applications at any time.
    Applications are screened for completeness, then forwarded to the IRB for review.
    Reviews will be concluded and sent to the Fund Administrator within two months.
    The Fund Administrator will summarize the IRB comments and scores, forwarding to the Smart Zone and company upon decision.
    Documentation execution and funding will be conducted on the matching fund source schedule.
  • 12. Criteria/Eligibility for Micro Loan
    Companies must meet the following criteria:
    located in Michigan
    company must have the rights (ownership or license) to innovative technology
    must be a small business (per the SBA)
    cannot be a publicly held company, but may be a spin-out as a new private entity
    have a plan for attracting additional funding or become cash flow positive
    pass the due diligence review of a SmartZone
    No match required
  • 13. Other Loan Matters
    Use of funds could include but are not limited to:
    intellectual property investigation and protection, but not patent application
    market and technology assessments
    partnership relations
    first/next customer attraction
    Background checks will be made on founder(s)/CEO.
    A company may reapply once.
  • 14. Loan Terms
    Subordinated Note: Subordinate to all other debt holders, current and future
    Interest rate is 12%
    Term is 2 years
    Default provisions:
    Failure to pay when due
    Violation of any covenant, agreement or condition in the note
    Bankruptcy or dissolution of the company
    Fewer than a majority of employees in Michigan
    Reporting for five years
    Quarterly financial statements
    Number of employees and new hires
    Sales
    New IP
    Grants and investments received
    http://www.annarborusa.org/business-accelerator/funding-incentives/ann-arborypsilanti-ldfa-microloan-program
  • 15. Other Loan Matters
    Loans may be made in two tranches
    Reviewers may recommend a lower amount to loan
    Reviewers may recommend the loan be paid per commercialization step accomplishments
    Second tranche payment based on intermediate milestone achievement, but not guaranteed
  • 16. Application
    The submission package must include:
    Business plan (maximum 10 pages counting financial pages)
    Company overview
    Market information
    Operations
    Product description
    Summary of management talent
    Financial history and projections
    Use of funds
    Entrepreneur Bio or CV
    Letter of support from SmartZone
    Certificate of Good Standing with the State of Michigan
  • 17. Timeline
    The Fund will accept applications at any time.
    Applications are screened for completeness by the SmartZone and Administrator, then forwarded to the reviewers.
    Reviews will be concluded and sent to the Fund Administrator within two months.
    The Fund Administrator will forward to the SmartZone and company with the recommendation plus scoring sheet with comments.
    Loan documentation execution and funding will be completed following successful background check.
  • 18. Michigan SmartZones
    7
    12
    1.Ann Arbor SPARK
    2.Automation Alley
    3.Rochester Hills/Oakland University Incubator
    4.Battle Creek Aviation
    5.Detroit/Woodward Technology Corridor – TechTown
    6.Grand Rapids
    7.Houghton/Michigan Tech Enterprise
    8.Kalamazoo
    9.Lansing Regional
    10.Mt. Pleasant/Center for Applied Research & Technology
    11.Muskegon Lakeshore
    12. Sault Ste Marie
    13. Jackson Technology Park
    14. Macomb INCubator
    10
    11
    6
    2
    3
    9
    14
    5
    1
    8
    4
    13
    http://www.michiganadvantage.org/Michigan-SmartZone-Network/