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 a positive outcome as well as a process overview and timeline.

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

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

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