University of Twente Funding your company, opportunities, rules                    26 January 2012           Harm de Vries...
A technology spin-offi s a n e w c o m p a ny f o u n d e d     to exploit a piece of    i n t e l l e c t u a l p ro p e ...
Creating a company is not a     new research project; it is a business project thatis able to turn a technology    or an i...
Spin-off ProcessDecision Phase Separation Phase Post             Harm de Vries - Twente Technology Fund
Why Commercialise IP?•   Non-core business, thus more focus / less distraction•   Better development in entrepreneurial en...
Spin-off or License?Spin-Off           +           •           •           •               Upside	 potential	             ...
Venture                                                                             Capitalist                     Common ...
Separation Phase•   Transfer of IP (how?)•   Future Collaboration (R&D, launching    customer)•   Transfer / use of person...
Post Separation PhaseFinancing •   Bank loan •   Grants •   Friends & family •   Venture Capital                 Harm de V...
VC Criteria•   Unique product(s) and/or technology platform•   Skilled and committed team (with entrepreneurial spirit)•  ...
Investment ProcessSourcing                                                            Syndication &           Contract dra...
Term Sheet•   Focuses parties•   Secures exclusive position•   Reduces future misunderstandings•   Sets a time line for ne...
use of                                                                                                                    ...
 I
 pay
 the
 right
                                                                                        price?liquidation                 ...
corporate                                                                                      business planning  governan...
 will
 the        informationveto rights       funds
 be
             rights                         used? shareholders                                                            ...
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Ppt ttf inzake spin outs 03-04-12

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Ppt ttf inzake spin outs 03-04-12

  1. 1. University of Twente Funding your company, opportunities, rules 26 January 2012 Harm de Vries - Twente Technology Fund
  2. 2. A technology spin-offi s a n e w c o m p a ny f o u n d e d to exploit a piece of i n t e l l e c t u a l p ro p e r t y created in an academic institution or company Harm de Vries - Twente Technology Fund
  3. 3. Creating a company is not a new research project; it is a business project thatis able to turn a technology or an invention into a shareholders’ return. Harm de Vries - Twente Technology Fund
  4. 4. Spin-off ProcessDecision Phase Separation Phase Post Harm de Vries - Twente Technology Fund
  5. 5. Why Commercialise IP?• Non-core business, thus more focus / less distraction• Better development in entrepreneurial environment• Better external financing solutions (share risk and rewards with other parties)• Expand presence in the marketplace• Allow quicker growth than in the mother company• No more drain on mother company’s resources Harm de Vries - Twente Technology Fund
  6. 6. Spin-off or License?Spin-Off + • • • Upside potential Control Focus - • • • Financial risk Active role Wait for return • Employment • Quick return Royalties • Limited upside License • No further investments / involvement • Loss of control (shelving)? • Sit back and wait • Finding a proper licensee Harm de Vries - Twente Technology Fund
  7. 7. Venture Capitalist Common Labour & s re know-how a Shares ShIP Transfer d re Research Coll. Capital er ef NewCo Pr Office spaceSeparation Phase Post Separation Harm de Vries - Twente Technology Fund
  8. 8. Separation Phase• Transfer of IP (how?)• Future Collaboration (R&D, launching customer)• Transfer / use of personnel• Investment in cash or in kind Harm de Vries - Twente Technology Fund
  9. 9. Post Separation PhaseFinancing • Bank loan • Grants • Friends & family • Venture Capital Harm de Vries - Twente Technology Fund
  10. 10. VC Criteria• Unique product(s) and/or technology platform• Skilled and committed team (with entrepreneurial spirit)• Solid IP and IP ownership• Clear market and medical need• Exit potential within 3-5 years• High expected internal rate of return (IRR)• Realistic valuation Harm de Vries - Twente Technology Fund
  11. 11. Investment ProcessSourcing Syndication & Contract drafting due diligenceMeetings Closing Term SheetDue diligence Negotiations & Structuring Harm de Vries - Twente Technology Fund
  12. 12. Term Sheet• Focuses parties• Secures exclusive position• Reduces future misunderstandings• Sets a time line for negotiations and closing• Addresses the main concerns of VC investors 1. Did I pay the right price? 2. How will the funds be used? 3. How and when can I exit? 4. How can I retain the key persons? Harm de Vries - Twente Technology Fund
  13. 13. use of anti-dilution syndicationmilestones protection Did
  14. 14.  I
  15. 15.  pay
  16. 16.  the
  17. 17.  right
  18. 18.   price?liquidation stagedpreference investments Harm de Vries - Twente Technology Fund
  19. 19. corporate business planning governance How
  20. 20.  will
  21. 21.  the informationveto rights funds
  22. 22.  be
  23. 23.   rights used? shareholders board consent representations Harm de Vries - Twente Technology Fund
  24. 24. registration rightstag along right (IPO) How
  25. 25.  and
  26. 26.   when can
  27. 27.  I
  28. 28.  exit?drag along right redemption rights Harm de Vries - Twente Technology Fund
  29. 29. option plan share ownership lock - up How
  30. 30.  can
  31. 31.  I
  32. 32.  retain
  33. 33.  the
  34. 34.   key
  35. 35.  persons?reversed vesting employment contract Harm de Vries - Twente Technology Fund
  36. 36. Incorporation Incorporation Common % Shares HoldingProfessor A 600,000 60%University 400,000 40%Total 1,000,000 100% Harm de Vries - Twente Technology Fund
  37. 37. Angel Round Pre financing Seed round Post financing Common % Shares Total % Shares Holding Amount issued # Shares HoldingProfessor A 600,000 60% 600,000 40%University 400,000 40% 400,000 27%Angel 0% €250,000 500,000 500,000 33%Total 1,000,000 100% €250,000 500,000 1,500,000 100%Valuation Pre-money €500,000 Price per share €0.50 Investment round €250,000 Post-money €750,000 Harm de Vries - Twente Technology Fund
  38. 38. Series A Round Pre financing Series A Post financing Common % Shares Issuance Total % Shares Holding Amount issued ESOP # Shares HoldingProfessor A 600,000 40% 600,000 27%University 400,000 27% 400,000 18%Angel 500,000 33% 500,000 23%VC 1 €2,000,000 600,000 600,000 27%ESOP 110,000 110,000 5%Total 1,500,000 100% €2,000,000 600,000 110,000 2,210,000 100%Valuation Pre-money €5,000,000 Price per share €3.33 Investment round €2,000,000 Post-money €7,000,000 Harm de Vries - Twente Technology Fund
  39. 39. Series B Round Pre financing Series B Post financing Common Pref Total % Shares Issuance Total % Shares Series A # shares Holding Amount issued ESOP # Shares HoldingProfessor A 600,000 - 600,000 27% 600,000 17%University 400,000 - 400,000 18% 400,000 11%Angel 500,000 - 500,000 23% 500,000 14%VC 1 600,000 600,000 27% €3,500,000 442,000 1,042,000 29%VC 2 - - 0% €6,500,000 820,857 820,857 23%ESOP 110,000 - 110,000 5% 65,000 175,000 5%Total 1,610,000 600,000 2,210,000 100% €10,000,000 1,262,857 65,000 3,537,857 100%Valuation Pre-money €17,500,000 Price per share €7.92 Investment round €10,000,000 Post-money €27,500,000 Harm de Vries - Twente Technology Fund
  40. 40. Series C Round Pre financing Series C Post financing Common Pref Total % Shares Issuance Total % Shares Series A+B # shares Holding Amount issued ESOP # Shares HoldingProfessor A 600,000 - 600,000 17% 600,000 9%University 400,000 - 400,000 11% 400,000 6%Angel 500,000 - 500,000 14% 500,000 7%VC 1 1,042,000 1,042,000 29% €5,000,000 321,623 1,363,623 20%VC 2 820,857 820,857 23% €5,000,000 321,623 1,142,481 16%VC 3 - - 0% €15,000,000 964,870 964,870 14%VC 4 - - 0% €15,000,000 964,870 964,870 14%ESOP 175,000 - 175,000 5% 875,000 1,050,000 15%Total 1,675,000 1,862,857 3,537,857 100% €40,000,000 2,572,987 875,000 6,985,844 100%Valuation Pre-money €55,000,000 Price per share €15.55 Investment round €40,000,000 Post-money €95,000,000 Harm de Vries - Twente Technology Fund
  41. 41. IPO Pre financing IPO Post IPO Common Pref Pref Pref Total Conversion % Shares Total % Shares Series A Series B Series C # shares Stock split Holding Amount issued # Shares HoldingProfessor A 600,000 600,000 715,733 9% 715,733 6%University 400,000 400,000 477,155 6% 477,155 4%Angel 500,000 500,000 596,444 7% 596,444 5%VC 1 600,000 442,000 321,623 1,363,623 1,626,651 20% 1,626,651 14%VC 2 820,857 321,623 1,142,481 1,362,852 16% 1,362,852 12%VC 3 964,870 964,870 1,150,983 14% 1,150,983 10%VC 4 964,870 964,870 1,150,983 14% 1,150,983 10%Flotation - €50,000,000 3,333,333 3,333,333 29%ESOP 1,050,000 1,050,000 1,252,533 15% 1,252,533 11%Total 2,550,000 600,000 1,262,857 2,572,987 6,985,844 8,333,333 100% €50,000,000 3,333,333 11,666,667 100%Valuation IPO Pricing €125,000,000 Price per share (before split) €17.89 Investment round €50,000,000 Price per share (after split) €15.00 Postmoney €175,000,000 Harm de Vries - Twente Technology Fund
  42. 42. Titel: Venture Capital Term Sheets “a guide to structuring and negotiating venture capital transactions” Authors: H.F. de Vries and M.J. van Loon Publisher: Reed Business Information ISBN13: 9789059016323 !Harm de Vries - Twente Technology Fund

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