Research and
Development
Limited
Partnership
Money given to a firm for developing a technology
that involves a tax shelter
Sponsoring company developing the technolo...
R&D LIMITED PARTNERSHIP
MAJOR ELEMENTS
 Contract
 Sponsoring Company
Limited Partnership
R&D LIMITED PARTNERSHIP
CONTRACT
 Specifies the agreement between the sponsoring company
and limited partnership whereby ...
 A party in a partnership agreement that usually supplies money
and has a few responsibilities.
 Limited partners have l...
 acts as the general partner developing the technology
 General partner - the overall coordinating party in a
partnershi...
 Funding Stage
a contract is established between the sponsoring company
and limited partners,
money is invested for the...
Exit Stage
 commences when the technology is subsequently successfully
developed
 the sponsoring company and the limite...
R&D Limited Partnership
Benefits and Costs
 Provides the funds needed with a minimum
amount of equity dilution while redu...
Examples
Syntex Corp. raised 23.5 million in an R&D
limited partnership to develop five medical
diagnostic products
Gene...
 Grants from the U.S government to small technology-based
businesses
 offers a uniform method by which each participatin...
 Department of Defense (DOD)
 National Aeronautics and space Administration (NASA)
 Department of Energy (DOE)
 Depart...
 Phase I
 Awards are up to 100,000 for six months of feasibility-related
experimental or theoretical research
 Objectiv...
 Government Agencies participating publish solicitations
which contains documentation on the agency's R&D
objectives, pro...
 Five Agencies participate in STTR
 DOD, DOE, DHHS, NASA and NSF
 SBIR vs. STTR program
1. In SBIR program the principa...
 Other grants are available to the entrepreneur at the
federal, state and local levels
 Many different forms, vary on th...
Research and development
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Research and development

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Research and development

  1. 1. Research and Development Limited Partnership
  2. 2. Money given to a firm for developing a technology that involves a tax shelter Sponsoring company developing the technology with funds being provided by the limited partnership of individual investors Good when the project involves a high degree of risks and significant expense  Risks and ensuing Rewards are shared
  3. 3. R&D LIMITED PARTNERSHIP MAJOR ELEMENTS  Contract  Sponsoring Company Limited Partnership
  4. 4. R&D LIMITED PARTNERSHIP CONTRACT  Specifies the agreement between the sponsoring company and limited partnership whereby the sponsoring company agrees to use the funds provided to conduct the proposed research and development that hopefully will result in a marketable technology for the partnership.  Key features:  Liability for any loss incurred is borne by the limited partner  Tax advantages to both the limited partnership and the sponsoring company
  5. 5.  A party in a partnership agreement that usually supplies money and has a few responsibilities.  Limited partners have limited liability but not a total taxable entity. Any tax benefits of the losses in the early stages of R&D limited partnership are passed directly to the limited partners offsetting other income and reducing the partner’s total taxable incomes.  when the technology is successfully developed in later years, the partners share in the profits. R&D LIMITED PARTNERSHIP LIMITED PARTNERS
  6. 6.  acts as the general partner developing the technology  General partner - the overall coordinating party in a partnership agreement  has the base technology which they offer in the partnership in exchange for money but needs funds to further develop and modify it for commercial success  retains the rights to use the base technology to develop other products and in the future for a license fee R&D LIMITED PARTNERSHIP SPONSORING COMPANY
  7. 7.  Funding Stage a contract is established between the sponsoring company and limited partners, money is invested for the proposed R&D effort  terms and conditions of the ownership  scope of the research are documented  Development Stage  sponsoring company performs the actual research, using the funds from the limited partners
  8. 8. Exit Stage  commences when the technology is subsequently successfully developed  the sponsoring company and the limited partners commercially reap the benefits of the effort 3 Basic Types of arrangements:  Equity Partnership- sponsoring company and limited partners form a new, jointly owned corporation, limited partners’ interest can be transferred to equity in the new corporation on a tax-free basis  Royalty Partnerships- royalty based on the sale of the products developed from the technology is paid by the sponsoring company to the R&D limited partnership  Joint Venture- manufacture and market the products developed from the technology
  9. 9. R&D Limited Partnership Benefits and Costs  Provides the funds needed with a minimum amount of equity dilution while reducing the risks involved  Restrictions placed on the technology can be substantial  Exit from the partnership may be too complex and involve too much fiduciary responsibility
  10. 10. Examples Syntex Corp. raised 23.5 million in an R&D limited partnership to develop five medical diagnostic products Genentech successfully develop human growth hormone and gamma interferon products from its 55 million R&D limited partnership that it raised 32 million through a second partnership six months later to develop a tissue-type plasminogen activator Trilogy Limited raised 55 million to develop a high-performance computer
  11. 11.  Grants from the U.S government to small technology-based businesses  offers a uniform method by which each participating agency solicits, evaluates and selects the research proposal for funding  Federal agencies involved in the program develop topics and publishes solicitation describing the R&D topic it will fund  Small businesses submits proposals directly to each agency using required format which is standardized  Agencies evaluates the proposal on a competitive basis and makes reward through a contract, grant or cooperative agreement
  12. 12.  Department of Defense (DOD)  National Aeronautics and space Administration (NASA)  Department of Energy (DOE)  Department of Health and Human Services (DHS)  National Science Foundation (NSF)  U.S Department of Agriculture (USDA)  Department of Transportation (DOT)  Nuclear Regulatory Commission (NCR)  Environmental Protection Agency (EPA)  Department of Education (DOED)  Department of Commerce (DOC)
  13. 13.  Phase I  Awards are up to 100,000 for six months of feasibility-related experimental or theoretical research  Objective: To determine the technical feasibility of the research effort and assess the quality of the company’s performance through a relatively small monetary commitment  Phase II  principal R&D effort for those project showing the most promise at the end of phase I  awards are up to 750000 for 2 years of further research and development  Money is to used to develop prototype products or services  Phase III  does not involve any direct funding from the SBIR program  funds from private sector or regular government procurement contracts are needed to commercialize the developed technologies in Phase III
  14. 14.  Government Agencies participating publish solicitations which contains documentation on the agency's R&D objectives, proposal format, due dates, deadlines, and selection describing the areas of research they will fund  Submission of the proposal by a company or individual  Awards are granted to those projects that have best potential for commercialization  Patent rights, research data, technical data and software generated in the research are owned by the company or individual, not by the government
  15. 15.  Five Agencies participate in STTR  DOD, DOE, DHHS, NASA and NSF  SBIR vs. STTR program 1. In SBIR program the principal investigator must have primary employment with the small business receiving the award while for the duration of the project there is no employment stipulation in the STTR program 2. STTR requires research partners at universities or other nonprofit institutions with at least 40% of the research conducted by the small business and at least 30% conducted by partnering nonprofit institution while SBIR program has a maximum of 33% and 50% in consulting costs.
  16. 16.  Other grants are available to the entrepreneur at the federal, state and local levels  Many different forms, vary on the objectives of the level of the government involved and geographical area  incentive programs for developing technology and technology companies located in the particular state or providing jobs in labor surplus areas

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