Ev base slides final

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Ev base slides final

  1. 1. ELEVATE VENTURESIT’S NOT WHERE A START-UP STARTS. IT’S WHERE IT CAN GO.
  2. 2. 21 FUND – THREE EVOLUTIONS Phase I (1999-2005) – facilitation of university-driven technology transfer into the commercial sector Phase II (2005-2009) – under the IEDC, company-driven technology-based product development in the commercial sector Phase III ( 2009-2011) – post financial crisis, company-driven acceleration of market entry and creation of entrepreneurial wealth, economic impact and jobs2
  3. 3. 21 FUND – LEGACY PORTFOLIO Sector Funding Counties Total Funding Opportunities Represented Amount ($) Academic Labs * 74 6 90.0 million Life Sciences 51 12 66.0 million Information Technology 38 12 47.1 million Advanced Manufacturing 34 15 40.4 million SBIR/STTR Matching 358 24 35.6 million Total** 555 32 279.1 million *University labs and Centers of Excellence were funded pre-dominantly before 2005. ** Only included closed opportunities with duly executed agreements,. According to a 2010 Economic Impact Study by the Ball State University, 21 Fund awards o translated into over $1 billion invested in the development of Indiana’s high- tech sector o created over 11,000 near-term high-paying jobs o made $427 million direct impact on Indiana’s real GDP, after subtraction of opportunity costs3
  4. 4. 21 FUND – PORTFOLIO MAPPING 21 Fund Direct Awards SBIR/STTR Matching Awards o Overall conversion rate is approximately 14% (or a 86% rejection rate) o 42 counties submitted at least one application o Of the 42 counties that applied, 10 did NOT receive an award o 4 counties (St. Joseph, Tippecanoe, Monroe and Marion) account for over 70% of the 21 Fund awards. Star size scaled to the percentage of total dollars4
  5. 5. WHY THE EVOLUTION NEEDS TO CONTINUE?Despite 21 Fund’s continuing progression and contribution to Indiana’s entrepreneurialgrowth, nationally competitive models have been able to demonstrate moreimpressive metrics and results.Jumpstart in Cleveland, OH-2010 Performance o Engaged 37,300 entrepreneurs and community members-7,500 women or minority o Approached by 8,307 entrepreneurs-1,412 women or minority o Received 2,317 business plans from entrepreneurs-771 from woman or minorities o Provided 87,750 hours of free assistance to entrepreneurs-21,800 hours to women or minorities o Invested $18.1 million in 49 companies-14 founded by women or minority o Portfolio companies have raised $127 million-Leverage of 7x on the investment o Reached annualized revenues of $30 million o Created and supported 431 direct jobs o Received 104 patents with another 152 in process o One portfolio company was strategically acquired o Generated economic impact of $267 million in the past four years o Created 811 direct and indirect jobs o Generated $12.1 million in taxes in 20095
  6. 6. A TYPICAL ENTREPRENEURIAL VENTURE LIFECYCLE Grants Friends Angel Investors Seed Funds Venture Capital/Private Equity Self Funding Family Research Product Idea Development Early Growth Rapid Growth Maturity Core Technologies Development o Entrepreneurs go through proof-of-concept and initial product build and validation phases with research grants, self-funding, friends and family, and angel investors, usually in limited amount of dollars. o Entrepreneurs then partner with venture capitalists to target and launch products, scale up product distribution, and achieve rapid revenue growth. o Financial returns to entrepreneurs, other early-stage investors and venture capitalists are achieved through initial public offerings or acquisitions of the ventures by strategic or later- stage financial investors.6
  7. 7. VENTURE DEVELOPMENT CONUNDRUM STILLEXISTS IN INDIANA Research SBIR 21 Fund Gazelle Grants STTR Investments Self Funding GAP Angel Investors GAP Institutional Investors Friends &Family Seed Funds Research Product Idea Development Early Growth Rapid Growth Maturity Core Technologies Development Federal $ Why is this a conundrum? State $ Private $ o Technologies and ideas are not fully commercialized due to lack of resources. o Limited number of startup successes lead to perception of limited technology-based entrepreneurial activities. o Perceived lack of opportunities creates a roadblock for attraction and retention of talent, and local and outside capital. o Without talent and local and outside capital, more technologies and ideas will not fully realize their economic impact and job creation potential.7
  8. 8. VENTURE DEVELOPMENT CONTINUUM Venture Development Organization Research SSBCI Angel SBIR 21 Fund Gazelle SSBCI High Grants Funds STTR Investments Growth Lending Self Funding Angel Investors SSBCI Seed SSBCI Institutional Investors Friends &Family Seed Funds Funds Enhancement Research Product Idea Development Early Growth Rapid Growth Maturity Core Technologies Development Federal $ How does a venture development organization transform this venture capacity conundrum into venture development continuum? VDO $ Private $ o Address market confusion and identify a clear funding road map. o Decrease the funding gap by leveraging public dollars into increased private investments. o Provide EIR assistance to compress company development cycle, leading to accelerated economic and job creation impact. o Increase visibility of Indiana gazelle companies to regional and national investors.8
  9. 9. ELEVATE VENTURES As a tax-exempt non-profit state-wide venture development organization, is leading the efforts to o Implement best practices modeling after nationally recognized venture development models, such as Jumpstart in Cleveland OH, i2E in Oklahoma City, OK, Innovation Works in Pittsburg, PA. o Provide entrepreneurs-in-residence and attract talent to assist companies with building a strong base and moving down a path of exponential and sustainable growth. o Attract new sources of capital to increase outcomes, including formation of seed funds and angel networks. o Minimize administration costs and maximize investment returns to ensure sustainability with active investment management. o Monitor investments and ensure collection of metrics and compliance with federal and state program guidelines.9
  10. 10. ELEVATE VENTURES’ E4 PROCESS10
  11. 11. RESOURCE ATTRACTION & RETENTION Ideas & Entrepreneurs Federal and Foundation Support Wealth Creation Ventures Increased Private & Institutional Investments Economic Job Creation Impact Angel Networks Growth in Funding Economic Gardening Successful Ventures Scalable Ideas Entrepreneurial Assistance Coachable Entrepreneurs Elevate Ventures11
  12. 12. ACHIEVABLE OUTCOMES o Quantitative • A statewide angel network of at least 10 Hoosier communities $10 • Increased deal flow private dollars • Increased number of companies funded at the right time with the right resources • Increased amount of dollars invested state wide at the right stage • Increased capital leverage of public dollars • Growth in the number of successful exits • Growth in wealth creation for entrepreneurs and investors • Growth of employment in technology-based ventures $1 o Qualitative public • Nationally competitive project selection process dollar • Nationally recognized venture development program with top-notch entrepreneurs-in-residence • Foster an environment and a culture that promote wealth creation and intelligent risk-taking and a hub for talents in various sectors12
  13. 13. WHY THE STATE PARTNERS WITH ELEVATEVENTURES The State faces structural issues in funding innovative companies and stimulating entrepreneurial ecosystem o Experienced staff not available due to conflict and lack of incentive – Resource Constraint o Limited experience base and rigid funding structure restrict leverage of federal and state dollars into co-investment opportunities with the private sources – Limited Investment Base o Dollars invested have supported business build, but no equity upside return potential to the State for reinvestment – Lack of velocity o Capital-only approach resulted in inefficiency in capital deployment – Limited Efficiency or Accountability13
  14. 14. STATE’S PARTNERSHIP WITH ELEVATEVENTURES ENHANCES SUCCESS o Led by Howard Bates and Steve Hourigan with top-notch staffing including venture partners, EIRs and Investment Managers – Experienced Team o Leverage federal and state dollars to attract other institutional investors– Increased Investment Base o Wealth created for entrepreneurs, individual and institutional investors via successful exits can be reinvested in Indiana companies– Increased Velocity o Active asset management with direct accountability leads to greater return– Maximized Accountability & Return Unlike for-profit only investment managers, Elevate Venture’s non-profit venture development approach adds additional value by: o Clear focus on nurturing and developing Indiana-based high-potential businesses into high-performing companies along the funding continuum o Leverage to attract federal and philanthropic dollars and provide much-needed entrepreneurial assistance to increase the probability of venture success14
  15. 15. CASE STUDIES 21 Fund’s most recent portfolio (2009-present) has already shown notable leverage ratio since the private matching mandate was implemented in early 2009. Sector 21 Fund Investment Follow-on Funding Leverage Ratio (X) Information Technology $11,800,000 $63,900,000 5.42 Life Sciences $9,200,000 $46,100,000 5.01 Advanced Manufacturing $3,800,000 $8,500,000 2.24 Total $24,800,000 $118,500,000 4.7815
  16. 16. CASE STUDIES Scale Computing o $2 million awarded by the 21 Fund in 2009 o Raised $17 million in late 2010, resulting in total of $31 million raised to date Chacha o $2 million awarded by 21 Fund in 2007 o Raised over $75 million to date OrthoPediatrics o $2 million awarded by 21 Fund in 2009 o Raised over $30 million to date Immuneworks o $2 million awarded by 21 Fund in 2008 o Entered into a strategic co-development partnership with Lung Rx, a publicly-traded company in 2010, which provides substantial funding for pre-clinical and clinical work16
  17. 17. CASE STUDIES Marcadia Biotech o $2 million award by the 21 Fund in 2006 o Received $16 million in follow-on funding o Secured development arrangements with Eli Lilly, Merck and Roche o Acquired by Roche in late 2010 for $537 million o Repaid 21 Fund $2.6 million per return provision in the Grant Agreement o If 21 Fund award was structured as an investment vehicle, upon Marcadia’s 2010 exit, estimated conservatively, the State would have received over $30 million in upfront cash payment and potentially additional $26 million in milestone payments. Endocyte o Received nearly $4 million from 21 Fund before 2005 o Raised over $90 million in follow-on private funding o Raised $75 million in an initial public offering in early 2011 o Raised $66.8 million in recent secondary public offering o Due to the early grant structure, the State failed to capture any financial return. o If 21 Fund’s $4 million was structured as an investment vehicle instead of grant, the State’s holding would have be estimated at over $10 million at the IPO price.17

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