Como atrair investidores para startups visão internacional

Cursos de Capacitação Avançada
Atração de Investidores para Startups,
uma Visão Internacional
Erik Sander
Maio/2016
CoordenaçãoFinanciamentoRealização Oferecimento
©2016 - Rede Inova São Paulo e ErikSander.
Todos os direitos reservados. Proibida a reprodução integral ou parcial sem o consentimento dos autores por escrito.

Attracting Investors to Startups:
International Vision
May 2016
Erik Sander
Executive Director, Florida Engineering Experiment Station
Director, UF Engineering InnovationInstitute

The information on these slides and in the accompanying
presentation is for general educational and informationalpurposes
only,and is not intended and should not be construed as legal
advice to be applied to any specific facts or circumstances. Any
party to an actual transaction should engage legal counsel toadvise
them on suchtransaction.
Disclaimer

Thursday
8:30 – 9:15 am Introduction to the Workshop,Participants,and Objectives;Discussion
of Tech Transfer inBrazil
9:15 – 10:15 am The University of Florida Technology Commercializationand
InvestmentEcosystem
10:45 – 12:00 pm What Do InvestorsThink andWhat Do They Look for in University
InvestmentOpportunities
12:00 – 1:30 pm Lunch
1:30 – 5:30 pm How do Investors Review University InvestmentOpportunities
Friday
8:30 – 8:45 am Start-off Questions andExpectations
8:45 – 10:00 am How Can a University Best Work withInvestors
10:00 – 11:00 am Structuring a Successful Investment - Doing theDeal
11:00 – 12:30 pm Wrap-up and FinalThoughts

Introduction to the
Workshop, Participants,
and Objectives
Introduction to the workshop
What participants would like tolearn
and can expect to understand

Walkaway Goals
 How do investors think about university spinoff companiesas
investmentopportunities?
 What are the criticalchallenges?
 What are some avenues and means to gather investorinterest?
 How can universities best work withinvestors?
 What are the realities of investor-academecollaborations?
 What is needed to make this systemwork?

The University of Florida
Tech Commercialization and
Investment Ecosystem
University of Florida and State of Florida university technology
spinoff company investment strategies and programs.
The history of how the university technology commercialization
office and programs were built to a Top10 program in the US today
Public/private investment partnerships that support technology
commercialization

Why are Investors Interested?
University Technology Licensing
 5,435 licenses executed (up 4.5% over prioryear)
 1,461 options executed (up7.7%)
 549 executed licenses containing equity (up17%)
 914 startup companies formed (up11.7%)
 4,688 startups still operating as of the end of FY2014 (up 11.4%)
 965 new commercial products created (up34.2%)
 6,363 U.S. patents issued (up11%)
Source:AUTM 2014 Licensing Survey(www.autm.net)

Source: Association of Technology Managers Infographic access April 2016 - http://www.autm.net/AUTMMain/media/Resources/Documents/AUTM_Infographic_FY2014.pdf

Florida’s Heritage
But did youknow………
 3rd largest state – 19.5M residents, of
which 5M speak a foreign language,
primarily Spanish
 Florida would be the 21st largest
economy in the world
 1st for Innovation (Fast Company)
 3rd for high-tech businesses and 5th
in high-tech employment
(TechAmerica Cyberstates)
 Internationallyrecognized
innovation clusters

Fin. & Prof. Services
Manufacturing
Florida’s Future
Biotech
Life Sciences
Health Care
Pharma.
Biomed Eng
Med. Devices
Renewable Energy
Nanotech
Hydrogen
Agri-
business
IT & Software
Microelect.
Telecomms
Modeling/Simulation/ Training
Photonics / Lasers / Optics
Aviation /Aerospace
Homeland Security
Defense

The Innovation Economy
Ideas
People
Capital

People
SD
CA NH
FL
MA
KS
AK
MS
AL
ID
GA
y = 1894,7x +20115
R² =0,8157
$30.000
$35.000
CO
$40.000
MD
NY
$45.000
VA
$50.000
17,0
GSPPerCapitabyState
GSP Per Capita vs.% w/ > Grad or Pro Degree
40 States (w 10 Outlier States andDC Removed)
$55.000
5,0 7,0 9,0 11,0 13,0 15,0
% of the Population with Graduate or Professional Degrees by State
Source: The National Center for Education Statistics, NCES, 2005-2007

10.000
20.000
30.000
40.000
50.000
60.000
70.000
0
0,00% 5,00% 15,00% 20,00%
AdjustedGSPPerCapita(NoNAICS21)
10,00%
% 18-64 Population w/ Degree
Bachelor, Graduate &PhD Degrees to Adj GSP PerCapita
% 18-64BachDeg
Linear (% 18-64BachDeg)
% 18-64GradDeg
Linear (% 18-64GradDeg)
Emp PhD %18-64
Linear (Emp PhD%18-64)
Impact
Top10 PhD Top10 PhD Top1
Impact
2nd10 d102nd10
y =8,000,000
R²=0.9
x +24304
729 19X 21X 2
n
3rd10
4th10
3rd10
4th10
3rd10
4th10
Bottom10 Bottom10 Bottom10
y = 427746x +10061
R²=0,9196
y = 374050x -16324
R²=0,9694

Ideas
Source: NSF Science and Engineering Indicators

Grants &
Sponsored
Research
Venture Capital
& Public Equity
Basic
Research,
Discovery
Feasibility
Study
Engineering
Model
Product
Development/
Design
Commercialization
Market Roll-out
Distribution
Channels
Manufacturing
Regulatory
Where we fit in a startup’s funding cycle
“Valley of Death”

Risk Mitigation - Florida Corridor Matching Grants
Research Program
 Partnership among 3 universities, 20 economic development orgs, and
14 community colleges started in1996
 $60M+ in state funds matched by $120M in companyfunds
 $1B in federal follow-on grants
 1,300 research projects
 375 company partners
 300 faculty; 2,600 students & research assistants
 103 patents plus 146 patent applications projected to have resulted
 Enable Corridor High TechCompanies to Conduct Applied Research
with UCF,USF and UF Professors and Graduate and DoctoralStudents
 Grants Range From $10,000 to$100,000

 Supports 26 universities andinstitutions
 Leverages $2B statewide research infrastructure to buildgreat
companies and products that improveand savelives
 Delivers company creation, building and fundingprograms
 Mentoring and coaching to prepare for fundraising
 Comprehensive due diligenceprocess
 Investor Advisory Board screens and provides feedback
 CEO Council of individuals looking for “next opportunity”
 Seed funds that require private investormatch
 Creation of statewide angel investornetworks

Institute at a Glance
 ~100 applications received for support andfunding
 34 companiesfunded
 $40 MM private capitalraised
 ~300 jobs YTD; projections exceed‘000s
 $74,000 average salary per job created
 Global visibility for Florida and Florida companies; Media coveragein
34countries

Seed Capital Accelerator Program
 Created in2011
 $8.5M for loans ranging between $50,000 and $300,000 to bridge the
gap
 Requires recipients to match 1:1 with private investmentdollars
 Results todate:
 Funds 98% committed: 28 companies approved for funding; 25funded
 Funded companies have raised 3–5x private investment (>$25MM)
 Avg. salary per job created = $74,000

Florida Technology Seed Capital Fund
 Created in 2013; launched Fall2013
 $4.275M available in seed funds
 Funding provided to spinout companies in the formofconvertible
notes or equity – Fund will beevergreen
 First funding up to $300,000; requires 1:1match
 Second funding for select companies up to $200,000; requires2:1
match
 Applications exceed available funds 4:1; All funds committed byJune
2014 (est.)

Florida Angel Nexus (FAN)
Capital attraction forFlorida
companies
FAN Chapters
Groups of Angels +‘Side
Car’Funds
Geography | Expertise |University
Affiliation
Recruit & Coordinate Members
Cultivate Local Deal Flow
Host Chapter Meetings

University of Florida
 Major,public, comprehensive, land-grant, research university
 Annual economic impact $8.76B/year; 106,000 jobs.
 4,000 faculty and 50,000 students in 16 colleges and 200+ research,
service and education centers, bureaus andinstitutes
 $700M in annual research expenditures; $100M fromindustry
 5,000 proposals submitted and 2,400 new awards receivedannually
 300-350 inventions; 80+ tech licenses; 15-20 spinoffs annually
 Cross-campus entrepreneurship
and innovation programs–
15-20 student spinoffcompanies
annually
Trusopt®
Sentricon®
Gatorade®

UF College of Engineering
 Comprehensive andlarge
 2nd largest MS program
 10th largest PhD program
 14th largest undergrad prog.
 Strong researchfunding
 ~$70M annualexpenditures
 ~15% from industry
 Over the last 5years:
 536 inventiondisclosures
 896 US and Foreign patentapplications
 254 US and Foreign patentsissued
 185 executed license and optionagreements
 30 start-up companies from licensed technology
 5-6 student startups annually
 2X national average per research dollar in patentsissued
 4X national average per research dollar in the number of start-up companies

Gainesville Technology Incubators
 Biotechnology DevelopmentInstitute
 35,000 sq ft; 19 labs, 13 offices
 Small and large animal facilities
 Gainesville TechEnterpriseCenter
 30,000 sq ft; 3 labs; 15 offices
 Mix of biotech and other
 Center for Innovation & EconomicDev.
 Santa FeCollegeendeavor
 Low to high tech
 Florida InnovationHub
 48,000 sq ft; 24 labs; 40 offices
 Substantial space for service providers & investors
24

Hacker Space
Starter
Space
26
Entrepreneurial Community Initiatives

Entrepreneurship and
innovation are
happening at hyper-
speed.
Public policy must
support this new
innovation economy to
be competitive.
Chart taken from“Grounded – The Price isWrong”,The Economist,September 28, 2013

What Do Investors Think and What
Do They Look for in University
Investment Opportunities
The investor mentality in general, and investor opportunities and
concerns specific to university created technology.
How investors look at just-created vs. growing university spinoff
companies.
Differing investor strategies for shorter term (e.g. IT) vs. longerterm
(e.g. bio) related companies in considering investment decisions.
Investment Structures and InvestorTypes
Parts of this presentation compliments of Bill Rossi, University of Florida. His
contributions are gratefullyacknowledged.

The Biggest Challenge is Cultural
Open-Publish
Long Term Focus
Basic Research
Disciplinary Depts.
Edge of the Envelope
Collaboration
Organized Anarchy
Focus on Science
Closed-Proprietary
Shorter Term Focus
Applied R&D
Multi-disc. Programs
Risk Management
Primarily internal R&D
Project Management
Focus on $
Industry CultureUniversity Culture Small Tech Comp.

Bridging the Valley of Death
Funding/Interest
Govt.Funding
Tech Push Market Pull
Industry
Product Development
University
Research Commercialization
Univ.
Research
Valleyof
Death
Industry Development

Virtual companies
form to spin off aUF
technology
Develop an alpha
proto. & product/
process docs
Develop BP,
mkt. study,
investor pres.
CEO
CBO
(faculty)
CTO
(faculty)
Inventor
(faculty)
Tech. Dev. Team
(IPPD)
Bus. Dev. Team
(CEI)
Prior art,
freedomto
operate,
patentability
CLO
(faculty)
LegalTeam
(LCL)
Integrated Tech Ventures - Bridging the Valley
31

Who Are Investors?
What are They Investing?
 Financial investors -Money
 Employees – Life; familytime
 Board, advisors, mentors – Time;reputation
 Strategic Allies – Time; reputation; theirops
 Vendors – Contractterms
 Customers – Reputation;reliability
 Family and friends – Faith in you;money
All do a basic ROIanalysis
Can you succeed and what does it mean tothem
What’s your ValueProposition

 Founders
 Friends, family,fools
 Angels
 Crowdfunding
 Grants
 Venturecapital
 Retainedearnings
 Debtinstruments
The Investment Stack
Source: Wadhwa, Vivek, Aggarwal, Raj, Holly, Krisztina and Salkever, Alex, Making of A Successful
Entrepreneur: Anatomy of an Entrepreneur Part II (November 17, 2009). Kauffman Foundation Small
Research Projects Research Paper No. 2. Available at SSRN: http://ssrn.com/abstract=1507384
Charts by Alberto Mena and Dave Foster accessed at Businessweek.com
(http://images.businessweek.com/ss/09/11/1117_making_of_an_entrepreneur)

Investor Mentality (The Upside)
 What’s the ValueProposition
 What are your products or services that can come from the tech;How
does your tech integrate; Can an intellectual property fence bebuilt
 Who’s on the team and can they pullthisoff
 What’s the market size, niche, growth rate, potentialpenetration,
composition
 Who are thecompetitors
 What’s the marketing, sales, and distributionstrategies
 What are the primary milestones and requirements to getthere
 What’s the financial plan and fundraisingstrategy
 What’s myopportunity

Investor Mentality (The Downside)
 R&D risks, alpha, betatesting
 Intellectual property infringementrisks
 Scale-up and packagingrisks
 Market introduction risks – Initial acceptance, the first 5customers,
regulatory, competitor position, marketgrowth,
 Customer acceptance / mindsharerisks
 Production risks – Infrastructure, off-shoring, key materialsuppliers
and costs/marketdrivers;
 Financial risks - Fundraising, financial, price point, margincushion,
market penetration, marketing, distribution channels, sales force,
capitalexpenditure;
 Personnel risks – Recruiting business and technical teams;What
happens if a key playerleaves
35©2016 - Rede Inova São Paulo e ErikSander.

People are the Key
3 4 5
ReturnonInvestment
MarketSize
Proprietary, Unique
PotentialforGrowth
Recruit
experienced
CEO,40%
Assemble CEO-
type board;
15%
0 1
Business model
outweighsteam
deficiencies,
7%
2
Get CEO
beforeseeking
venture capital;
3%
ManagementQuality
Factors in VC
investment
decision
Incomplete
management
team?
Let VCrecruit
CEO;35%
Profit Dynamics, Inc., VC Survey –2002
(www.capital-connection.com)

VC reasons to decline investment
 Lack of experienced management team(40%)
 Didn’t fit investment criteria, industries, geographic area (17%)
 Insufficient market size or need (13%)
 No competitive advantage, non-compelling technology(13%)
 No clear execution strategy (10%)
 Company too small, will not grow large enough(10%)
 Company too early stage(8%)
 No industry barriers to entry for competitors(6%)
 Risk to projected return too high(6%)
 Low margins, industry is facing margin pressure (4%)
 Valuation too high(4%)
 Company isn’t profitable; entrenched competitors; not referred to VC;
poor job presenting; viewed VCs only as funding source(4%)
Source: Profit Dynamics, Inc., VC Survey – 2002 (www.capital-connection.com/vcsurvey.html)

Evolutionary vs. Revolutionary
 Better-Faster-Cheaper
 Incrementalimprovement
 Value proposition tied to level of perceivedimprovement
 Typically lower risk / lower return
 Brave NewWorld
 Gamechanger
 High risk –Technology,
Manufacturability, Market acceptance, Regulatory
 Highreturn

Customer Wants vs. Needs
 Value is contextuallydriven
 Value is in the eye of thecustomer
 What are the alternatesolutions
 Is this a new need or an ongoingheadache
 Many times the customer’ssolutionis
current SOP – it’s thecompetition
 Sometimes the customer isn’t theuser
 Understand what your technology means to the customer oruser

Roadmapping Clear Expectations

Perceived Risk & Perceived Value
are Inversely Related
 Risk Spectrum – Science, technology, commercialization,production,
market,management
 Success reduces risk and increases business’ perception oftech.
valuation
 Risk reduced at keymilestones
 Technology – Precursors, prototype, alpha, beta,scale-up
 Business – IP freedom to operate, patent issue, external fundraise, market
intro, customers, scale-up,competition

Roadmapping – Risk Reduction
ValuationEvaluation
Academic
Corp. R&D
LitigationVC Biotech Invest.
Banker
Pharm
Co.
Technology Risk
Information available at time of valuation
Therapeutic target
Competitive profile
Patent position
Spec. disease
Reg strategy
Indication
Toxicology
Man. costs
Actual sales
Actual profits
Highest Least

Roadmapping - Key Milestones/Requirements
 Key business, technology, partnership, etc. milestones
 Isolate key decisions and issues that need immediate, near-term, or long-term resolution
 Stage Gating the Process Mitigates Risk
 Key Requirements – Technology,personnel, regulatory, financial, distribution
channels, external purchases/licenses, etc.
Patent
Filing
Company
Acquireslicense
Tech /Product
Development
1Q2016
Business
Development
1st install
ProjectInitiation
2nd install
Go-No Go on
FundingTranche
R&DMilestone
BuildingPipeline
--XX
-- XX
3Q2016 4Q2012Q2016
Go-No Go on
FundingTranche
R&DMilestone

 Debt
 Loans
 Guarantees
 Debt-equityarrangements
 Equity
 CommonStock
 Preferred Stock
 Options andWarrants
Investment Structure

Seed Start-up Series A (1st Round) Series B(2nd Round) Late
Stage(Mezzanine)
Founder Money
Friends and Family
Angels
Ven
t
ure Capital
Strategic Partners
Public Equilty
Mezzanine/Late Stage Funds
Supplier and Trade Credit
Commercial Loans
Asset-Based Lenders
Public Debt
Commercial Paper
Required ratesof returnper annum
100-80% 80-50% 50-35% 35-25% 25-10%
Financing ecotypes bystage of development
Source:
Professor
KimbleByrd,
Rowan
University

Financing Resources Map
SOURCE OF FINANCING VC ANGELS F&F ASSET LOANS TRADECREDIT
RelativeScore low-high low-high low-high low-high low-high
COST OF MONEY 8-10 6-8 5-8 1-3 0-2
FUND-RAISING EXPENSES 0-2 4-6 3-6 3-5 0-2
DEPTH OF POCKET 7-9 5-7 3-5 1-4 0-3
COLLATERAL REQUIREMENTS 0-2 1-3 1-3 7-10 2-5
RISK BEARING ABILITIES 7-10 6-8 3--6 0-3 0-2
REPUTATION AND SIGNALING 8-10 5-7 0-3 0-3 0-3
MANAGEMENT SKILLS 7-10 5-7 0-4 0-3 0-2
SPEED OF DECISION 7-9 5-7 3-5 7-10 6-9
INDUSTRY/PRODUCT KNOW 7-9 5-7 1-5 5-8 0-3
FLEXIBILITY 7-9 6-8 5-8 0-3 0-3
CONTROL TENDENCIES 7-9 5-7 3-6 0-2 0-2
Source:Professor Kimble Byrd,RowanUniversity

Business Angels
 Means
 High Net WorthIndividuals
 Extensive Business Experience
 Invest $20k-$2M range
 Modes
 Financial
 Operational
 Entrepreneurial
 Guardian
 Motives
 Psychological“Income”
 Interest inTech
 SocialUtility
 EconomicDevelopment

Options and Warrants

IRR “Pocket” Table

Equity Ownership and Dilution
 Pre-money Valuation = Current Valuation; Example$1M
 Share Price = Pre-money valuation / Pre-money issued shares Example:$1M
/1M shares issued = $1.00 pershare
 Issued Shares (in investment round) = Investment $ / SharePrice
Example: $200k / $1.00/share = 200,000 shares
 Post-money Valuation = Pre-money valuation + Investment$
Example: $1M + $200k =$1,200,000
 Post Investment Equity Positions
 Investor = Issued shares / Post-money shares
Example: 200,000 shares / 1,200,000 shares = 16.7%
 Original Shareholders = Pre-money shares / Post-money shares Example:
1,000,000 / 1,200,000 = 83.3%

Capital Raise Valuation Example

FINANCINGROUND
SEEDSTARTUP SERIESA SERIESB EXIT
TIMES
RETURN
POSTMONEY
VALUATION $1,000,000 $5,000,000 $15,000,000 $75,000,000 75X
FOUNDERS
Investment Sweat 28X
%Equity 90% 72% 40% 40%
Value $900,000 $3,600,000 $5,950,000 $28,000,000 28X
FAMILY ANDFRIENDS
Investment $100,000 35X
%Equity 10% 8% 5% 5%
Value $100,000 $400,000 $733,333 $3,500,000 35X
ANGELS
Investment $1,000,000 $500,000 10X
%Equity 20% 22% 22%
Value $1,000,000 $3,260,000 $15,400,000 10X
VCs
Investment $5,000,000 6X
%Equity 33% 33%
Value $5,000,000 $28,100,000 6X
The Cap Table

How do Investors Review
and Vet University
Investment Opportunities
Models that illustrate how investors review very early stage
opportunities, such as those coming from universities.
These models can serve to inform university technology
commercialization professionals on vetting their university research
outcomes in light of how investors may view them as opportunities
for spin-offcompanies.

The Value Proposition –
The Simplest AssessmentModel
What Economically
Substantial Problem
Can You
Uniquely Solve
and Make Money

Simple Opportunity Analysis Model
English BizSpeak
Who are you Management Team; StrategicAllies;
Partners; Boards;Vendors
What are youdoing Product / Service Offering;
Core Technology; ProductLines
Why can you do it better than anyoneelse Competitive Advantage;Distribution
Channel; Marketing Plan; KeyResources
Who cares, why do they care, andhow
much do theycare
Market; Market Needs Analysis;Revenue
Model; CustomerProfile
What do you need to get itdone Investment Sought, Partnership,
Technology, DistributionChannels
How will youbenefit Financial Plan, Revenue Modeland
Streams, Profitability
How can othersbenefit Investment / PartnerOpportunity

A More In-Depth
Entrepreneurial
Opportunity Feasibility
Analysis

Profit/Loss
What Can We Learn?
Time toProfitability Product Life Cycle
Market
Penetration
Rate
MarketShare

Global Opportunity Analysis
 Define the Value Proposition – Better-Faster-Cheaper or
Brave New World
 Determine if attractive to entrepreneur,customers,
investors, employees, & partners
 Identify strategy to maximize upside & mitigaterisk
 Leverage relationships, Establish options, Incrementalfunding;
Borrowed resources; StrategicPartners
 Technology – The means to the business end
 If based on technology alone, need a significant increase inproduct
quality or reduction incosts

Global Opportunity Analysis
 Dimension Window ofOpportunity
 Large Market Size - Investors typically want to see sales of $50 million in5
years (share along with size)
 Rapid Market Growth - Rapid sales/income growth justifies investment
risk; Easier to enter; Less stable market shares
 Timing – Selling SUV’s during an energyshortage
 Estimate key elements and magnitude of effort andpayback
(cost/benefit analysis)
 What do you have to do to accomplishobjective
 What resources do I need and how do I getthem
 What do you get back – what’s thepayout

Market Analysis
 Marketstructure
 Fragmented - niches of under-servedcustomers
 Monopolistic – have to take on the biggun
 Perfectly competitive - commodity, low margin business
 Market size - $100 million minimum;Toolarge may mean mature;too
small may mean not enoughgrowth
 Market growth - Growth rates of 30-50%attractive
 Market capacity - Can existing competitors meetdemand
 Market share attainable - Potential to be a leader; 20%+share
 Market Players - Identifying & reaching key customers (Key Companies,
Motivation of decisionmakers)

Profit Potential Analysis
 Steady and rapid sales growth first 5-7years
 Attain critical mass for market control and economies of scale
 Tipping Point – slow initial growth, but then extremely fast
 Recurring revenue - Lowers cost & increases barriers toentry
 Growing debt capacity supported by hard assets orearnings
 Investable - Can create value in 3-5 years; Convert equity with30-40%
IRR
 Time to breakeven and positive cash flow less than 3 years
 Margins
 Gross Margin over 40% provides cushion for fixed costs
 Net Operating Margin of less than 10-20% can be risky in many industries

Durability Analysis
 Imitative competitors (Starbucks & new entrants; Restaurant Row)and
Product substitutions (E-mail vs paper mail; Steak vschicken)
 Changing technology - Lower costs or better productsforcompetitors
 Shifts in customer preferences - Juice towater
 Personnel turnover - Lose keypeople
 Supplierleverage
 Buyerleverage
 Purchasing power - Wal-Mart dictates what they will pay and on what terms
 Price - If costs increase, Wal-Mart may not allow priceincrease
 Quality standard - Wal-Mart dictates quality standard

Skills, Resources Analysis
 What skills are brought to the table
 Inventory offounders
 Who supplies missing skill resources
 Skill outsourcing vs in-house(control)
 Advisoryboards
 Strategicpartners
 Capital – a necessary resource, but having capital no
guarantee of success

Regulatory Compliance Analysis
 Licenses
 Can you get them and holdthem
 Operatingprocedure
 Can you comply with therules
 Product approvals andtesting
 FDA, EPA,OSHA, meeting standards
 Insurance andbonding

Scalability Analysis
 Product vs.service
 Costs scale with production (Gross Marginanalysis)
 Product / service deliverymechanisms
 Bigger facility oroutsourcing
 Replicate concept in anothergeography
 Franchise

AQuantification-Based
Tech Assessment Model

V2RTechnologyCommercialAssessment
TechnologyName/ Source
Weight
(0-1)
Rating
(1-5)
Weighted
Score
Weight
(0-1)
Rating
(1-5)
Weighted
Score
IPAssessment CommercialAssessment
1 IPisDefensible 5 5 0.8 Resultsof SignificantSponsored Research 2 1.6
1 IP Position(Patented,Copyrighted,Pending,Search) 5 5 0.8 Conformsto RelevantStandards 4 3.2
0.8 NoPrior Claimsto the Technology 5 4 0.6 ImprovementorCostReduction> 20% 4 2.4
0.3 InventionRemainsConfidential 5 1.5 0.5 LowProductionRisk 3 1.5
0.3 NoNearTermPublicationsPending 5 1.5 0.5 SustainableCompetitiveAdvantage 3 1.5
0.25 Lit SearchCompleteand Clean 5 1.25 3.2 Total 16 10.2
3.65 Total 40 18.25
ResearcherAssessment
TechnologyAssessment 1 Expert is TechnologyChampion 5 5
1 Foundational Technology for MultipleProducts 4 4 0.8 Expert has RealisticExpectations 3 2.4
1 IdentifiableandSignificantBenefits/ Breakthrough 5 5 0.8 Expertis EntrepreneuriallyMinded 2 1.6
1 Tech.Dev.Stage(PaperStudy,LabDemo, Prototype) 3 3 0.8 Expert readyto Workwith Company 4 3.2
0.8 ScalableProducts 4 3.2 0.5 Expert hasDealtin Commercialization 1 0.5
0.8 ShortDevelopmentTime Frame 4 3.2 3.9 Total 15 12.2
0.8 LimitedandDefinableCapEx 4 3.2
0.6 TechnologyStateofthe Art 4 2.4 TotalCumulativeScore 139
0.6 EasilyDemonstrable 3 1.8 Total CumulativeWeightedScore 91.35
0.5 Additionto ExistingV2R Portfolio 3 1.5 V2RTechnologyCommercialAssessment
General CommentsandConcerns0.4 LongProductLifeCycle 3 1.2
7.5 Total 37 28.5
MarketAssessment
1 Fills Identifiable andMarketable Need 4 4
0.9 MarketSizable 5 4.5
0.7 Market GrowingSubstantially 5 3.5
0.7 DefinableNiche 3 2.1
0.7 Large PotentialMarket Share 3 2.1
0.6 MarketAccessible 5 3
0.5 Absenceof Direct CompetitiveProducts 3 1.5
0.5 LowBarriersforV2RMarket Entry 3 1.5
5.6 Total 31 22.2

Investor Financial
Analysis of Startups

 Income Statement – A snapshot over a time period, typically a year
showing how a company got to its current state. Indicates theefficiency
and profitability of thebusiness.
 Balance Sheet – A snapshot in time showing Assets, Liabilities,and
resultant Shareholder Wealth. Indicates financial health - today.
 Cash Flow Statement – An ongoing analysis focusing on liquid assets and
liabilities to assess the financial resources to pay the bills and short term
cashneeds.
 Pro-forma – Financial projections showing projected business growth
 Key Financial Ratios – Means to assess company health based on financial
indicators
Basic Accounting Statements

Income Statement
ABC Tech,Inc.
Income Statement (in 000’s)
Fiscal Year2015
Revenue:
Gross Sales(Revenue
Stream1) $3,000
Gross Sales (Revenue
Stream2) $5,000
Gross Sales $8,000
Cost of Goods Sold
DirectLabor $1,100
DirectMaterials $30
Cost ofSales $30
Cost of Goods Sold $1,160
Gross Margin $6,840
Gross Margin (%) 61.3%
FixedExpenses:
R&D $400
OfficeExpenses $100
OperatingSupplies $15
Rent $36
VehicleExpenses $20
Etc. $1,000
Total Fixed Expenses $671
EBIDTA $5,269
Net Margin(%) 65.9%
• Distinguish RevenueStreams
• Cost of Goods Sold – Coststhat
vary with production andsales
• Gross Margin - Percentage of
sales to cover fixed expenses
andEBIDTA
• Fixed expenses (The Nut) need to
be covered regardless of sales
• Understand industrystandards
anddeviations

 THE critical statement for most startups - CASH ISKING
 Many forms, but follows the premise of the incomestatement
(Revenue less expenses), but on a “cash”basis
 Managed monthly or morefrequently
 Critical bridge between management and operations (Salesterms;
Employee compensation; Vendor payments;etc.)
Cash Flow Statement

Pro-forma
 Revenue Model –Prioritize
revenue streams (multiple
products, sales, licenses,
warranties, upgrades, etc.)
 Assumptions are critical–
clearly explain thecontext
 Market penetration in relation
tocompetition
 Market structure and growth
 Understandindustry
standards; justify deviations
– especially in marginsand
sales &marketing

Key Financial Ratios
 Profitability
 GrossMargins
 Operating Margins
 NetMargin
 Return on Assets(ROA)
 Return on Equity(ROE)
 Liquidity
 Current
 Quick / AcidTest
 Risk
 Debt
 Debt toEquity
 Efficiency
 Inventory
 DSO
 InvestmentTurnover

How Can a University
Best Work with Investors
Ways to engage with and present opportunities to investors ranging
from Technology Opportunity Spotlights to Academic/Investor
Hybrid PresentationModels.
Types of investment terms that attract investors and the reasoning
behind theseterms.
The session will also include a review of a typical investmentdue
diligence package as well as a typical investment termsheet.

Technology
Marketing /
Opportunity
Sheets for
Investors

A Process for Project Scoping, ProjectManagement
and Reporting Out
A Hybrid of an Academic and Industry Presentation

UF Engineering Innovation Institute
www.eng.ufl.edu/innovation
Project Title
PI’s andAffiliations

Value Proposition
• The one slide “Executive Summary”-
Establishes audience receptivity to your
opportunity
• Summarize key products / serviceswhich
your technology will enable
• Describe:
1. The economically substantial problem
2. That products / services coming from your
technology uniquely solves
3. And how that can be best brought to market

Research Team
• Provide a brief introduction of the research
team and any outside partners in the project

Research Project Overview
• Overview research activities
– Summarize accomplishments to date vs.
objectives set at the beginning of theproject
– Identify objectives still to bemet
• Provide a brief overview of resultant
technologies
• Summarize key technology features on
which a product / service would be based

Products / Services Overview
• Outline products and services enabled byyour
technology emphasizing product features,
functions, and customerbenefits
• Is this an evolutionary or revolutionaryoffering
– Better-Faster-Cheaper - Ability to build market share with
higher quality / performance or lowerprices
– Brave New World – Strategy to attract earlyadopters
and penetrate market with newproduct
• Include an overview of the revenue streamsthat
might be generated by the products / services
enabled by your technology

Intellectual Property
• Outline intellectual property position
– Invention disclosures and patent
applications submitted
– Invention disclosures and patent
applications planned for the nearterm
• Outline relevant known intellectual
property of others, either within UF
(complimentary) or outside of UF
(competitive)

UF Engineering InnovationInstitute
Competitive Analysis
• Summarize competitive products & technologies
and define your competitive advantages
• Consider a Competitive Matrix comparing your
technology against competitive products / technologies
for key user features such as cost, performance, ease of
use, etc.
Key User
Feature 1
Key User
Feature 2
Key User
Feature 3
Key User
Feature4
YourTech
Competitive
Tech1
Competitive
Tech2
Competitive
Tech3

Market Overview
• Market Opportunity – Key market problems/
needs beingaddressed
• Market Identification – Your plan to identify
the highest potential customer base; Whomight
be the earlyadopters
• Market Structural Characteristics
– Market size (annual revenue) and growth rate
(historical and predicted annual percentagegrowth)
– Is this a niche of a largermarket
– What major drivers or trends have or willimpact
yourmarket
– Technology changerate

Regulatory Environment
• Summarize the regulatory requirements
that a company will have to address to
bring your technology / product to
market

Next Steps and
Resource Requirements
• Summarize key technology development
and funding requirements and use offunds
• Isolate key decisions and issues that need
near-term vs. long term resolution
• Summarize who would be the highest
potential commercialization partners and why
they are key to commercialization
• Planned next steps in development/
commercialization process

Structuring a Successful
Investment
Also KnownAs
Doing the Deal

University Tech Transfer and Investors
A Shared Philosophy Enables Success
CreatingValue forOne
CreatesValue forAll

The Deal
 An economic agreement that allocates upside andrisk
 What each party brings to the deal and how badly they want itdrives
deal structure andnegotiation
 Systemic Problem - Projections involve subjective differences of
perception of upside and risk (market penetration, pricingeconomy,
market, cash flows,competition)
 No Deal is Perfect – Strive for satisfaction, notperfection
 The Devil is in theDetails

Key Deal Terms
 Basic terms governing distribution of value /equity
 Key Milestones and performance incentives andpenalties
 Additional rights andobligations
 Mechanisms to provideinformation
 Default and Remedial ActionClauses

A Good Deal
 Simple yet robust—works in manyscenarios
 Each party’s incentives taken intoaccount
 Allows for constructivecommunication
 Based ontrust
 Notunfair
 Does not trapcompany
 Improves chances for venturesuccess

Key Drivers of Negotiations
 Cash andTime
 “Burn rate” and “Runway”
 Key element affecting the entrepreneur’s bargainingpower
 Risk
 Typically assessed differently by the investor than by the entrepreneur
 Investor needs tailored to investment instrument
 Debt – lowest risk / return
 Preferred stock - Less risk than lower classes
 Common stock - sharedrisk
 Staged equity investment – options to abandon or reduce valuation
 Valuation – A product of theabove

Some Principals of Valuation
 Value is subjective and in the eye of thebeholder
 Entrepreneurial finance rather than corporate perspective - Long term
value vs. quarterly earnings
 Most tenets of corporate finance near useless in valuinghigh-risk
entrepreneurialcompanies
 Entrepreneurial valuation features cash, time, risk, andvalue

Some Valuation Methods
 Historical = Sunk Costs +“Appreciation”
 Comparables
 Valuation/terms of “similar” deals (company maturity, space, market
penetration,etc.)
 Discounted multiples of P/E or free cashflow
 Present value of future earnings streams andcosts
 Predetermined investor ownership requirement based onrisk/return
perception
 Horse Trading - Negotiating

Review of an Investment Term
Sheet and Due Diligence Package

Final Thoughts

Some Keys to Investment Collaborations
 Investing in university spinoff companies takes a very longterm
approach.
 Peer review add credibility to theresearch.
 Multidisciplinary, collaborative team research produces uniqueresults
– a key for universityspinoffs
 The license and forget model typically doesn’twork
 Recognize different motivation/rewardsystems
 University - sponsored research, understanding science, publishing (peer
recognition),education
 Industry - time/cost to market, proprietary position
 Doing more deals is usually better than driving a deal intotheground

Final issues discussion
Lessons learned
Go-forward actions

Florida Engineering Experiment Station
www.eng.ufl.edu/FLEXStation
Erik Sander, Executive Director
352-392-6000
esander@eng.ufl.edu

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Acesse:
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