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Industry and Academia Partnerships: An Inside Look into Technology Transfer

Non-Traditional Funding of Tech Transfer

June 5, 2014

Presenter:

Mike Riedlinger

HTR Program Manager

Technology Commercialization

& Director

Rochester BioVenture Center

Presenter:

Nasir Ali

CEO, Upstate Venture Connect

Executive DirectorSeed Capital Fund of CNY

Presenter:

Rami Katz

Chief Operating Officer

Excell Partners

Goals for Today

Learn about potential non-traditional funding sources including: Incubators; Angel networks; and Venture capitalists.

Gain knowledge regarding what each of these audiences is looking for when considering funding a project, including how best to appeal to each audience, typical deal structures and timelines.

Mike RiedlingerHTR Program Manager, Technology Commercialization

& Director, Rochester BioVenture Center

Non-Traditional Funding for Tech Transfer Projects

Business Incubators

What’s an Incubator?

Definition• A facility that provides space and resources to a

startup or early-stage firm (usually pre-revenue) on a selective basis.

• Residents must apply and be accepted to become client/tenants.

• Some also offer non-resident support programs with ad-hoc access to the host incubation facility.

What’s an Incubator?General objectives

• Incubators seek to develop concept and pre-seed stage businesses into sustainable businesses

• Most are non-profit entities that have community economic development as a primary objective

• Some are venture-backed and seek to create scalable businesses that provide a financial return to the investor/owners of the incubator, like IdeaLab

• “Accelerators” are variations on incubators, like TechStars and Y-Combinator

What’s an Incubator?Common non-profit incubator funding sources include:

• Subsidies from affiliated educational institutions• Economic Development Funds from state and federal

agencies• Grants from foundations, federal, state and

local government agencies• Donations from local and regional organizations and

community members• Program fees and portion of rent payments

How to find them in NYS

• Business Incubator Association of New York State http://bianys.com/

http://bianys.com/memberlists

Incubator Benefits for Tenants

Space lease/rentals on favorable terms• Some subsidize monthly rates• Access to additional amenities like conference

rooms, auditoriums, office equipment, etc.• Ability to break a lease with low/no penalities• Expand/contract rented space on short notice

Access to specialized resources• Laboratories• Shared-use equipment

Incubator Benefits for TenantsExpertise for business development at low or no cost

• Mentors/coaches/advisors• Professional networks

(accountants, attorneys, HR services, etc.) • Lower cost affiliations with other organizations

(MedTech Incubator members, group purchasing)• Market research reports & services• Educational programs• Product development & manufacturing• Connections to industry and academic

organizations

NIST Manufacturing Extension PartnershipNational Institute of Standards and Technology MEP

Nationwide network that works with small and mid-sized U.S. manufacturers (under 500 employees) to help them create and retain jobs, increase profits, and save time and money

• Innovation strategies• Process improvements • Green manufacturing• Training Programs & Consulting projects

Works with partners at the state and federal levels on programs that put manufacturers in position to develop new customers, expand into new markets and create new products

http://ws680.nist.gov/mepmeis/FindYourLocalCenter.aspx

NIST Manufacturing Extension Partner Offices in New York State

Incentive Programs

NYS Tax Incentives• NYS “Hot Spot” Act• NYS “Startup NY”

Other Incentive Programs

NYS “Hot Spots”Business Incubator and Innovation Hot Spot Support ActAdministered by Empire State Development (ESD)

Provides for operating grants and other assistance to New York State incubators and New York State innovation hot spots for the purpose of developing successful businesses in the state

• Technical assistance,

• Direct mentorship,

• Entrepreneurial education, and

• Business development services

In addition, new section 38 has been added to the Tax Law to provide for New York State innovation hot spot program tax benefits.

See: http://www.tax.ny.gov/pdf/memos/multitax/m14_1c_1i_2s.pdf& consult your tax advisor!

http://startup.ny.gov/

START-UP NY

http://startup.ny.gov/eligibility/regional-profiles/

START-UP NY Facilities

Celebrating 25 Years as a catalyst for

Entrepreneurship & Innovation-based Growth

Lennox Tech Enterprise Center◦ Advanced Technology◦ 50,000 square feet

Rochester BioVenture Center◦ Medical Devices and Life Sciences◦ 42,000 square feet◦ Wet labs and biotech infrastructure

In-depth coaching/mentoring from CxO level talent

Assistance with business plan execution, sales/ marketing strategy, fundraising, connections, etc.

1. Technology Commercialization Identify, recruit and commercialize the most

promising technologies

2. Business Incubation Provide intensive mentoring for high-growth-

potential startups

Become a vital and extended part of their teams to execute the business plan and grow

3. Manufacturing Growth Consulting Work with companies up to 500 employees to

develop new products, markets, productivity/profitability improvement

Some of our Programs

Pre-SeedWorkshop

TECForum

LaunchPAD

Software Accelerator

Entrepreneur-in-Residence Program

(Statewide)

Growth

Leadership

Series

Clean Energy Proof-of-Concept Center

(Upstate NY)

Optics/Photonics Cluster

Entrepreneurs-

in-Residence

(National Best Practice

– NBIA)

Access to HTR resources without a leased office:

• One-on-one business plan review and development coaching—as resources are available

• Presentation skills training and feedback (“Batting Cage”)

• Linkage to regional research and development organizations

• Referrals to appropriate legal and accounting services

• Participation in HTR “client only” events

• Conference room reservation at Lennox or RBC as-available

• Wireless Internet connectivity at Lennox

Angel Investors and Tech

Commercialization

25www.uvc.org

Nasir AliCEO, Upstate Venture Connect

Executive Director, Seed Capital Fund of CNY

About Seed Capital Fund

• In 2007, 42 angel investors created Seed Capital Fund of CNY to make early stage investments in promising tech commercialization opportunities

• ~$3MM invested to date has led to ~$40MM more funding for seven portfolio companies– Mezmeriz (Cornell, Ithaca)

– E2e Materials (Cornell, Ithaca)

– Cheribundi (Cornell, Geneva)

– Diffinity Genomics (U of R, Rochester)

– Stealth company (U of R, Rochester)

– Paper Battery Company (RPI, Troy)

– Chequed (SUNY Albany, Saratoga Springs)

www.uvc.org26

About Upstate Venture Connect

• Entrepreneur-led non-profit with a focus on building, measuring and celebrating Upstate NY’s startup economy

• Since 2010, UVC has worked with entrepreneurs and community leaders to:– Launch three angel funds (Capital District, Rochester, Buffalo)

– Establish a world class, investor backed software accelerator

– Build a network of 4,000+ individuals who share an interest in supporting Upstate NY startups

– Set up a student sandbox program in Mohawk Valley (Utica)

– Track hundreds of entities and events across the region using crowdsourced map and calendar (see uvc.org for more)

www.uvc.org27

What is angel investing?

• Angel investors are successful individuals who invest their own cash (over 258,000 in US)

• Usually first money in after grants and personal/friends/family funds

• Best angels provide cash, make connections, and actively help the company grow

• Study: Angel funded startups are significantly more likely to survive at least four years and raise additional capital

• Typical amounts are $25-$100K per investment per angel; average angel round sizes are $700K-$1MM per company

www.uvc.org28

www.uvc.org29

Source: Startups.co

www.uvc.org30

Source: Startups.co

www.uvc.org31Source: Startups.co

Recent angel investing has been heavily skewed towards software startups

www.uvc.org32

Source: 2013 Halo Report published by Silicon Valley Bank, Angel Research Institute and

CB Insights

Why tech commercialization investing is difficult for angels

• Gap in knowledge/understanding– Most angels invest individually and tend to put money into

technologies and markets they have experience in

• Extended timeframe to revenue and exit– All else being equal, a software company that can start selling

and be sold quickly seems more attractive

• High follow on capital requirements– Angels have limited follow on funding capacity and run the

risk of being diluted, crammed down by larger VC/strategic investors

• Technology/market misalignment– Research is on the frontiers of human knowledge; markets

can take years to catch up

www.uvc.org33

Ways to improve the odds of raising angel capital

1. Make sure you have a world-class leadership team driven by a passion to build a large, fast growing business

2. Line up interested customers even before you build a prototype

3. Don’t explain the technology details in your investor presentations; focus on the market problem, its immediacy and scale; why your solution is preferred

4. Look for angel investors who have the right technology/industry background to lead an investment; others will follow

www.uvc.org34

Become visible: Add your efforts to the Upstate NY Startup Ecosystem Map at http://uvc.org

www.uvc.org35

Become visible: Find events of interest and start meeting people who can connect you with others

www.uvc.org36

For more info…

Nasir Ali

e: nasir@uvc.org

m: 315-857-4618

t: @uvconnect

www.linkedin.com/in/snasirali

www.scfcny.com

http://uvc.org

http://startfast.net

www.uvc.org37

www.ExcellNY.com (585) 458-SEED

Seed Stage VC

Rami Katz, Chief Operating Officer

rkatz@excellny.com

www.ExcellNY.com (585) 458-SEED

• A Dedicated Upstate NY Seed Fund

• Invests ~$250K-$500K

• 3 Current Funds totaling $10M

• Raising New Fund - $30M - $50M

• Looking to make 6-8 deals in 2014

Page 39

Excell Partners - Overview

www.ExcellNY.com (585) 458-SEED

Syracuse University

Syracuse

RPI - Albany

Excell’s Outreach Footprint

Academic Board Upstate NY Footprint

www.ExcellNY.com (585) 458-SEED

• Medical

Devices

• Biotech

• Diagnostics

LIFE SCIENCE

• Material

Science

• Green Tech

• Clean Energy

MATERIAL/ENERGY

• Software

• Healthcare IT

• Telecomm

• Optics /

Imaging

IT/SOFTWARE

Advanced

Manufacturing

MANUFACTURING

Page 41CONFIDENTIAL - NOT FOR DISTRIBUTION

Excell – Industry Focus

www.ExcellNY.com (585) 458-SEED

Excell’s Portfolio: Follow-on Funding

$50,951,262

$21,055,337

$67,656,023

$5,939,265

$24,218,793

$36,811,075

$-

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

$80,000,000

VC Angels FederalGrants

StateGrants

Debt Other

>$206MM raised

www.ExcellNY.com (585) 458-SEED

What is VC?

www.ExcellNY.com (585) 458-SEED

Financing Sources - Summary

Concept Pre-Seed SeedEarlyStage

Growth

CustomerValidation

Maturity

ProfitabilityMarket

ExtensionIdea RevenuesPrototype

Grants – SBIR, NSF, NIH, NYSERDA, etc.

Seed – Angels & Some VCs

Ve

ntu

reSt

age

s

3Fs

Senior/Bank Debt

Econ. Dev. / Factoring

Grants

Equ

ity

De

bt

VCs - A/B Series

www.ExcellNY.com (585) 458-SEED

Valley of Death

Primary Focus:

• At revenue

• Path to break-even

• Ready to scale

• Big growth potential

Secondary Focus:

• Pre revenue

• Prototype complete

• Customer validation

• Big growth potential

EXCELL I & II

Excell - Target Investment Stage

EXCELL

INNOVATE NY

IMPACT CAPITAL

45 CONFIDENTIAL - NOT FOR DISTRIBUTION

Proof of Concept

Seed Startup EarlyLater Stage

www.ExcellNY.com (585) 458-SEED

Early Stage #2,003 +13.2%, $9.8B +14.3%

Angel Investmentsource: UNH CVR-2013

Ear

lyS

tag

eL

ate

$24.8B +8.3%

70,730 deals+5.5%

45% in Seed/Startup

VC Investmentsource: PWC MoneyTree-

2013

Mostly later stage 3,698 deals +8%

$29.4B +11%

Seed #218 – (34.4%) $943M – +14.3%

VCs Vs. Angels

www.ExcellNY.com (585) 458-SEED

– Direct Mail/mass email 1000:1

– Indirect referral 100:1

– Portfolio CEO referral 7:1

– Personal referral 3:1

– Limited Partner/Advisor request 1:1

Source: Derby Management

How to reach a VC?

Excell: go to ExcellNY.com – Entrepreneurs Tab

www.ExcellNY.com (585) 458-SEED

What Happens After Contact?

40 15 5 3100

Application Review Initial Screen Complete Screen Due Diligence Investment

Do we want to

learn more?

Does it fit the

mission?Go/No GO &

Tech expert input

Deep Market,

“Customer voice”

& IP Review

Negotiate &

Close

333 164 87 29 15 10

Page 48

www.ExcellNY.com (585) 458-SEED

Target – 10X in 5 years 58.5% PA

Actual (%):

Source: Cambridge Associates & NVCA – US VC Index 09/30/2011

What VCs Look For?

Fund Type 1-Year 3-Year 5-Year 10-Year 15-Year 20-Year Target

Early Stage 21.88 4.36 6.26 0.89 43.08 31.46 40-100%

Later Stage 25.57 12.71 12.87 6.65 13.16 21.44 25%+

Multi-Stage 17.71 2.91 5.04 4.53 29.49 24.44 30-50%

S&P500 1.14 1.23 (1.18) 2.82 5.23 7.64

NASDAQ 1.97 4.91 1.35 4.89 4.62 7.91

Dow Jones 3.83 3.15 1.37 4.66 6.53 9.16

www.ExcellNY.com (585) 458-SEED

• Funding & Structure for Future Rounds

• Board Level Support

• Identification of Management Talent

• Assistance with Strategic Partners

Excell – Hands-on Support

• Sales, MKT Research, IP Monitoring, Source: Derby Management

What VCs Offer

www.ExcellNY.com (585) 458-SEED

VC Mechanics

www.ExcellNY.com (585) 458-SEED

6/5/2014

Know your VC• Fund includes GPs & LPs

• GPs manage fund, LPs provide the funds

• Term & Investment period

• Management Fees: ~2.5% (varies)

• Carry/Earning – ~80% - 20%

– After return of capital and expenses

• GPs typically invest 1%

Check Portfolio & Deal Size Fit

www.ExcellNY.com (585) 458-SEED

$230K

$1.25M $1.25M

$2.56M

$1M

$3.37M

$2.27M

$5.2M

$1.96M

$955K $657K

$1.32M

$-

$1,000,000

$2,000,000

$3,000,000

$4,000,000

$5,000,000

Pre Prototype Prototype development Product / initial-sales Scale-up

Previous Capital Raised Pre-Money Valuation Capital Sought

Upstate NY - Valuations

UPNY 2006-2010 “Ask” Data

www.ExcellNY.com (585) 458-SEED

Got $eed?

Rami Katzrkatz@excellNY.com,

(585) 458-7336

THANK YOU!

Contact Us

Mike Riedlinger mike.riedlinger@htr.org

Nasir Ali nasir@uvc.org

Rami Katz rkatz@excellny.com

Questions?

Thank you for your

time!

events@medtech.org

www.medtech.org

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