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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
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
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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