first. transformative. proven.€¦ · we are early-stage active investors we have first access to...

INVESTING IN NANOTECHNOLOGY

NASDAQ : TINY

FIRST. TRANSFORMATIVE. PROVEN.

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This presentation may contain statements of a forward-looking nature relating to future events. Statements contained in this presentation that are forward-looking statements are intended to be made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. These statements reflect the Company’s current beliefs, and a number of important factors could cause actual results to differ materially from those expressed herein. Please see the Company’s Annual Report on Form 10-K, as well as subsequent filings, filed with the Securities and Exchange Commission for a more detailed discussion of the risks and uncertainties associated with the Company’s business, including but not limited to the risks and uncertainties associated with venture capital investing and other significant factors that could affect the Company’s actual results. Except as otherwise required by Federal securities laws, Harris & Harris Group, Inc. undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties.

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SAFE HARBOR STATEMENT

HARRIS & HARRIS GROUP

Harris & Harris Group is an Early-Stage,

Active Investor in Transformative

Nanotechnology Companies.

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WE WERE THE FIRST INVESTORS TO SPECIALIZE IN NANOTECHNOLOGY

2004: Sale to Wilson Greatbatch

2003: Initial Investment

1997: IPO (NASDAQ: NANX)

1994: Initial Investment

4

WE ARE EARLY-STAGE ACTIVE INVESTORS

We have first access to some of the most promising developments in nanotechnology.

Note: Pie chart depicts distribution of value of our equity-focused portfolio as of June 30, 2012.

•  LEDs •  Solar Energy •  Biofuels •  Batteries •  Water •  Ultracapacitors •  Digital Cinema

•  Non-Volatile Memory •  Quantum Computing •  Image Sensors •  Touch Screens

•  Personalized Medicine

•  Vaccines •  Molecular

Diagnostics

Quantum Dots

Inorganic Nanowires

Nanoimprint Lithography

MIT Harvard University

RTI International Univ. of Texas

Univ. of California CalTech

Univ. of Illinois Univ. of Washington

Mass. General Hospital

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First Ins.tu.onal Investor or Part of First Ins.tu.onal Syndicate

• ABSMaterials • Adesto • Ancora •  Bridgelux •  Contour Energy •  Enumeral • HzO •  Laser Light Eng. • Mersana • Nantero(1) • Nextreme •  Senova •  SiOnyx • Ultora •  Xradia

• AdapFve Web (Exited in 2001)(1) • Ag Services of America (Exited in 1993)(1) • Agile (Exited in 2005) • Alliance Pharma. (Exited in 1990, 1997 and 2000)(1) • American Equine Products (Exited in 1990)(1) •  Chlorogen (Exited in 2008) •  CORDEX Petroleums (Exited in 1998)(1) •  Crystal IS (Exited in 2011) •  Cswitch (Exited in 2009) •  Evolved Nanomaterial Sciences (Exited in 2008)(1) •  Experion Systems (Exited in 2005)(1) • Genomica (Exited in 2001)(1) • Molten Metal Technology (Exited in 1993)(1) • NanoGram (Exited in 2010) • NanoGram Devices (Exited in 2005)

• NBX (Exited in 1999)(1) • NeoPhotonics (IPO in 2011)(2) • NeuroMetrix (Exited in 2005)(1) •  Phoenix Molecular (Exited in 2008) • Questech (Exited in 2011)(1) •  Re Capital (Exited in 1989)(1) •  SciQuest (Exited in 2000)(1) •  Silknet So\ware (Exited in 2001)(1) •  Siluria (Exited in 2011) •  Solazyme (IPO in 2011)(2) •  Starfire (Exited in 2009) •  Sundial (Exited in 2001)(1) •  Voice Control Sys. (Exited in 1999)(1) •  Zia Laser (Exited in 2008)

(1)  Ini.al investment made prior to 2002. The first member of the current investment team joined Harris & Harris Group in 2002. (2)  NeoPhotonics and Solazyme remain as unrealized porKolio holdings as of June 30, 2012.

WE ARE EARLY-STAGE ACTIVE INVESTORS

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•  Diminishing early-‐stage financings creates opportuni.es: o  Outstanding pipeline of deals. o  Ability to negoFate favorable

deal terms.

•  Early stage nanotech deals require our specific skills and involvement: o  Technology development. o  IP landscape development. o  Management team

development. o  Venture syndicaFon. o  Product and market

definiFon. o  Need for corporate partners.

FOCUS ON EARLY STAGE

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NANOTECHNOLOGY ADDRESSES MEGATRENDS

•  Governments, corporaFons, and investors increasingly organize their R&D, new business, and funding efforts around addressing megatrends.

•  Nanotechnology is fundamentally posiFoned to address the needs created by the most important megatrends.

Global health and ageing population

Ubiquitous data and

connectivity

Nanotechnology Impact

Global energy needs

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$54 billion worth of energy products projected to make use of nanotechnology in 2015.

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Energy trend

Nanotech founda.ons

UnconvenFonal Oil and Gas

Ultra-‐tough coaFngs in producFon extremes

Catalysts that make chemicals from nat gas

Treatments for produced water from fracking

Rise of Renewables

Treatments for more efficient solar cells

Composites for lighter wind turbines

Energy storage on the grid aids integraFon

Clean, Efficient TransportaFon

Lightweight composites for fuel-‐efficient cars

Catalysts that make chemicals from nat gas

Reservoir agents refine crude sFll in the ground

Source: Lux Research

NANOTECHNOLOGY IMPACTS ENERGY

Note: There is no guarantee that 2015 projecFons will be achieved. Do not place undue reliance on such projecFons. Harris & Harris Group does not warrant the accuracy, completeness or Fmeliness of informaFon cited from third-‐party sources.

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$328 billion worth of healthcare products projected to make use of nanotechnology in 2015.

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Healthcare Trend

Nanotech Founda.ons

Big Pharma Patent Expiry

Improved delivery technologies

Biologics and novel therapeuFcs

Advanced drug discovery tools

Personalized Medicine

Molecular diagnosFcs

Gene sequencing and personal genome

Monitoring of personal biometrics

Aging PopulaFons

Treatments for diseases of old age

Home health monitoring

PalliaFve and prevenFve care


NANOTECHNOLOGY IMPACTS HEALTHCARE


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$841 billion worth of electronics products projected to make use of nanotechnology in 2015.

Electronics Trend

Nanotech Founda.ons

Booming Mobile Devices

Improved displays and novel form factors

Robust materials and enhanced portability

New funcFonality for social applicaFons

Energy Efficiency

Solid-‐state lighFng and power electronics

Improved thermal management

Improved energy storage and conversion

Ubiquitous ConnecFvity

Bandwidth for cloud compuFng and Big Data

Internet and communicaFon security

Pervasive sensors, RFID, Internet of things


NANOTECHNOLOGY IMPACTS ELECTRONICS


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OUR PORTFOLIO COMPANIES ADDRESS NEEDS IN MANY INDUSTRIES

Note: The portfolio companies listed are ones in which Harris & Harris Group made its initial investment since 2002. This time period was chosen based on the year that the first of the current managing directors joined the firm.

TECHNOLOGY GESTATION PERIOD

1900 1915 1930 1945 1960 1975 1990 2005

90

80

70

60

50

40

30

20

10

0

100 % of U.S. Households

Commercializa.

on

Gesta.o

n

2010

Radio

Color TV

Microwave

Computer

Internet Nanotechnology

Electricity

Nanotechnology recently completed the transi.on from gesta.on to commercializa.on.

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•  Compound Annual Growth Rate of: •  21.5% for total funding from 2000 to 2010 •  35.0% for corporate R&D funding from 2000 to $9 Billion in 2010 •  19.5% for global publicaFons from 2000 to 2010

TOTAL GLOBAL REVENUE

2004 2009 2015

Nanomaterials $0.29 B $1 B $2.9 B

Nanointermediates $2.5 B $27 B $474 B

Nano-‐enabled products $16 B $223 B $1960 B

2015 numbers are projected Source: Lux Research Inc.

By 2015, $2 trillion in products projected to incorporate nanotechnology.

NANOTECHNOLOGY COMMERCIALIZATION IS NOW


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NANOTECHNOLOGY IS POSITIONED FOR RAPID ADVANCEMENT

1980 1990 2020 1974 2010 2011 2001 2020

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Commercializa.on

Gesta.on

1990 2020

•  Carbon Nanotubes Discovered

•  First liquidity events

•  PorKolio Company Revenue Growth of 42%

•  Assembled Team •  First Investments •  Term “Nanotechnology”

Coined

Basic and Applied Research

Early Adop.on

Rapid Advancement

Mass Market

•  Five Liquidity Events

Low

Opp

ortunity

High

1991

We believe we are the leaders inves.ng in nanotechnology, and its growth is allowing us poten.ally to deploy more funds profitably.

Note: There is no guarantee that the projecFons on this slide will be achieved. Do not place undue reliance on these projecFons.

First Decade of Commercialization

Second Decade of Commercialization

WE HAVE BEEN PRACTICING EARLY-STAGE INVESTING SUCCESSFULLY FOR 30 YEARS

1982 2012 20021 1992 2007

1 IPO Exit 3 M&A Exits 9 Other Exits2

2 IPO Exits 1 M&A Exit 1 Other Exit2

5 IPO Exits 4 M&A Exits 19 Other Exits2

2 IPO Exits3 3 M&A Exits 18 Other Exits2

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•  Aggregate net realized and unrealized appreciation for our 94 equity-focused investments since 1982 is $86 million (1.4x) on invested capital of $196 million.4,5,6

1  The investments and returns generated prior to 2002 were managed by former employees of Harris & Harris Group. The current Managing Directors of Harris & Harris Group joined and managed investments of the firm beginning in 2002, 2004, 2005 and 2007.

2  “Other Exit(s)” includes transacFons such as the sale of shares of publicly traded stocks obtained in open market or PIPE transacFons, sale of shares in a private transacFon to another investor or the porlolio company, abandonment of shares, bankruptcy filing and asset sale.

3  PorFons of the holdings of the two companies that completed IPOs in 2011 remain unrealized as of June 30, 2012. 4  The return figures presented are as of June 30, 2012, do not reflect the deducFon of any fees and expenses, including advisory fees, carried interest, commissions, brokerage fees or

other fees and expenses, and such figures do not reflect the issuance or reinvestment of dividends. Actual returns received by an investor would be reduced by fees incurred in the management of the porlolio. For example, the gross returns of a venture capital porlolio of approximately $282 million on invested capital of approximately $196 million, would return approximately $233 million if an annual management fee of 2 percent and incenFve fee of 20 percent were applied. All fees and expenses of the Harris & Harris Group, Inc., porlolio are set forth in our public filings at www.sec.gov. Please contact Investor RelaFons for paper copies of such filings.

5  Performance informaFon is presented on a gross basis as Harris & Harris Group, Inc., operates as an internally-‐managed business development company under the Investment Company Act of 1940 and does not pay an advisory fee to an external management company.

6  Aggregate net realized and unrealized appreciaFon since 1982 does not include cash returns of approximately $1.3 million from the sale of call opFons covered by our shares of Solazyme and NeoPhotonics, $883,000 on invested capital of $208,000 from the sale of shares of Solazyme, funds held in escrow of $1.2 million, potenFal future milestone payments of $9.5 million and unrealized values of publicly traded posiFons based on the closing price on June 29, 2012. The future milestone payments are payable upon reaching certain regulatory and sales milestones related to the acquisiFon of BioVex Group, Inc., by Amgen, Inc.

OUR KNOWLEDGE IS BORN OUT OF EXPERIENCE AND SUCCESS

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Previous Experience of Our Investment Team Douglas W. Jamison Managing Director

Chairman and CEO, Harris & Harris Group, Inc., Sr. Tech. Manager at University of Utah Technology Transfer Office, Co-‐Editor-‐in-‐Chief of Nanotechnology Law and Business, B.A. (Dartmouth College), M.S. (Univ. of Utah).

Daniel B. Wolfe, Ph.D. Managing Director

President, Harris & Harris Group, Inc., Consultant to nanotechnology companies and venture capital firms, Ph.D. and A.M. (Harvard University; Physical Chemistry), B.A. (Rice University).

Alexei A. Andreev, Ph.D. Managing Director

Draper Fisher Jurvetson, Renaissance Capital/Sputnik Funds, Ph.D. and B.S. (Moscow Steel & Alloys InsFtute; Solid State Physics), M.B.A. (Stanford Univ.).

Mis. Ushio, Ph.D. Managing Director

Merck & Co., Inc., Technology Licensing Officer at Columbia Univ., Ph.D. (University College London; Biochemical Engineering), B.S. (Johns Hopkins University).

Rob Burns, M.B.A. Senior Vice President

Lux Research, Inc., M.B.A. (George Washington University, InternaFonal Business), B.A. (University of Maryland, Economics), 2011 Eisenhower Fellow.

Blake Stevens, Ph.D. Associate

HzO, Inc., Ph.D. (Northwestern, Materials Science and Engineering), B.S. (Cornell, Materials Science and Engineering).

Ian Chia, Ph.D. Associate

Ph.D., M.Phil, M.A. (Columbia University, GeneFcs and Developmental Biology), M. Phil. (Cambridge University, Management), B. Sc. (McGill University, Microbiology and Immunology).

Backgrounds of Our Board of Directors Retired Partner of Deloitte & Touche Vice President at Tower Group Founder of Ramsey/Beirne Associates Managing Director at MVC Capital

Chief Operating Officer of Cold Spring Harbor Labs Senior Attending Physician of Orthopedic Surgery Former VC GP for USVP; Semiconductor Executive

Our interdisciplinary team has the ability to iden.fy and diligence cross-‐discipline deals.

OUR EXPERTISE IS INTERDISCIPLINARY

Physics

Biology

Materials Science

Engineering

Medicine

Nanotechnology

Chemistry

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H&H TECHNOLOGY

DOMAINSBIOTECHNOLOGY CHEMICAL ELECTRONICS

Precision Chemistry Novel Medicines Novel Chemical SynthesisNanoscale, molecular,

macromolecular modeling.

Nano-Fluidics &

Fabrication Novel, multiplexed, small-volume

sample handling.Novel materials for low cost

analysis. Nanofluidic control systems and

macroscale integration.

Separations Efficiently purify water and

proteins.Novel resins and

membranes.Modeling and optimization of

separation systems.

Sensing Nano-scale sensors for molecular

analysis and bioprocess monitoring.

Novel materials and chemistry for low cost

remote sensing.

Dispersed sensor systems, mesh/adaptive networks, multi and

hyper-spectral imaging.

Semiconductors &

Molecular Analysis

Semiconductor based technology for genetic and biochemical

analysis.

Novel circuit board substrate materials &

chemistry.

High-density, high-speed memory and data storage.

Big Data Biomarker discovery and better decision making for patient care.

Algorithms for novel chemical and materials

design.

High-speed memory and interconnects, multi-variable processing, unstructured to

structured data sets.

3D Biology 3D cell printing and propagation

for diagnostics and discovery.

Advanced materials for 3D tissue regeneration and

growth. Protein and tissue modeling.

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HARRIS & HARRIS GROUP TECHNOLOGY DOMAINS ARE RELEVANT TO SEVERAL INDUSTRIES

Biofuels

Ligh.ng

Energy Harves.ng

Baieries

Renewable Chemicals

Water Molecular Diagnos.cs

Touch Screens

Drug Discovery

3D Biology

Cancer Therapeu.cs

???

Disposable Electronics Image Sensors

Quantum Compu.ng Solid State Memory

Vaccines

These discoveries cross-‐fer.lize mul.ple billion-‐dollar end markets resul.ng in a diverse porKolio.

OUR APPROACH YIELDS A DIVERSE PORTFOLIO

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OUR PARTNERS - PRESENT

Note: All numbers are as of June 30, 2012. The amounts listed are from portfolio companies in which Harris & Harris Group made its initial investment since 2002. This time period was chosen based on the year that the first of the current managing directors joined the firm.

Over $80 million in federal funding

Over two thirds have significant corporate

partnerships or investors

> $1 billion in capital from other venture capital firms

Leve

rage

on

Ou

r In

vest

men

ts

$149 million Invested by

H&H

Alloy Ventures ARCH Venture Partners ATA Ventures Battery Ventures Braemar Energy Ventures CMEA Capital Crosslink Ventures DCM – Doll Capital Management

Draper Fisher Jurvetson Energy Ventures Fidelity Biosciences Globespan Capital Partners Khosla Ventures KPCB Proquest Polaris Venture Partners Venrock

Bosch Bristol Myers Squibb Bunge Coherent Chevron Dow Hitachi Chemical

IMAX Intel LG Innotek Lockheed Martin Mitsui Panasonic Pfizer

Samsung Sephora Schlumberger Synaptics Syngenta Tyco Unilever

Columbia University California Institute of Technology Harvard University Lawrence Berkeley Laboratory Massachusetts General Hospital Massachusetts Institute of Technology Research Triangle Institute

University of California University College London University of Illinois Urbana Champaign University of Texas Whitehead Institute

Advanced Defense Research Projects Agency National Science Foundation National Institute for Standards and Technology Night Vision and Electronic Sensors Directorate Office of Naval Research

National Institutes of Health Department of Energy

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Energy Healthcare Electronics

Early Stage

Produced Water Absorbents Cobalt Ultora

Nextreme

Ancora Enumeral

Senova HzO

Mid Stage

Contour Energy Laser Light Engines

ABSMaterials Nanosys

Champions Oncology (OTC: CSBR)

Mersana Ensemble OpGen(1)

Adesto SiOnyx

D-Wave Systems Cambrios

Kovio Nantero

Late Stage Solazyme

(NASDAQ: SZYM) Bridgelux

Metabolon

Xradia Molecular Imprints

NeoPhotonics (NYSE: NPTN)

WE HAVE A PIPELINE THAT INCLUDES HIGH-QUALITY INVESTMENTS

Note: Equity-Focused portfolio companies and stage classifications as of June 30, 2012. (1) New investment made in 2012.

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OUR PARTNERS - FUTURE

Government Agencies

Corporate Partners

Venture Capital Firms

Leve

rage

on

Ou

r In

vest

men

ts

Capital from H&H

Permanent capital of Harris & Harris Group invested alongside outside capital managed by Harris & Harris Group.

Uncertain future for availability of government grants, contracts, loan guarantees.

Corporations have capital and need visibility and access to disruptive technologies in core and adjacent markets.

Number and size of venture capital firms investing in energy, healthcare and electronics are decreasing, which reduces capital availability from these sources.

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CORPORATE INVOLVEMENT IS CRITICAL

Corporate involvement is cri.cal to providing scale and distribu.on. Understanding the op.mal transi.on point is quintessen.al to build capital efficient businesses.

EARLY-‐STAGE DEVELOPMENT

CharacterizaFon, reproducibility, Base line processes,

IntegraFon challenges, SpecificaFon challenge Correct cost model

SCALE AND MANUFACTURING Manufacturing scale,

Factory integraFon, pilot faciliFes,

Clinical Trials

$$

TIME

REVENUE GROWTH IntroducFon and access to the market & customers

Value Crea.on

Cumula.ve Cost

Deal team Strengths

Ac.ve Corporate Involvement

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PRIORITIES FOR 2012 AND BEYOND

We currently believe Harris & Harris Group is well positioned to grow its NAV and generate returns for shareholders through:

•  Liquidity Events:

•  Between 2012 and 2014, we believe our late-stage companies could reach liquidity through IPOs or sales.

•  We believe more than 75 percent of our mid-stage companies could be in a position to complete transactions that create liquidity for our investments in those companies.

•  Generating Predictable and Near-Term Income:

•  We are investigating opportunities to increase our venture debt investment opportunities.

•  We are selling call options covered by our positions in publicly traded portfolio companies.

•  Increasing Investable Assets Without Issuing Common Stock

25 Note: These projections are based on currently available information and the timelines for reaching and the percentages of our current portfolio companies that may reach liquidity events may differ materially in the future from these projections. There can be no assurance that any of these companies will be able to consummate either type of transaction, or that a successful liquidity event by any of these companies will generate a positive return on invested capital.

HARRIS & HARRIS GROUP

We are EARLY-STAGE, ACTIVE investors in TRANSFORMATIVE nanotechnology companies.

•  We are FIRST.

•  We have invested SUCCESSFULLY for 30 years.

•  Our companies are TRANSFORMING industries.

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Biochemical Analysis Diagnos.c Report

METABOLOMICS: NEXT GENERATION OMICS Complete biochemical profile for disease

biomarker discovery through metabolic profiling.

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METABOLON

EXTENSION OF SILICON TOOLBOX Bring silicon economics and high-‐performance to night vision, security and surveillance and gesture user interface sensors.

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SIONYX

Nano-‐engineered Si surface

Night vision CMOS imager

Cell phone, surveillance,

industrial cameras

with partners

USING MATERIALS SCIENCE TO ADVANCE ELECTRONICS Address the need for low-‐power, low-‐cost, high-‐speed, scalable non-‐vola.le memory for mainstream and embedded applica.ons

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ADESTO

Novel non-‐vola.le programmable material system

CMOS compa.ble fabrica.on

Stand-‐alone EEPROM, embedded memory, and FPGA matrix

with partners

FROM DIGITAL TO QUANTUM COMPUTING Harness the ability of quantum mechanics to solve some of the

most computa.onally intensive problems in seconds or minutes rather than years.

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D-WAVE SYSTEMS

Superconduc.ng Josephson Junc.ons

Integrated Superconduc.ng Circuits

Adiaba.c quantum computer

with partners

June 30, 2012 March 31, 2012

Value of Privately Held Portfolio Companies $88,510,504 $82,884,924

Value of Publicly Traded Portfolio Companies $35,001,116 $37,815,824

Value of Rights to Milestone Payments $3,386,224 $3,352,886

Total Value of Portfolio Securities $126,897,844 $124,053,634

Primary and Secondary Liquidity $62.8 million1 $67.7 million1

NAV / Share $4.88 $4.89

Stock Price $3.80 $4.15 1 Amount includes values of publicly traded positions and cash on hand at each respective date.

Q2 2012 VS. Q1 2012

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first. transformative. proven.€¦ · we are early-stage active investors we have first access to...

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