tia silicon cape presentation 23june2011

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CONVERTIBLE LOANS & ROYALTIES CONVERTIBLE LOANS & ROYALTIES Naim Rassool (GM: Technology Innovation WC) Craig Landsberg (GM: Business Advisory & Support Services) Craig Landsberg (GM: Business Advisory & Support Services) 1

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Convertable Loans and Royalties

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  • CONVERTIBLE LOANS & ROYALTIESCONVERTIBLE LOANS & ROYALTIES

    Naim Rassool (GM: Technology Innovation WC)

    Craig Landsberg (GM: Business Advisory & Support Services)Craig Landsberg (GM: Business Advisory & Support Services)

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  • Presentation Outline

    TIA & Funding products (10min) TIA&Fundingproducts(10min) ConvertibleLoans(10min) Royalties(10min)

    2

  • TIA Act No. 26 of 2008

    stim lating and intensif ing technological inno ation instimulating and intensifying technological innovation in

    order to improve economic growth and the quality of life of all

    South Africans by developing and exploiting technological

    innovations.

    TechnologyIdeas

    TechnologyInnovation

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  • Strategic Intent

    VisionVision

    To be a world class innovation agency that supports and enables technological innovation to achieve socio-economic benefits for Southtechnological innovation to achieve socio economic benefits for South

    Africa through leveraging strategic partnerships

    Mission

    T h S th Af i l b l titi d t d li iTo enhance South Africas global competitiveness and to deliver socio-economic value through mobilising financial and non-financial interventions

    across different sectors of the economy.

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  • DST Funding Entities Merged into TIA

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  • SA high tech, high risk funders in innovation value chaing , g

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  • TIA Technology Sectors

    BiotechnologySectors IndustrialSectors

    AgroAdvanced

    Manufacturing

    Health Energy

    Industrial Biotech ICT

    Mining

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    Mining

  • Summary of Funds

    Equity

    Debt

    Convertible Loan

    Royalty

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  • Convertible Loans

    Concept & Rationale for Loan being convertible into equity Concept & Rationale for Loan being convertible into equity

    IRR on convertible loan

    Repayment terms scenario: Immediate interest accrues at prime x% Repayment at break-even Repayment sometime after break-even No interest for fixed periodNo interest for fixed period Repayment after profitable for 12 consecutive months

    Security for Loan IP

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    Ranking of loan repayment

  • Royalties

    Rationale for Royalties Share of future success of technology/product Arms-length Type of entity

    Common practice Common practice

    Concept of Royalty Direct Commercialisation Model Direct Commercialisation Model

    o Percentage off turnover (very rare cases off gross profit)o Typically fixed periodo yp ca y ed pe odo Common best practice

    Indirect Commercialisationo Percentage off receipts

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  • Royalties

    Determining Royalty Rates 25% IP rule

    Industry norms

    Eroding net margins

    TIAs return (minimum real return)

    Structuring Royalties Holidays (royalty 0%)

    Deferment (in case of cashflow problems, accrues interest

    monthly at prime)

    Dil ti ( l i ti l t i ti i th i t )

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    Dilution (only in exceptional cases to incentivise other investors)

    Converting Royalties (must try to indicate ratio at which converts)

  • Thank You!

    Download Funding Guidelines & Application Forms fromDownload Funding Guidelines & Application Forms from www.tia.org.za

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  • TIAs successful Information Communication Technology (ICT) investments.gy ( )

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  • BlueCubeMQiinlinemineralquantifiersallowprocessoperatorsinmineralseparationplantstoaccessminutebyminutemineralcompositioninformation

    Outputdataischannelleddirectlytoaclientsdatabaseforimmediateusebyoperators.Thetechnologyprovidesconsistentandaccurateinformationonactualmineralcomposition information,notonlytheelementalcomponents.

    Thedataprovidedbytheinlinemineralscannersassistoperatorsinoptimising

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    therecoveryofvaluablemineralsbyprovidingimmediatefeedback.

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