803 North Main Street Ann Arbor, MI 48104 (734) 930-9741 [email protected] managing partners:...

803 North Main StreetAnn Arbor, MI 48104

(734) [email protected]

managing partners:

Lisa M. KurekMichael Kurek, PhD

partner emerita:

Mickey Katz-Pek

Developing the Business of Life Science

“Securing Funding Opportunities

for High-tech Businesses”A high-level overview of common funding sources available

to entrepreneurs for technology-based high-tech startup businesses.


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The Academic EntrepreneurThe Academic Entrepreneur(and most other entrepreneurs)(and most other entrepreneurs)

A good idea A good idea is necessary is necessary

but not but not sufficientsufficient


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Funding for CommercializationFunding for Commercialization

$ Internal institutional grants

$ Michigan 21st Century Jobs Fund

$ SBIR/STTR

$ Angel investment

$ Venture capital

$ Corporate investment

$ Banks


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$ Non-Dilutive

$ Equity

$ Debt


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Non-Dilutive:

$ Internal institutional grants

$ MUCI

$ SBIR/STTR


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Equity

$ Michigan 21st Century Jobs Fund

$ Angel investment

$ Venture capital

$ Corporate investment


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Debt$ Corporate investment

$ Banks

$ SBA Loans


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Non-DilutiveNon-Dilutive

$ Typically government or non-profit

$ Looking to achieve goals such as job creation or public good


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• Create jobsCreate jobs

• Promote small businesses: recognized Promote small businesses: recognized

more and more as a unique national more and more as a unique national

resource of technology innovationresource of technology innovation

• Stimulate technological innovationStimulate technological innovation

• Help develop products of commercial Help develop products of commercial

meritmerit

Purpose of SBIR/STTR ProgramsPurpose of SBIR/STTR Programs


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Participating Agencies*Participating Agencies*

DOD - $1200 m USDA - $19.3 m

HHS - $650 m DOT - $4.0 m

NASA - $138 m EPA - $7.0 m

NSF - $105 m DOC - $9.4 m

DOE - $102 m DoED - $8.4 m

DHS - $30 m

TOTAL: >$2.3 B FY 2005

SBIR & STTR SBIR Only

*www.sbirworld.com


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Small Business Innovative Research Small Business Innovative Research Grant (SBIR)Grant (SBIR)

Phase Amount/Period Purpose I $100k/ 6 months Evaluate scientific/technical merit and feasibility

II $750k/ 2 years Expand results of and further pursue development

III requires private $ Commercialization


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Small Business Innovative Research Small Business Innovative Research Grant (SBIR)Grant (SBIR)

PI’s primary employment is with the company

Must identify company controlled research facilities

Lag between phase I and II funding Extremely limited discretionary funds


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Non Dilutive:Non Dilutive:Michigan – Based SourcesMichigan – Based Sources

$ Michigan Universities Commercialization Initiative (MUCI)

$ Michigan Economic Development Corporation (MEDC)


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MUCI Challenge FundMUCI Challenge Fund$ Goal is to transfer university-

based technologies into the private sector

$ Available to 10 MI public universities

$ University TTO/OVPR is the applicant

$ Up to $150K available per project for market studies, prototype development, business plan prep and more…

www.muci.org


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What you’ll need for non-dilutive What you’ll need for non-dilutive financing…financing…

$ Find a funding source applicable to your opportunity

$ Typically require response to an RFP or Solicitation

$ Technical / Product Development / Business Plan as appropriate

$ Ability to write extremely competitive proposals


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Equity: Angel InvestmentEquity: Angel Investment

$ Typically high net-worth individuals

$ Looking for a product, service, company or entrepreneur with whom they can identify

$ Mentoring relationship

$ “Street Smarts”

$ Can move quickly


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Equity: Venture CapitalEquity: Venture Capital$ Often specialize in a

business sector

$ Many have life-stage preferences

$ Often require significant equity positions to invest

$ Typically are able to invest more than angels

$ Company needs a clearly defined exit strategy


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What you’ll need for equity What you’ll need for equity financing…financing…

$ Extensive knowledge of your market

$ How do you plan to make money?

$ “Elevator Pitch”

$ Clear, concise executive summary

- only one chance to make a first impression!

$ Business Plan


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Where to find Angels…Where to find Angels…$ Networking (Accountants,

Attorneys, University TTOs)

$ Michigan Angel Networks:

Great Lakes Angels (www.glangels.org)

Grand Angels (www.grandangels.org)

Aurora Angels (www.auroraangels.com)

Ann Arbor Angels (www.annarborangels.org)


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Where to find venture capital Where to find venture capital firms…firms…

$ Networking

$ Venture Capital Associations:

Michigan Venture Capital Association (www.michiganvca.com)

National Venture Capital Association (www.nvca.org)

Equity:Equity:Michigan – Based SourcesMichigan – Based Sources

““Convertible Debt”Convertible Debt”

$ 21st Century Jobs Fund

$ Michigan pre-seed capital fund

MI 21MI 21stst Century Jobs Fund: Century Jobs Fund:

www.michigan.org/21stcentury

$ FY2006 almost completed

$ FY2007 RFP due????

$ Technology areas supported: Advanced automotive, manufacturing, and materials

Alternative energy

Homeland security and defense

Life sciences


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Michigan Pre-Seed FundMichigan Pre-Seed Fund$ Goal is to provide access to early-stage

capital for company development

$ Supported by Michigan Smart Zones

$ Technology areas supported: Advanced automotive, manufacturing, and materials

Alternative energy

Homeland security and defense

Life sciences

$ $50K to $250K available per company

$ $1 : $1 match required!

www.annarborspark.org


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Debt: BanksDebt: Banks$ Difficult for start-ups to

secure debt financing

$ Risk averse

$ Collateral Required

$ May require personal guarantees

$ Do not require board seats

$ Do not share in profits


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Debt: Small Business Debt: Small Business Adminstration (SBA)Adminstration (SBA)

$ Provides loan programs to small businesses

$ SBA is a guarantor of loans, not a provider

$ Works through its network of lenders

$ Small Business Investment Companies (SBICs)

$ Many other services


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What you’ll need for debt What you’ll need for debt financing…financing…

$ Summary of the loan request

$ Historical balance sheet and income statements

$ Projected balance sheet, income statement, and cash flow

$ Accounts receivable/payable reports

$ Breakdown of inventory

$ Summary of collateral values

$ Personal financial statements (incl. tax returns)

$ Summary of the business and industry


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Corporate InvestmentCorporate Investment$ Team up with customers,

suppliers, even competitors

$ Lots of possibilities…

Joint ventures

Strategic alliances

Other business combinations

Technology licensing

$ May allow you to concentrate on what you know best – your technology!


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Other SourcesOther Sources

$ Personal assets

$ FFF (Friends, family and fools)

$ Vegas, baby, Vegas!


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Michigan – Based SourcesMichigan – Based Sources

$ 21st Century Jobs Fund

$ Michigan Universities Commercialization Initiative (MUCI)

$ Michigan pre-seed capital fund

$ Michigan Economic Development Corporation (MEDC)


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Funding for Commercialization:Funding for Commercialization:Build a funding portfolioBuild a funding portfolio

$ FFF $

$ SBIR/STTR $

$ Angel investment $

$ Venture capital $

$ Corporate investment $

$ Banks $


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Funding Strategy TimelineFunding Strategy TimelineTask Result Grant $ Investment $

Apr-04 Start Company Initial seed $ FFF $50k

Apply for Phase I SBIR

Nov-04 Complete Business Plan Phase I funded $100k

Begin Sending to Investors

Apr-05 Apply for Phase II SBIR

Apply for 2x Phase I SBIR

Nov-05 Negotiate Term Sheets Phase II Funded

2x Phase I Funded $950k

Feb-06 First Pre-seed Round $250k

Apr-06 Apply for 2x Phase II SBIR

Update Business Plan

Aug-06 Seed Round $750k

Nov-06 2x Phase II Funded $1,500k

$2,550k $1,050

NETWORK, NETWORK, NETWORK!NETWORK, NETWORK, NETWORK!

BBC Training Meetings and Seminars

www.bioconsultants.com

MEDC Strategic Economic Investment & Commercialization

Boardwww.michigan.org/medc/ttc/tricorridor/

MTEC Training and Eventswww.mtecsmart.com


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Business Development ResourcesBusiness Development Resources• Attorneys - corporate and patent

• Accountant

• Scientific Advisors

• Consultants

• Non-profit agencies Michigan SBTDC: www.misbtdc.org

• Michigan Economic Development Corp.: http://medc.michigan.org

John Shallman – Life Science

Vince Nystrom – Advanced Manufacturing

Fred Grasman – Homeland Security

• Smart Zones/ Accelerators www.michigan.org/medc/smartzones/index.asp

Commercialization Training

SBIR/STTR Training

Business Development Consulting

Grant Development Assistance

ClientAccess

BBC MTTC ProgramBBC MTTC Program

Life Sciences OnlyLife Sciences Only All 21CJF Tech SectorsAll 21CJF Tech Sectors


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BBC MTTC Program: DeliverablesBBC MTTC Program: Deliverables

• SBIR Phase I Funding

• SBIR Phase II Funding

• Commercialization Plan

• Market Research & Competitive Analysis

• Business Plan

• Investor Presentations

• Equity Funding

• Licenses negotiated

• Strategic Partners

• Management recruited

• Customers identified

• Financial and grant management systems developed

• Board members recruited

• Contract Manufacturers identified

• Sales plans and implementation strategies

Grant Development Assistance

Business DevelopmentConsulting

ClientAccess


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Questions??Questions??

803 North Main StreetAnn Arbor, MI 48104

(734) [email protected]

managing partners:

Lisa M. KurekMichael Kurek, PhD

partner emerita:

Mickey Katz-Pek


803 North Main Street Ann Arbor, MI 48104 (734) 930-9741 [email protected] managing partners:...

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