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2. 21 FUND THREE EVOLUTIONSPhase I (1999-2005) facilitation of university-driven technology transfer into the commercial sectorPhase II (2005-2009) under the IEDC, company-driven technology-based product development in the commercial sectorPhase III ( 2009-2011) post financial crisis, company-driven acceleration of market entry and creation of entrepreneurial wealth, economic impact and jobs2 3. 21 FUND LEGACY PORTFOLIOSectorFundingCountiesTotal FundingOpportunitiesRepresented Amount ($)Academic Labs * 74 6 90.0 millionLife Sciences 51 1266.0 millionInformation Technology38 1247.1 millionAdvanced Manufacturing34 1540.4 millionSBIR/STTR Matching3582435.6 millionTotal** 55532279.1 million*University labs and Centers of Excellence were funded pre-dominantly before 2005.** Only included closed opportunities with duly executed agreements,.According to a 2010 Economic Impact Study by the Ball State University, 21 Fundawardso translated into over $1 billion invested in the development of Indianas high- tech sectoro created over 11,000 near-term high-paying jobso made $427 million direct impact on Indianas real GDP, after subtraction of opportunity costs3 4. 21 FUND PORTFOLIO MAPPING21 Fund Direct Awards SBIR/STTR Matching Awardso Overallconversion rateis approximately14% (or a 86%rejection rate)o 42 countiessubmitted atleast oneapplicationo Of the 42counties thatapplied, 10 didNOT receive anawardo 4 counties (St.Joseph,Tippecanoe,Monroe andMarion) accountfor over 70% ofthe 21 Fundawards. Star size scaled to the percentage of total dollars4 5. WHY THE EVOLUTION NEEDS TO CONTINUE?Despite 21 Funds continuing progression and contribution to Indianas entrepreneurialgrowth, nationally competitive models have been able to demonstrate moreimpressive metrics and results.Jumpstart in Cleveland, OH-2010 Performanceo Engaged 37,300 entrepreneurs and community members-7,500 women or minorityo Approached by 8,307 entrepreneurs-1,412 women or minorityo Received 2,317 business plans from entrepreneurs-771 from woman or minoritieso Provided 87,750 hours of free assistance to entrepreneurs-21,800 hours to women or minoritieso Invested $18.1 million in 49 companies-14 founded by women or minorityo Portfolio companies have raised $127 million-Leverage of 7x on the investmento Reached annualized revenues of $30 milliono Created and supported 431 direct jobso Received 104 patents with another 152 in processo One portfolio company was strategically acquiredo Generated economic impact of $267 million in the past four yearso Created 811 direct and indirect jobso Generated $12.1 million in taxes in 20095 6. A TYPICAL ENTREPRENEURIAL VENTURE LIFECYCLEGrantsFriends Angel InvestorsSeed FundsVenture Capital/Private Equity Self Funding FamilyResearchProductIdea Development Early GrowthRapid GrowthMaturityCore Technologies Development o Entrepreneurs go through proof-of-concept and initial product build and validation phases with research grants, self-funding, friends and family, and angel investors, usually in limited amount of dollars. o Entrepreneurs then partner with venture capitalists to target and launch products, scale up product distribution, and achieve rapid revenue growth. o Financial returns to entrepreneurs, other early-stage investors and venture capitalists are achieved through initial public offerings or acquisitions of the ventures by strategic or later- stage financial investors.6 7. VENTURE DEVELOPMENT CONUNDRUM STILLEXISTS IN INDIANA ResearchSBIR 21 Fund GazelleGrants STTRInvestmentsSelf FundingGAP Angel Investors GAPInstitutional InvestorsFriends &FamilySeed FundsResearch ProductIdea Development Early Growth Rapid GrowthMaturityCore TechnologiesDevelopmentFederal $Why is this a conundrum? State $Private $o Technologies and ideas are not fully commercialized due to lack of resources.o Limited number of startup successes lead to perception of limited technology-basedentrepreneurial activities.o Perceived lack of opportunities creates a roadblock for attraction and retention of talent, andlocal and outside capital.o Without talent and local and outside capital, more technologies and ideas will not fullyrealize their economic impact and job creation potential.7 8. VENTURE DEVELOPMENT CONTINUUMVenture Development Organization Research SSBCI AngelSBIR 21 Fund Gazelle SSBCI HighGrantsFundsSTTRInvestmentsGrowth LendingSelf FundingAngel InvestorsSSBCI SeedSSBCIInstitutional InvestorsFriends &FamilySeed FundsFundsEnhancementResearchProduct Idea Development Early GrowthRapid GrowthMaturityCore Technologies DevelopmentFederal $How does a venture development organization transform this venture capacityconundrum into venture development continuum?VDO $Private $o Address market confusion and identify a clear funding road map.o Decrease the funding gap by leveraging public dollars into increased privateinvestments.o Provide EIR assistance to compress company development cycle, leading toaccelerated economic and job creation impact.o Increase visibility of Indiana gazelle companies to regional and national investors.8 9. ELEVATE VENTURESAs a tax-exempt non-profit state-wide venture development organization, is leadingthe efforts too Implement best practices modeling after nationally recognized venturedevelopment models, such as Jumpstart in Cleveland OH, i2E in Oklahoma City, OK,Innovation Works in Pittsburg, PA.o Provide entrepreneurs-in-residence and attract talent to assist companies withbuilding a strong base and moving down a path of exponential and sustainablegrowth.o Attract new sources of capital to increase outcomes, including formation of seedfunds and angel networks.o Minimize administration costs and maximize investment returns to ensuresustainability with active investment management.o Monitor investments and ensure collection of metrics and compliance with federaland state program guidelines.9 10. ELEVATE VENTURES E4 PROCESS10 11. RESOURCE ATTRACTION & RETENTION Ideas &Entrepreneurs Federal and Foundation Support Wealth CreationVenturesIncreasedPrivate &InstitutionalInvestmentsEconomicJob Creation Impact AngelNetworks Growth inFunding EconomicGardeningSuccessfulVentures Scalable Ideas Entrepreneurial Assistance Coachable EntrepreneursElevate Ventures11 12. ACHIEVABLE OUTCOMES o Quantitative A statewide angel network of at least 10 Hoosier communities$10 Increased deal flow private dollars Increased number of companies funded at the right time with the right resources Increased amount of dollars invested state wide at the right stage Increased capital leverage of public dollars Growth in the number of successful exits Growth in wealth creation for entrepreneurs and investors Growth of employment in technology-based ventures$1 o Qualitativepublic Nationally competitive project selection process dollar Nationally recognized venture development program with top-notch entrepreneurs-in-residence Foster an environment and a culture that promote wealth creation and intelligent risk-taking and a hub for talents in various sectors12 13. WHY THE STATE PARTNERS WITH ELEVATEVENTURES The State faces structural issues in funding innovative companies and stimulating entrepreneurial ecosystem o Experienced staff not available due to conflict and lack of incentive Resource Constraint o Limited experience base and rigid funding structure restrict leverage of federal and state dollars into co-investment opportunities with the private sources Limited Investment Base o Dollars invested have supported business build, but no equity upside return potential to the State for reinvestment Lack of velocity o Capital-only approach resulted in inefficiency in capital deployment Limited Efficiency or Accountability13 14. STATES PARTNERSHIP WITH ELEVATEVENTURES ENHANCES SUCCESS o Led by Howard Bates and Steve Hourigan with top-notch staffing including venture partners, EIRs and Investment Managers Experienced Team o Leverage federal and state dollars to attract other institutional investors Increased Investment Base o Wealth created for entrepreneurs, individual and institutional investors via successful exits can be reinvested in Indiana companies Increased Velocity o Active asset management with direct accountability leads to greater return Maximized Accountability & Return Unlike for-profit only investment managers, Elevate Ventures non-profit venture development approach adds additional value by: o Clear focus on nurturing and developing Indiana-based high-potential businesses into high-performing companies along the funding continuum o Leverage to attract federal and philanthropic dollars and provide much-needed entrepreneurial assistance to increase the probability of venture success14 15. CASE STUDIES 21 Funds most recent portfolio (2009-present) has already shown notable leverage ratio since the private matching mandate was implemented in early 2009. Sector21 Fund InvestmentFollow-on Funding Leverage Ratio (X) Information Technology $11,800,000$63,900,0005.42 Life Sciences$9,200,000 $46,100,0005.01 Advanced Manufacturing$3,800,000$8,500,0002.24 Total$24,800,000 $118,500,0004.7815 16. CASE STUDIES Scale Computing o $2 million awarded by the 21 Fund in 2009 o Raised $17 million in late 2010, resulting in total of $31 million raised to date Chacha o $2 million awarded by 21 Fund in 2007 o Raised over $75 million to date OrthoPediatrics o $2 million awarded by 21 Fund in 2009 o Raised over $30 million to date Immuneworks o $2 million awarded by 21 Fund in 2008 o Entered into a strategic co-development partnership withLung Rx, a publicly-traded company in 2010, whichprovides substantial funding for pre-clinical and clinicalwork16 17. CASE STUDIES Marcadia Biotech o $2 million award by the 21 Fund in 2006 o Received $16 million in follow-on funding o Secured development arrangements with Eli Lilly, Merck and Roche o Acquired by Roche in late 2010 for $537 million o Repaid 21 Fund $2.6 million per return provision in the Grant Agreement o If 21 Fund award was structured as an investment vehicle, upon Marcadias 2010 exit,estimated conservatively, the State would have received over $30 million in upfront cashpayment and potentially additional $26 million in milestone payments. Endocyte o Received nearly $4 million from 21 Fund before 2005 o Raised over $90 million in follow-on private funding o Raised $75 million in an initial public offering in early 2011 o Raised $66.8 million in recent secondary public offering o Due to the early grant structure, the State failed to capture any financial return. o If 21 Funds $4 million was structured as an investment vehicle instead of grant, theStates holding would have be estimated at over $10 million at the IPO price.17