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Technology Transfer Accelerator Turkey (“TTA Turkey”) IP Conference Turkey30 October 2014

Istanbul

Agenda

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1. About EIF EIF Resources, Governance and Investments

Equity Highlights

EIF Technology Transfer: History and Characteristics

2. About TTA Turkey Background, Structure and Objectives

TTA Turkey Fund

Targets, Investment Criteria, Investment Process and Structure

Main Terms & Conditions, Flow of Funding, Time Frame and Process

Investment Considerations and Assessment Criteria

What is the EIF?

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The leading developer ofrisk financing for entrepreneurshipand innovation across the EU

“”

Fulfillingour dual goal and pursuing EUpolicy objectives as well as financial sustainability

Addressingmarket needs by acting as a countercyclicalinvestor in tough economic times

Workingwith financial intermediaries across the 27 EU countries, EFTA and all Accession countries

HelpingSMEs, micro-enterprises and European regions innovate and grow by making finance more accessible

LowerMid-Market

Expansion/Development

Capital

Early StageBusiness Angels

Involved throughout the Business Cycle

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EIF

Curr

ent

Invest

ment

Focu

sStr

ate

gic

C

halle

nges

Technology TransferProof of ConceptBusiness Angels

Seed Stage

TechnologyTransfer Accelerator

Catalyse hybrid debtfinance for growth

Support VCecosystemand decreasedependencyon public finance

Fill funding gap left by institutional investors

Instruments to stimulateinnovation, competitivenessand cross-border investment

Investing inVC funds

Investing inGrowth Capital

Mezzanine

European Commission Resources

EIB / EIF Resources Member States / Private Sector Resources

EIF’s Resources

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EIF manages resourcesfrom different stakeholders“ ”European

Investment Bank

Risk Capital Mandate(RCR) EUR 5bn

Mezzanine Facility for Growth (MFG) EUR 1bn

European Commission

Competitiveness and Innovation Framework Progr. (CIP) EUR 1bn allocated to equity and guarantees

Risk-Sharing Instrument (RSI) EUR 120m

Progress Microfinance EUR 200m

National & Regional Funds

20 European and regional Funds-of-Funds including Germany, Portugal, Spain, Turkey, UK

14 Holding Funds supported by structural funds EUR 1.3bn

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Equity Highlights

2012

2011

2010

2009

2008

Equity Signatures

PE Assets under Management

1 350

1 126

930 733 409

6 952

5 919

5 367

4 103

3 535

(EUR / m) 201

3

1 468

7 904

EIF’s Governance

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Committed to the highest standardsof governance and integrity“ ”

Audit Boardand both in- and external auditorsoversee Chief Executive and Board of Directors

Risk Management, Legal and compliance units

ChiefExecutiveis responsible forthe day-to-day management ofthe EIF

Board ofDirectorshas a supervisoryrole and approves all EIF transactions

EIF Technology Transfer Aims to Bridge the Gap between the Research and the Market

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R&D Technology Transfer

“Technology IP”

Marketable Product

“Prototype IP”

University / Research

Organisation

Market

IP / Idea

Spin-out

Licensing

Collaboration

(Contract Research)

EIF Technology Transfer History and Characteristics

History of EIF Technology Transfer InvestmentsScale-up of activities since TTA study (2005)

No dedicated mandateInvestments so far with own resources, the European Commission and the EIB

33 operations in total

Characteristics of Technology Transfer OperationsDifferent shapes and sizes

Long lead times and low transformation ratio

Key point: Scale

Difficult fundraising periods

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Close collaboration with TTOs

Access to good scientific research

Adequate incentives to Management Team

Governance - no investor involvement in investment decisionsIndependence and non-competition of Management Team

No direct financing of research

Alignment of interests with long-term focus, up to 10-20 years

IP adequately protected under relevant legislation

Minimum critical size ca. EUR 20-30m

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Long-term, Sustainable Vehicles With Like-Minded Investors

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EIF Technology Transfer InvestmentsTo Date

Vintage Year Investment CountryFund Size (EUR m)

EIF investment (EUR m)

% Fund

TT Funds

1 2001 T-Source France 38 4.3 11%2 2003 Louvain Vives I Belgium 15 4.5 30%3 2006 Leuven CD3 (Centre for Drug design and Discovery) Belgium 8 4 50%4 2006 IP Venture Fund UK 37 18 49%5 2008 Chalmers Innovation Seed Fund Sweden 17 9 53%6 2008 Manchester UMIP Premier Fund UK 38 11 29%7 2009 Karolinska Development Sweden 36 27 75%8 2010 Leuven CD3 II (Centre for Drug design and Discovery) Belgium 16 8 50%9 2011 Louvain Vives II Belgium 43 15 35%10 2011 Telecom Technologies Transfert (3T) France 21 10 49%11 2012 Demeter Cleantech seed fund France 35 15 43%12 2012 Elaia Alpha fund France 45 20 44%13 2012 Cancer Research Tech (CRT) Pioneer Fund UK 30 15 50%14 2013 Rockspring UK 31 10 32%15 2013 INRIA IT Translation France 30 10 33%16 2013 IP Venture Fund II UK 36 24 67%17 2013 Grand Ouest d'Amorcage Sante France 57 15 26%18 2013 Auriga Bioseeds IV France 40 12 30%19 2013 SINTEF Venture IV Norway 27 12 44%20 2013 "TT Fund" (confidential) in progress EU 44 20 45%21 2014 "TT Fund" (confidential) in progress EU 60 30 50%22 2014 "TT Fund" (confidential) in progress EU 55 22.5 41%23 2014 "TT Fund" (confidential) in progress EU 50 20 40%24 2014 "TT Fund" (confidential) in progress EU 25 10 40%25 2014 "TT Fund" (confidential) in progress EU 30 12 40%

….2014 ……………..TOTAL 864 358 42%

Business Incubation / Acceleration Funds

26 2009 Strata/Mes Lithuania 8 7.6 95%27 2010 Imprimatur Latvia 12 9 75%28 2012 Nauseca Belgium 18 6 33%29 2012 Practica Lithuania 11 8.5 77%30 2012 Eleven Bulgaria 11 11 100%31 2012 Lauchub Bulgaria 9 9 100%32 2012 Openfund Greece 10 7 70%33 2012 Piraeus Greece 14 9.3 66%

TOTAL 93 67.4

TOTAL 957 426

Agenda

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1. About EIF EIF Resources, Governance and Investments

Equity Highlights

EIF Technology Transfer: History and Characteristics

2. About TTA Turkey Background, Structure and Objectives

TTA Turkey Fund

Targets, Investment Criteria, Investment Process and Structure

Main Terms & Conditions, Flow of Funding, Time Frame and Process

Investment Considerations and Assessment Criteria

TTA Turkey

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This project is co-financed by the European Union and the Republic of Turkey

This financing is provided from IPA funds allocated to Regional Competitiveness Operational Programme which is supported by EU and Republic of Turkey. The Contracting Authority of this Project is the Ministry of Science, Industry and Technology, DG for EU and Foreign Relations, IPA-PO, and final beneficiary is the Scientific and Technological Research Council of Turkey.  

TTA Turkey – Project LevelBackground

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Funded by IPA monies Deadline for Project Implementation: 31 December 2017

End Beneficiary: The Scientific and Technological Research Council of Turkey (TÜBİTAK)

Project Amount: EUR 30.5 million Project Components:

1. Cornerstone TTA Turkey Fund – EUR 26.3 million2. Advisory Services and Networking for TTOs and TÜBİTAK – EUR

1.35 million3. Visibility – EUR 200,0004. Impact Evaluation – EUR 100,000

2012

2013

2014

Market Needs Assessment carried out

Business Plan for the Project submitted

Negotiations and ApprovalSignature Date: July 2014

2015

2016

2017

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TTA TurkeyProject Structure and Main Objectives

TTA Turkey’s main purpose is to: Establish an independently managed Technology Transfer Accelerator Fund that invests in

commercialisation of technology intensive research coming out of universities and research centres

Increase the R&D commercialisation capacities of TTOs so that they can play a successful interface role between the industry and the university

IPA ResourcesEIF as Advisor & Project Manager

IPA Commitment

toTTA Turkey

Fund

Advisory Services

and Networkin

g(Technical

Assistance)

TTOs

TÜBİTAK

Visibility

Impact Evaluat

ion

proceeds

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TTA Turkey FundTarget Investments and Region

TTA Turkey to invest in:

proof of concept generation projects

university / research center spin-offs, start-ups

intellectual property (IP) assets / projects

return for equity into start-ups, spin-offs, and SMEs

100% of the investments to be made in Turkey

A minimum of 30 projects to be selected by the Fund Manager by 31 December 2017

At least 15 projects shall be identified and invested in the Target Region (12 NUTS II, 43 provinces)

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TTA Turkey FundStructure

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Target Fund SizeIndicative Maximum Amount of Funding

EUR 30 millionEUR 40 million

Maximum Contribution from IPA FundsMinimum Third Party Capital (Private Investors)Applicant’s Own Commitment in the Fund

EUR 26.3 millionEUR 2.8 million1-5% of the total Fund size

Maximum Investment Amount to a Single Company/Project

EUR 2.5 million Over 12 months

Maximum Duration of the Fund10 yearsPossibility of extension for 1+1 years 12 years

Deadline for the Fund’s Investment / Selection PeriodDeadline for Disbursements by the Fund

31 December 201731 December 2017

Portfolio Diversification Minimum of 30 projects/companies

Target Industry SectorsGeneralist with preferred and excluded sectors as covered in details in the Call for EoI

Main Terms & Conditions

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Flow of Funding

IPA Contracting Authority

EIF Special Account

TTA Fund

Co A Co B Co C Co DCo DStart

up

1 2 3 4 5 6

1 2 3 4 5 61 2 3 4 5 6

1 2 3 4 5 6

Monies to Special Account

Monies to Fund on Capital Calls from Fund Manager based on establishment of Companies once start up invested

Monies to Companies once Projects identified – before 31 Dec 2017

Monies to projects onmilestone basis during the Term of the Fund

Monies to Contracting Authority from Special Account – after 31 Dec 2017Thereafter from whomever transfer of holding has beenmade to (if anybody)

Monies to Special Account on receipt from TTA Fund

Monies to Fund due to project spin-outs, licensing, contract research with consequent dividend payment

Monies to Companies from successful projects on spin-outs, licensing, contract research, other

Co DStart

up

Time Frame and Process

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Next Steps Deadline

Requests for Clarifications from Applicants Accepted Friday, 15 August 2014

EIF to Reply to Clarification Requests Friday, 22 August 2014

Call for EoI Open for Applications Thursday, 11 September 2014

First Screenings September 2014

Scoring and Second Screenings October 2014

Due Diligence of Shortlisted Applicants October 2014

Legal Negotiation & Execution December 2014

Assessment Criteria & Scoring

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QUALITY ASSESSMENT CRITERIA WEIGHTIN

G

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Project Relevance, Quality and Coherence• Evaluation of the Fund focus and proposed investment strategy, including viability of Fund’s size.• Evaluation of the Fund Manager’s team profile, including but not limited to:

(i) Team stability and dynamics.(ii) Its ability to implement the Financial Instrument(iii) Operational, financial, technical and VC competences. Capabilities as members of Boards

and/or committees of an investment and/or advisory nature.(iv) Prior experience in technology transfer field, commercialisation of research and

development, business development, IP law.• Evaluation of Applicant’s investment processes, including deal flow generation, ability to invest,

ability to add value to companies and exit strategy.

40 points

2 Project Maturity, Investment Readiness• Demonstration of ability to raise at least EUR 2.8 million of the Fund from private investors.• Demonstration of ability to source deals in Turkey (SMEs/projects).• Investment readiness of the proposed structure like maturity of the proposed legal structure,

including internationally proven best market practices; outline of any different legal entities required; planned establishment costs and details thereof; detailed term sheet; proposed law firm etc. in order to execute the closing of the fund timely and efficiently.

40 points

3 Institutional Capacity & Sustainability• Fund Manager organisation, structure and long-term viability.• Assessment of the corporate governance in place.• Assessment of legal structures and independence.• Terms and Conditions, including management fee and profit share arrangements.• Assessment of the alignment of interests between the Fund Manager and the Investors.• Assessment of Reporting and Control Procedures.

20 points

Investment Process and Indicative Timelines

Understandconcept

Based on preliminary questionnaire / concept note

Investment readiness

Physical meeting (typically in Luxembourg), opportunity to articulate investment opportunity, understand EIF

Stress testing and

verification

EIF team conducts on site visits (min. 2 days). May, or may not lead to term sheet

Legal documentatio

n

After EIF BoD approval, legal docs drafted on behalf of Manager. EIF reviews importance of legal counsel

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First Screening

Second Screening

Due Diligence

Board Approval

12 months

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First Screening Second Screening Due Diligence Board Approval

Partner Institution

sMarket Investmen

t Strategy

Deal flow

Potential Investors

Investment Process

Team Track Record

Governance

Investment Considerations

Criteria (1/4)

Partner Institutions

Metrics: Research budget, peer group comparisons, invention disclosures, IP filed, IP awarded, growth rates, commercialisation income, encumbrances, 3rd party agreements

Structure: Organisation structure of TTO, roles, ownership of TTO

Policies: IP policy, rules, regulations, ownership rights

Activities: Industry co-operations, advisory services, contract research, etc.

Financials: For TTO; revenues, royalty income, grants, licenses, cost of sales, gross profit, operating costs, gift aid, dividends

Investment strategy

Licensing / Spin-outs: Proposed route for commercialisation

Strategy: Geographical focus, stage focus, sectors, investment sizes, follow-on and reserve policy, holding periods, role in financing rounds

Fund Size: Justification for size through bottom-up analysis, min / target / max size, modification to strategy according to size scenarios

Target Profiles: Criteria for investment targets (company profiles)

Co-investors: Envisaged co-investors at different stages of investments

Exits: Strategies based on previous examples

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Origination: Source of projects, networks (formal and informal), privileged / preferential access, rights of first refusal, option rights

Fees: Payments in lieu of access to pipeline

Historical Analysis: e.g. 3-5 years evolution of deal flow by source, sector, etc.

Selectivity Ratio: Historical examples / experience

Pipeline: Current and future opportunities

Deal flow and pipeline

Sponsors: Main investors , anchor investors , special rights (e.g. fees, carry, information, co-investment, etc.)

Names / Profiles: Like-minded, long-term investors with soft and hard commitments

Team Investment: Investment to fund, e.g. 1%, 2%, 5%, absolute amount, split between team members (see also remuneration / incentives)

Fundraising Strategy: List of other potential / targeted investors, status of contacts, potential commitments

Process: Origination, screening, project / deal review, due diligence, deal approval, deal structuring, negotiation, deal completion, contracting third parties

Decision-making Bodies: Bodies, or individuals take final decisions at each stage, delegations foreseen

Potential Investors

Investment Process

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Market / Competitors

Trends: Targeted sectors, challenges faced, evolution in previous years

Competitors: Financing, other sources of finance, private / public

Demand Side Economics: Analysis and evidence of demand for targeted projects

Criteria (2/4)

Composition: Envisaged team responsible for managing fund, key individuals from TTO / other, secondees, new recruits (profiles)

Profiles / CVs: Full CVs of team members and key individuals, specific dates, positions held, achievements

Experience: Collective team experience in IP management, licensing, creation of companies, investing,, strategy, consulting, etc.

Team Collaboration: Years worked together, prior collective working relationships

Workload: Time commitment to fund vs. other activities, activity allocation, other board seats

Board Members: CVs

Previous funds: Metrics, vintage, total size, fund cash flows, net and gross IRR, LPs, amounts

Companies: Previous / current funds, dates of investment, investment at cost, FMV (EVCA), gross multiples, forecast exit dates, exit scenarios

Individuals: Track record of individuals, other investment / relevant activity (e.g. licensing deals)

Partner Institutions: Licensing and spin-out company creation, notable success stories (e.g. Nobel prizes), products developed

Structure: e.g. UK-LP, SCR, FCR, NV, SPRL, SICAR, KB, etc.

Relationships: Overall structure and relationships between governing and decision-making bodies. Role and function of each of the bodies. Specific individuals involved and respective voting powers and rights

CoI: Conflict of interest management, for example with (other) investors in fund, any investor (LP) involvement in decision-making

Advisory Board: Composition, largest investors, etc.

Team Track Record Governance

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Criteria (3/4)

History: Evolution, founders, key dates and events in development, significant changes in organisation, strategy, ownership

Legal Status: Capital structure, ownership

Regulation: How the management company shall be regulated, adherence to AML/KYC

Budget: Detailed forecast budget for Management Company over lifetime of the fund, under different scenarios, e.g. min / target / max size

Management Fee: Justification for level of management fee, use of fees, fee offsets

Alignment of Interests: Team investments to fund align with investors, long-term time horizon, team stability / instability

Remuneration: Detailed breakdown of remuneration for all team members including base salaries, bonuses

Evolution: Historical evolution of remuneration for individual team members in previous years

Incentives via Carry: Repartition of carry to individuals, unallocated carry if applicable, carry to partner institution(s)

Management Company

Economics Remuneration / Incentives

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Criteria (4/4)

Thank You!

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Jose RomanoHead of Regionj.romano@eif.org

European Investment Fund37B, Avenue J. F. KennedyL-2968 LuxembourgTel.: (+352) 42 66 881Fax: (+352) 42 66 88 200www.eif.org

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Technology Transfer Accelerator Turkey (“TTA Turkey”) IP Conference Turkey30 October 2014

Istanbul