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ELEVATE VENTURESIT’S NOT WHERE A START-UP STARTS. IT’S WHERE IT CAN GO.

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21 FUND – THREE EVOLUTIONS

Phase I (1999-2005) – facilitation of university-driven technology transfer into the commercial sector

Phase II (2005-2009) – under the IEDC, company-driven technology-based product development in the commercial sector

Phase III ( 2009-2011) – post financial crisis, company-driven acceleration of market entry and creation of entrepreneurial wealth, economic impact and jobs

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21 FUND – LEGACY PORTFOLIO

*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 Fund awardso translated into over $1 billion invested in the development of Indiana’s high-

tech sectoro created over 11,000 near-term high-paying jobso made $427 million direct impact on Indiana’s real GDP, after subtraction of

opportunity costs

Sector Funding Opportunities

Counties Represented

Total Funding Amount ($)

Academic Labs * 74 6 90.0 million

Life Sciences 51 12 66.0 million Information Technology 38 12 47.1 million Advanced Manufacturing 34 15 40.4 million SBIR/STTR Matching 358 24 35.6 millionTotal** 555 32 279.1 million

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21 FUND – PORTFOLIO MAPPING21 Fund Direct Awards SBIR/STTR Matching Awards

Star size scaled to the percentage of total dollars

o Overall conversion rate is approximately 14% (or a 86% rejection rate)

o 42 counties submitted at least one application

o Of the 42 counties that applied, 10 did NOT receive an award

o 4 counties (St. Joseph, Tippecanoe, Monroe and Marion) account for over 70% of the 21 Fund awards.

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WHY THE EVOLUTION NEEDS TO CONTINUE?

Despite 21 Fund’s continuing progression and contribution to Indiana’s entrepreneurial growth, nationally competitive models have been able to demonstrate more impressive 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 2009

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A TYPICAL ENTREPRENEURIAL VENTURE LIFE CYCLE

Research Core Technologies MaturityRapid GrowthProduct

Development Early GrowthIdea Development

FriendsFamily

GrantsSelf Funding

Seed FundsAngel Investors Venture Capital/Private Equity

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.

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VENTURE DEVELOPMENT CONUNDRUM STILL EXISTS IN INDIANA

Why is this a conundrum?

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-based

entrepreneurial activities.o Perceived lack of opportunities creates a roadblock for attraction and retention of talent, and

local and outside capital. o Without talent and local and outside capital, more technologies and ideas will not fully

realize their economic impact and job creation potential.



SBIRSTTR

Research Grants

21 Fund Gazelle Investments

Angel InvestorsSeed Funds Institutional InvestorsGAP GAPSelf Funding

Friends &Family

Federal $

Private $

State $

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VENTURE DEVELOPMENT CONTINUUM

SSBCI Seed Funds

How does a venture development organization transform this venture capacity conundrum into venture development continuum?

o Address market confusion and identify a clear funding road map.o Decrease the funding gap by leveraging public dollars into increased private

investments.o Provide EIR assistance to compress company development cycle, leading to

accelerated economic and job creation impact.o Increase visibility of Indiana gazelle companies to regional and national investors.

Venture Development Organization

SSBCI Enhancement

SSBCI High Growth Lending



SBIRSTTR

Research Grants

21 Fund Gazelle Investments

Angel InvestorsSeed Funds Institutional InvestorsSelf Funding

Friends &Family

Federal $

Private $

VDO $

SSBCI Angel Funds

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ELEVATE VENTURESAs a tax-exempt non-profit state-wide venture development organization, is leading the efforts to

o Implement best practices modeling after nationally recognized venture development 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 with building a strong base and moving down a path of exponential and sustainable growth.

o Attract new sources of capital to increase outcomes, including formation of seed funds and angel networks.

o Minimize administration costs and maximize investment returns to ensure sustainability with active investment management.

o Monitor investments and ensure collection of metrics and compliance with federal and state program guidelines.

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ELEVATE VENTURES’ E4 PROCESS

RESOURCE ATTRACTION & RETENTION

Growth in Funding

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Increased Private &

Institutional Investments

Federal and Foundation

Support

Ideas & Entrepreneurs

Scalable Ideas

Coachable Entrepreneurs

Successful Ventures

Economic Impact Job Creation

Wealth Creation Ventures

Entrepreneurial Assistance

Economic Gardening

Angel Networks

Elevate Ventures

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ACHIEVABLE OUTCOMES

o Quantitative • A statewide angel network of at least 10 Hoosier communities• Increased deal flow • 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

o Qualitative• Nationally competitive project selection process• 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 sectors

$1 public dollar

$10 private dollars

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WHY THE STATE PARTNERS WITH ELEVATE VENTURES

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 Accountability

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STATE’S PARTNERSHIP WITH ELEVATE VENTURES 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 Venture’s 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 success

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CASE STUDIES

Sector 21 Fund Investment Follow-on Funding Leverage Ratio (X)

Information Technology $11,800,000 $63,900,000 5.42

Life Sciences $9,200,000 $46,100,000 5.01

Advanced Manufacturing $3,800,000 $8,500,000 2.24

Total $24,800,000 $118,500,000 4.78

21 Fund’s most recent portfolio (2009-present) has already shown notable leverage ratio since the private matching mandate was implemented in early 2009.

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CASE STUDIES

Scale Computing o $2 million awarded by the 21 Fund in 2009o Raised $17 million in late 2010, resulting in total of $31

million raised to date

Chachao $2 million awarded by 21 Fund in 2007o Raised over $75 million to date

OrthoPediatricso $2 million awarded by 21 Fund in 2009o Raised over $30 million to date

Immuneworkso $2 million awarded by 21 Fund in 2008o Entered into a strategic co-development partnership with

Lung Rx, a publicly-traded company in 2010, which provides substantial funding for pre-clinical and clinical work

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CASE STUDIESMarcadia Biotech o $2 million award by the 21 Fund in 2006o Received $16 million in follow-on fundingo Secured development arrangements with Eli Lilly, Merck and Rocheo Acquired by Roche in late 2010 for $537 milliono Repaid 21 Fund $2.6 million per return provision in the Grant Agreemento If 21 Fund award was structured as an investment vehicle, upon Marcadia’s 2010 exit,

estimated conservatively, the State would have received over $30 million in upfront cash payment and potentially additional $26 million in milestone payments.

Endocyte o Received nearly $4 million from 21 Fund before 2005o Raised over $90 million in follow-on private fundingo Raised $75 million in an initial public offering in early 2011o Raised $66.8 million in recent secondary public offeringo Due to the early grant structure, the State failed to capture any financial return.o If 21 Fund’s $4 million was structured as an investment vehicle instead of grant, the

State’s holding would have be estimated at over $10 million at the IPO price.