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)
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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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