Download Co-Investment Funds - IP Conference

Investing in TT / Acceleration
October 2015 – ISTANBUL
J DARCY
1
EIF Current
Investment Focus
Involved throughout
the business cycle
Technology
Transfer Accelerator
Strategic Challenges
Technology Transfer
Proof of Concept
Business Angels
Seed Stage
Instruments to stimulate
innovation, competitiveness
and cross-border investment
European Commission Resources
Investing in
VC funds
Early
Stage
Business Angels
Fill funding gap left by
institutional investors
EIB / EIF Resources
Investing in
Growth Capital
Expansion/
Development
Capital
Support VC
ecosystem
and decrease
dependency
on public finance
Mezzanine
Lower
Mid-Market
Catalyse hybrid debt
finance for growth
Member States / Private Sector Resources
2
EIF resources
“
EIF manages resources
from different stakeholders
European
Investment Bank
 Risk Capital Mandate
(RCM) 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
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
 Progress Microfinance
EUR 200m
3
Bridging the gap between
research and the market
R&D
University /
Research
Organisation
Technology Transfer
Marketable Product
“technology IP”
“prototype IP”
Spin-out
Market
Licensing
Collaboration
(contract research)
IP / Idea
4
Catalysing commercialisation
Research organisations / TTOs are key counterparts
Engage with
industry, develop
partnerships, and
encourage contract
research
Become active
participants in longterm TT vehicles /
funds
Outsource with
qualified and
experienced partners
willing to work in
close collaboration
Build networks to meet
economic reality; inward
looking vs. outward
Research organisations
to provide commitments
for participating in TT
structures, financially and
/ or with other resources
Identify and work with
trusted (fund) managers
who can help select the
best opportunities with
commercialisation
potential
5
EIF TT Transactions
Norway: Sintef
Research commercialisation / TT
Sweden: Karolinska
Development
Business Creation and
Acceleration
Sweden: Chalmers Innovation
UK: Cancer Research
Technology
Latvia: Imprimatur Capital,
Seed and VC fund
Lithuania: Strata/Mes Business
Angel Co-investment fund
UK: UMIP Premier Fund
UK: IP venture fund UK
Lithuania: Practica Incubator
and follow-on fund
Belgium KU Leuven CD3
Bulgaria : Eleven Start-up
accelerator
Belgium: NausecaBusiness
Angel fund
Bulgaria : LaunchUp
Start-up accelerator
3T (Telecoms Institutes)
Turkey : Diffusion - ICT
France: Inria IT2: Digital
technologies
Elaia (Applied Maths –
ENS, Dauphine, Collège
de F, X)
Greece: Openfund, Seed
Fund
Greece: Piräus Fund, Seed
Fund
6
Research Commercialization / TT
• Based on innovative / disruptive technologies
• Partnering with Research
• Projects and IP licensing
• Spin-out funds
TT Fund
Fund-of-Funds managed by EIF
[90%]
funding
University 1
University 2..
Tech Park 1
Science Lab
2..
Deal sourcing
Private
Investors
TT Fund Private
Manager Investors
TT Fund
[10%]
funding
Expertise contribution
Patents
Licenses
Spin-offs
Start-ups
Industry
Contacts
IP / patent
experts
Test Labs
Corporates
8
Business incubation and
acceleration
• Development of innovative businesses
• Bases on innovative ideas and business models
• Incubators
• Accelerators
• With Business Angels
Acceleration and Seed Fund
Fund-of-Funds managed by EIF
Selection
Max [90%] contribution
Acceleration and Seed Fund
Fund
Manager
Acceleratio
n
Compartme
nt
Pre-Seed
Seed
Compartmen
t
Seed
Min [10%]
Private
Investors
contribution
Start-up
10
Snapshot
11
BA Co-investment Facility Structure
Fund-of-Funds managed by
EIF
In case of EAF:
(a) EIF as advisor to umbrella
structure
(b) Local Advisor if needed
BA Co-investment
Facility
(e.g. EAF national
compartment)
Selection
50/50%
Business
Angel 1
(Trustee)
Business
Angel 2
(Trustee)
Trust
Co-Investment Agreements
Full delegation of investment decisions,
monitoring, exit; definition of co-inv. terms &
guidelines
50/50%
Trust
SMEs
12
EIF challenges
• Find the appropriate counterpart (linked with
knowledge provider / acceleration)
•
•
•
•
Small amounts, legal framework, time spent…
High added-value!
Contribute to a system
Get 2014 – 2020 EU Funding!
13
BACK UP SLIDES
14
EIF TT investments
Vintage Year
Investment
Country
Fund Size
(EUR m)
EIF investment
(EUR m)
%
Fund
France
Belgium
Belgium
UK
Sweden
UK
Sweden
Belgium
Belgium
France
France
France
UK
UK
France
UK
France
France
Norway
EU
EU
EU
EU
EU
EU
38
15
8
37
17
38
36
16
43
21
35
45
30
31
30
36
57
40
27
44
60
55
50
25
30
4.3
4.5
4
18
9
11
27
8
15
10
15
20
15
10
10
24
15
12
12
20
30
22.5
20
10
12
11%
30%
50%
49%
53%
29%
75%
50%
35%
49%
43%
44%
50%
32%
33%
67%
26%
30%
44%
45%
50%
41%
40%
40%
40%
864
358
42%
8
12
18
11
11
9
10
14
93
7.6
9
6
8.5
11
9
7
9.3
67.4
95%
75%
33%
77%
100%
100%
70%
66%
957
426
TT Funds
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2001
2003
2006
2006
2008
2008
2009
2010
2011
2011
2012
2012
2012
2013
2013
2013
2013
2013
2013
2013
2014
2014
2014
2014
2014
….2014
TOTAL
T-Source
Louvain Vives I
Leuven CD3 (Centre for Drug design and Discovery)
IP Venture Fund
Chalmers Innovation Seed Fund
Manchester UMIP Premier Fund
Karolinska Development
Leuven CD3 II (Centre for Drug design and Discovery)
Louvain Vives II
Telecom Technologies Transfert (3T)
Demeter Cleantech seed fund
Elaia Alpha fund
Cancer Research Tech (CRT) Pioneer Fund
Rockspring
INRIA IT Translation
IP Venture Fund II
Grand Ouest d'Amorcage Sante
Auriga Bioseeds IV
SINTEF Venture IV
"TT Fund" (confidential) in progress
"TT Fund" (confidential) in progress
"TT Fund" (confidential) in progress
"TT Fund" (confidential) in progress
"TT Fund" (confidential) in progress
"TT Fund" (confidential) in progress
……………..
Business Incubation / Acceleration Funds
26
27
28
29
30
31
32
33
2009
2010
2012
2012
2012
2012
2012
2012
TOTAL
TOTAL
Strata/Mes
Imprimatur
Nauseca
Practica
Eleven
Lauchub
Openfund
Piraeus
Lithuania
Latvia
Belgium
Lithuania
Bulgaria
Bulgaria
Greece
Greece
15
Selected EIF Transactions: Research
Commercialization and TT
Manager
Operation
Embedded Chalmers Innovation Seed Fund
in University Karolinska Development
Fund size EIF invest
Spinouts
(mEUR)
(mEUR)
17
9
v
36
27
v
Louvain Vives I
External
Licensing IP
Single
Research
centers
v
Multiple
Research
center
v
Proof-ofConcept
Funding
v
v
v
Location
Sweden
Sweden
v
v
Belgium
v
v
Belgium
Louvain Vives II
43
15
v
Leuven CD3 I (Centre for Drug
design)
Leuven CD3 II (Centre for Drug
design)
8
4
v
v
v
v
Belgium
16
8
v
v
v
v
Belgium
Manchester UMIP Premier Fund
38
11
v
v
UK
IP Venture Fund I
37
18
v
v
v
UK
TT Fund
30
…
v
v
v
UK
v
v
v
France
T-Source
v
Demeter Cleantech seed fund
35
15
v
v
v
France
Elaia Alpha fund
45
20
v
v
v
France
Rockspring
31
10
v
v
v
UK
CRT
30
15
v
v
UK
v
v
16
IP markets
17
Selected Transactions: Business
incubation and acceleration
Fund size
(mEUR)
Business
Angel
Strata/Mes
8
v
Imprimatur
12
Nauseca
18
Practica
11
Eleven
11
Lauchub
9
Openfund
10
Piraeus
14
Operation
Incubator Accelerator Seed Fund
v
Follow-on
Funding
v
Institution
Building/Developing
market
v
Lithuania
v
Latvia
Country
Belgium
v
v
v
v
Lithuania
v
v
v
v
Bulgaria
v
v
v
v
Bulgaria
v
v
Greece
v
v
Greece
v
18
Accelerators
• Starting companies from scratch
• Small investments (about EUR20k) in a large number of startups
• Incubation phase to elaborate BP or build prototype
• Demo day: present businesses, find investors, mentors,
business partners, exchange experience….
• Follow on financing from the Accelerator (up to EUR 200k)
• Organization and investment lead by experienced
entrepreneurs and investment professionals
• International setup
• Creates an environment of entrepreneurship with mutual
support
• Attracts plenty of interests at large corporates
Acceleration & Seed Fund - Process
ACCELERATION STAGE
Application Window
 Application process: Fully
online, held every 3 – 4 months or
continuous
 Indicative investment: EUR
[25,000 – 50,000]*
 Equity share: ~10%
 Stage term: 3-12 months
 Goal: Working prototype, beta
version
Selection &
Funding
*Depending on the sector focus and market
characteristics
Acceleratio
n
SEED STAGE
Graduation
day
SEED
Portfolio
Seed investments
in other companies
 Indicative investment: up to EUR
[xx] (including follow on investments).
Substantial portfolio share in startups from acceleration stage
 Equity share: 30 - 49% (on
aggregate)
 Stage term: 12-24 months
 Goal: Commercialization,
internationalization
Incubators
•
•
•
•
•
•
•
•
•
•
•
Starting companies from scratch
Small investments (about EUR10k to 30k) in start-ups
Incubation phase to elaborate BP or build prototype
Specialized support organized by the Incubator (funding, legal,
accounting, marketing,…)
Network of entrepreneurs, located in the incubator
Follow on financing by the incubator (up to EUR 200k)
Connected to a VC fund, managed by the same manager
Organization and investment lead by experienced
entrepreneurs and investment professionals
International setup
Creates an environment of entrepreneurship with mutual
support
Attracts plenty of interests at large corporates
Co-Investment Funds
• Managed by experienced managers with full alignment of
interest (substantial investment by the fund manager <5%)
• Co-investments with Business Angels and other qualified
investors
• Investments in early stage companies or start-up companies
• Specialized support organized by the Co-investor (funding,
strategic advice, marketing,…)
• Network of entrepreneurs, managed by the fund manager
• Leverage of fund monies with qualified third party funds
• No fundraising necessary for the fund manager
• Fund investment strategy for relatively short fund terms
Co-Investment Fund Structure
Fund-of-Funds managed by
EIF
Ca. [95%] committed by the FoF
Ca. [5%] committed by the Fund
Manager
Selection
Fund
Manager
-Sourcing of co-investors
-Compliance check on coinvestors
Private
Co-investors
Co-Investment Fund
[50%] of the capital in a transaction
[50%] of the
capital in
each
transaction
SMEs
23
Indicative Timelines
12 mths
First
Screening
Understand
concept
Based on preliminary
questionnaire / concept
note
Second
Screening
Due
Diligence
Investment
readiness
Stress testing
and verification
Physical meeting
(typically in
Luxembourg),
opportunity to
articulate investment
opportunity,
understand EIF
EIF team conducts on
site visits (min. 2
days). May, or may not
lead to term sheet
Board
Approval
Legal
documentation
After EIF BoD
approval, legal docs
drafted on behalf of
Manager. EIF review
Importance of legal
counsel
24
Long-term, sustainable vehicles
with like-minded investors

Close collaboration of investment vehicle with TTO

Access to good science

IP adequately protected under relevant legislation

No direct financing of research

Governance - no investor involvement in investment decisions

Independence and non-competition of management team

Adequate incentives to management team

Alignment of interests with long-term focus, up to 15-20yrs

Min critical size ca. EUR 20-30m. EIF can fund up to 50%
25
Manchester: Largest UK
University
Research Budget
Manchester University / UMIP Premier Fund
■ 10 year Limited Partnership.
■ Managed by VC firm: MTI partners
■ GBP 32 m raised. 18 months
between first pitch to EIF and first
closing in 4/2008
CD3 (K.U.Leuven) - Next Generation
Licensing - Empowering
Universities
Leuven CD3 (Centre for Drug Design and
Discovery)
■ Partnership with university
■ Managed by TTO
■ Invests in drug development
projects
Drug development process steps
Target ID
Target
Screening
validation Lead ID
CD3 portfolio
UNIVERSITIES
• Chemical
libraries
• Structura
l biology
•…
CD3
Pre-clinical
Optimisation
Clinical I
development
• Bench
synthesis
• Parallel
synthesis
• Early
toxicology
•…
Clinical II
Clinical III
PHARMA/BIOTECH COMPANIES
CD3 addresses a demand from both ends of the chain
■ from Universities: be able to offer more finished drug candidates to the industry
■ from the Industry: enrich their pipeline with more proven candidates
IP Group: Bringing together 12
Universities 26 Spin-Outs in Three Years
IP Venture Fund UK
■ Co-investment fund
(seed, post-seed
financing)
■ Critical mass reached
through a network of
universities
■ Liquidity vs listing
Deal flow and
critical mass
SINTEF Venture IV
Due diligence
30
Taking the lid off EIF’s Due
Diligence process (1/5)
First Screening
Second Screening
Due Diligence
Board Approval
Partner
institutions
Market
Investment
strategy
Dealflow
Potential
Investors
Investment
process
Team
Track record
Governance
Management
co.
Economics
Remuneration
/ incentives
31
Taking the lid off EIF’s Due
Diligence process (2/5)
Partner Institutions
Metrics: research budget, peer group
comparisons, invention disclosures, IP
filed, IP awarded, growth rates,
commercialisation income,
encumbrances, 3rd party agreements
Structure: organigramme 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
Market / competitors
Trends: in targeted sectors, challenges
faced, evolution in previous years
Competitors: for financing, other sources
of finance, private / public
Demand side economics: analysis and
evidence of demand for targeted projects
Investment strategy
Licensing / spin-outs: proposed route for
commercialisation
Strategy: geographical focus, stage
focus, sectors, investment sizes, followon 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, for example on
previous examples
32
Taking the lid off EIF’s Due
Diligence process (3/5)
Dealflow and pipeline
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 yrs evolution
of dealflow by source, sector, etc.
Selectivity ratio: historical examples /
experience
Potential investors
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
Investment process
Process: origination, screening, project /
deal review, due diligence, deal approval,
deal structuring, negotiation, deal
completion, contracting third parties
Decision-making bodies: which bodies,
or individuals take final decisions at each
stage, delegations foreseen
Team investment: investment to fund,
e.g. 1%, 2%, 5%, absolute amount, split
between team members (see also remun.
/ incentives)
Fundraising strategy: list of other
potential / targeted investors, status of
contacts, potential commitments
Pipeline: of current and future
opportunities
33
Taking the lid off EIF’s Due
Diligence process (4/5)
Team
Track Record
Composition: envisaged team
responsible for managing fund, key
individuals from TTO / other, secondees,
new recruits (profiles)
Previous funds: metrics, vintage, total
size, fund cash flows, net and gross IRR,
LPs, amounts
Profiles / CVs: Full CVs of team
members and key individuals, specific
dates, positions held, achievements
Companies: for previous / current funds,
dates of investment, investment at cost,
FMV (EVCA), gross multiples, forecast
exit dates, exit scenarios
Experience: collective team experience in
IP management, licensing, creation of
companies, investing,, strategy,
consulting, etc.
Team collaboration: yrs worked together,
prior collective working relationships
Workload: time commitment to fund vs.
other activities, activity allocation, other
board seats
Board members: CVs
Individuals: Track record of individuals,
other investment / relevant activity (e.g.
licensing deals)
Partner institutions: licensing and spinout company creation, notable success
stories (e.g. nobel prizes), products
developed
Governance
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 decisionmaking
Advisory board: composition, largest
investors, etc.
34
Taking the lid off EIF’s Due
Diligence process (5/5)
Management co.
History: evolution, founders, key dates
and events in development, significant
changes in organisation, strategy,
ownership
Legal status: capital structure, ownership
Regulation: how management company
shall be regulated, adherence to
AML/KYC
Economics
Budget: detailed forecast budget for
management company over lifetime of
fund, under different scenarios, e.g. min /
target / max size
Management fee: justification for level of
management fee, use of fees, fee offsets
Remun. / incentives
Alignment of interests: team investment
to fund aligns 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)
35
EXAMPLES
36
Technology Transfer
Financial Facility (TTFF)
“
provide support for attainment of proof of concept,
help prototyping and initial development, through
to growth
”
PoC
http://ec.europa.eu/programmes/horizon2020/en/h2020-section/access-risk-finance
PoC +
Seed
Operation
EUR 100 – 250k
Up to EUR 750k
Up to EUR 3m
Available to TTOs
No co-investment
Co-investment 30%
Co-investment 60%
Evaluation 4-5wks
Pilot EUR 60m
37
Key features of TTFF
• European Investment Facility (not a subsidy
programme)
• Imperative of commercialisation: industry/investment
community involved from the earliest stages
• Rigorous governance: professional, independent
decision-making at every step
• Legal robustness, simple, cost-effective
38
EAF mandates as of today

EAF Germany:

Virtual structure within ERP/LfA mandates managed by EIF

Volume 70m€ (ERP/EIF 60m€, LfA/EIF 10m€)

Top-up to 135m€ (ERP/EIF +60m€, LfA/EIF +5m€) about to be signed/in final negotiations

EAF Austria:

Compartment of EAF SICAR structure advised by EIF, AWS supporting as sub-adviser

Volume 22.5m€ (AWS 15m€, EIF 7.5m€)

EAF Spain:

Compartment of EAF SICAR structure advised by EIF

Volume 30.0m€ (Axis/ICO 10m€, Neotec 10m€, EIF 10m€)

New compartments to be set-up early 2015

EAF Netherlands: 45m€ (DMEA/PPM Oost and EIF via DVI),

EAF Irelands: 20m€ (Enterprise Ireland 10m€, EIF 10m€)
39
European Angels Fund- Structure*
Public
Mandator
Public
Mandator
Public
Mandator 1
Mandators / Investors
Private
Investor
Private
Investor
Private
Investor 1
EIF /
EIB
Institutional
Investor
Institutional
Investor
Institutional
Investor 1
LP Commitments
Umbrella Structure with
European Angels Fund
national Compartments
EAF
EAF
Compartment 1 Compartment 2
…
EAF
Compartment X
EAF Co-Investment
under CFAs
Intermediaries
Portfolio Companies
*
Structure is currently being set-up and not operative yet.
BA 1
Trust
(Trustee)
PU n
PU 3
PU 2
PU 1
…
BA n
Trust
(Trustee)
PU n
PU 3
PU 2
PU 1
…
EAF
Compartment n