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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.
Research Core Technologies MaturityRapid GrowthProduct
Development Early GrowthIdea Development
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
Research Core Technologies MaturityRapid GrowthProduct
Development Early GrowthIdea Development
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.