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WWW.BNYM
ELLO
N.C
OM
CDFA //
BNY MELLO
N DEV
ELOPM
ENT FINAN
CE W
EBCA
ST SERIES
Introd
ucing Inno
vatio
n Bo
nds
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sCo
uncil of D
evelop
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inance Agencies
Columbu
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anager
BNY Mellon
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Introd
ucing Inno
vatio
n Bo
nds
CDFA
Training Institu
te
11 cou
rses in develop
ment finance
desig
ned for a
ll skill levels. Learn
more and register to
day at
www.cdfa.net
Panelists
Rena
Nakashima, M
oderator
BNY Mellon
Brennan Klose
Olivia Hun
tInno
vatio
n Financing Ro
undtable
Inno
vatio
n Financing
Roun
dtable
Leslie Platt
Samuel M
oyer
Leslie Platt a
nd Associates L
LCInno
vatio
n Financing
Roun
dtable
Tina
Neal
Perseverance Capital Adviso
rs
Inno
vatio
n B
onds
:In
trodu
ctio
n
For D
iscu
ssio
nO
ctob
er 2
013
Cop
yrig
ht ©
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
2013
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
1
•In
trod
uctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
AM
ERIC
A N
EED
S A
NEW
INN
OVA
TIO
N F
INA
NC
ING
EC
OSY
STEM
Lega
cy R
&D
fu
ndin
g sy
stem
New
mod
ern
Am
eric
an
inno
vatio
n fin
anci
ng
ecos
yste
m
Am
eric
a’s
choi
ce
•In
nova
tion
stru
ggle
s•
Inno
vatio
n th
rives
Goa
ls•
Est
ablis
h 21
st c
entu
ry m
arke
t-bas
ed in
nova
tion
finan
cing
sy
stem
−O
pen
stan
dard
s fo
r tec
hnol
ogy
trans
actio
ns−
Inno
vatio
n de
als
& a
sset
cla
sses
−E
cosy
stem
of p
artic
ipan
ts, s
ervi
ce p
rovi
ders
and
stru
ctur
ed
trans
actio
ns c
atal
yzed
by
CD
FA a
nd c
olle
ague
s•
Mod
erni
ze d
eliv
ery
of g
over
nmen
t R&
D fu
nds
via
−C
omm
erci
al a
gree
men
ts−
Sta
ndar
d tra
nsac
tion
tem
plat
es−
Exi
stin
g le
gal a
utho
ritie
s−
Sys
tem
atic
eng
agem
ent w
ith th
e ca
pita
l mar
kets
Sou
rce:
Cur
rier &
Ives
; tea
m a
naly
sis
2
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
3
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Glo
bal R
&D
: ~$1
.5 T
•US
A O
vera
ll R
&D
: ~$4
00 B
•US
Gov
ernm
ent R
&D
: ~$1
50 B
R&
D S
PEN
DIN
G, 2
013
Sou
rce:
Bat
telle
, NS
F
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Cas
h flo
w 1
: R&
D p
roje
ct s
tage
sup
port
−Sou
rces
: priv
ate
com
pani
es, N
GO
s, g
over
nmen
t−U
ses:
pay
for R
&D
pro
ject
sta
ges
−Sec
uriti
zabl
e
•Cas
h flo
w 2
: pro
duct
reve
nues
afte
r pro
duct
reac
hes
mar
ket
−Sou
rces
: pro
duct
sal
es
−Use
s: c
ompa
ny re
venu
es a
nd p
rofit
s−N
ot e
asily
sec
uriti
zabl
e
CA
SH F
LOW
S IN
R&
D P
RO
JEC
TS
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
6
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•The
con
cept
is to
sec
uriti
ze th
e go
vern
men
t co
mm
itmen
t for
fund
ing
thro
ugh
issu
ing
taxa
ble
bond
s, in
clud
ing
via
cond
uit i
ssue
rs
•The
fede
ral c
omm
itmen
t will
be
pled
ged
to a
co
rpor
ate
trust
ee o
n be
half
of b
ondh
olde
rs
•The
com
mitm
ent o
f app
ropr
iatio
ns w
ill b
e su
ffici
ent
to p
ay in
tere
st a
nd p
rinci
pal o
n th
e bo
nds
•Eac
h bo
nd w
ill b
e cu
stom
ized
to m
eet t
he n
eeds
of
the
Bor
row
er’s
cas
h flo
w c
onsi
dera
tions
and
ex
pect
ed c
ompl
etio
n of
mile
ston
es
INN
OVA
TIO
N B
ON
D F
INA
NC
ING
: TA
XAB
LE
SEC
UR
ITIZ
ATIO
N
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Bon
dhol
ders
will
look
onl
y to
the
assi
gnm
ent o
f the
fe
dera
l con
tract
and
any
rese
rve
fund
s to
repa
y th
e bo
nds
•Bon
dhol
ders
adv
ance
the
fund
s in
to a
pro
ject
fund
ad
min
iste
red
by th
e tru
stee
•Bor
row
er a
cces
ses
fund
s on
ly a
fter s
ucce
ssfu
l co
mpl
etio
n of
spe
cific
sci
entif
ic m
ilest
ones
•If s
cien
ce fa
ils, t
he d
eal i
s co
llaps
ed a
nd fe
dera
l go
vern
men
t mus
t mak
e a
term
inat
ion
paym
ent t
hat
will
mak
e bo
ndho
lder
s w
hole
SEC
UR
ITY
FOR
TH
E TA
XAB
LE IN
NO
VATI
ON
BO
ND
S
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Tax
able
due
to fe
dera
l rep
aym
ent s
tream
•No
exem
ptio
n fro
m re
gist
ratio
n
•Reg
iste
red
or P
rivat
e P
lace
men
ts O
nly
•Rul
e 14
4a Q
ualif
ied
Inst
itutio
nal B
uyer
s
•Sho
rt M
atur
ities
Lik
ely
< 10
yea
rs
PRO
POSE
D S
TRU
CTU
RE
OF
INN
OVA
TIO
N B
ON
DS
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Fed
eral
gov
ernm
ent a
ppro
pria
tes
no m
ore
than
wou
ld h
ave
unde
r FA
R ru
les,
and
mos
t lik
ely
less
as
the
priv
ate
sect
or
will
inve
st in
a m
ore
certa
in o
utco
me
and
com
pany
will
co
ntrib
ute
at le
ast 1
0%
•The
ava
ilabi
lity
of fu
nds
allo
ws
borr
ower
to m
ove
at th
e sp
eed
of s
cien
ce a
nd w
ithou
t bur
eauc
ratic
del
ays,
has
teni
ng
the
deve
lopm
ent o
f the
end
pro
duct
•Sci
entif
ic m
ilest
ones
are
del
inea
ted
and
agre
ed to
by
the
scie
ntifi
c re
view
com
mitt
ee, w
hich
will
incl
ude
a m
ajor
ity o
f go
vern
men
t sci
entis
ts, s
o no
loss
of c
ontro
l
•Im
porta
nt c
atal
yst f
or ju
mps
tarti
ng jo
bs a
nd in
nova
tion,
le
adin
g to
pro
duct
s th
at b
enef
it pu
blic
hea
lth a
nd s
afet
y
FED
ERA
L G
OVE
RN
MEN
T A
ND
INN
OVA
TIO
N B
ON
DS
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
11
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts
via
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Wha
t is
the
Fede
ral A
cqui
sitio
n R
egul
atio
n?
•Def
initi
on o
f the
Oth
er T
rans
actio
n A
utho
rity
•His
tory
of t
he O
ther
Tra
nsac
tion
Aut
horit
y (e
.g.
NA
SA
, DA
RPA
)
•The
Oth
er T
rans
actio
n A
utho
rity
perm
its
com
mer
cial
agr
eem
ents
, with
out b
urde
nsom
e le
gacy
sys
tem
•Oth
er T
rans
actio
n A
utho
rity
is fe
asib
le th
roug
hout
al
l Fed
eral
age
ncie
s
OTH
ER T
RA
NSA
CTI
ON
AU
THO
RIT
Y A
ND
CO
MM
ERC
IAL
AG
REE
MEN
TS
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
TRA
NSL
ATIO
NA
L FI
NA
NC
ING
OB
STA
CLE
S A
ND
SO
LUTI
ON
S
13
Phase 1 ‐ R
esearch
(Fun
ding
Gap)
Phase 2 ‐ Tria
ls(Fun
ding
Gap)
Phase 3 ‐ Tria
ls
IF (A
ll Ph
ases)
30.1
20.1
2IF (P
h1 & Ph2)
30.2
21
3IF (P
hase 1 only)
3.45
12.3
13
Tradition
al Fun
ding
Mod
el4
13
13
02
46
810
1214
IF (A
ll Ph
ases)
IF (P
h1 & Ph2
)
IF (P
hase 1 only)
Trad
ition
alFund
ing Mod
el
TIme to Com
mercia
l Availability (Yrs)
Phase 1 ‐ R
esearch
(Fun
ding
Gap)
Phase 2 ‐ T
rials
(Fun
ding
Gap)
Phase 3 ‐ T
rials
•A
dmin
istra
tive
burd
ens
•Fu
ndin
g ga
ps•
Unc
erta
in m
arke
t co
mm
itmen
tsLe
gacy
ob
stac
les
Inno
vatio
n Fi
nanc
ing
solu
tions
•C
omm
erci
al
agre
emen
ts•
Fund
ing
cont
inui
ty li
nks
•M
ilest
one
succ
ess
paym
ents
•A
dvan
ce m
arke
t com
mitm
ents
•Li
mite
d co
inve
st-
men
t*
•Ex
tens
ive
coin
vest
-m
ent*
*Ava
ilabl
e C
o-in
vest
men
t = n
et p
rese
nt v
alue
(NP
V) o
f mile
ston
es a
nd a
dvan
ce m
arke
t com
mitm
ents
, adj
uste
d fo
r con
tinui
ty li
nk ri
sk
and
adm
inis
trativ
e bu
rden
/del
ay ri
skS
ourc
e: T
eam
ana
lysi
s
NP
V c
ash
flow
sou
rces
??
?
??
??
?
?
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Why
not
just
refo
rm th
e Fe
dera
l Acq
uisi
tion
syst
em?
•NA
SA
and
DA
RPA
dea
l with
com
plex
pro
blem
s, a
nd
com
mer
cial
izat
ion
intro
duce
s ev
en m
ore
stak
ehol
ders
•Com
mer
cial
agr
eem
ents
allo
w fo
r col
labo
rativ
e fin
anci
ng –
cruc
ial i
n th
e R
&D
spa
ce
•Com
mer
cial
agr
eem
ents
rais
e th
e ce
iling
on
deal
co
mpl
exity
, a q
ualit
ativ
e, d
ynam
ic c
hang
e
THE
DYN
AM
IC P
OTE
NTI
AL
OF
CO
MM
ERC
IAL
AG
REE
MEN
TS
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
15
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•It t
akes
tim
e to
dev
elop
new
ass
et c
lass
es to
fin
ance
pro
ject
s in
new
mar
ket s
egm
ents
•Fin
ance
able
pro
ject
s ca
n cr
eate
new
leve
ls o
f liq
uidi
ty a
nd c
atal
yze
fast
er, l
arge
r dea
l flo
w
•Con
vent
iona
l pro
ject
fina
ncin
g to
ols
depl
oyed
for
the
first
tim
e in
the
inno
vatio
n sp
ace
can
grea
tly
acce
lera
te A
mer
ican
inno
vatio
n in
the
21st
cent
ury
MA
RK
ET G
RO
WTH
AN
D A
CC
ELER
ATIO
N
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
17
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Prod
ucts
, Job
s, a
nd
Econ
omic
Gro
wth
•Q
&A
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
•Eas
ier p
roje
ct fi
nanc
ing
will
incr
ease
inno
vatio
n pr
ojec
t dea
l flo
w
•Inn
ovat
ion
proj
ects
are
big
job
crea
tors
of h
igh
valu
e jo
bs
•If R
&D
mov
es 2
x fa
ster
, with
2x
priv
ate
coin
vest
men
t, th
en R
&D
sec
tor e
cono
mic
gro
wth
ca
n in
crea
se b
y up
to 4
00%
IMPA
CT:
INN
OVA
TIO
N P
RO
DU
CTS
, JO
BS
AN
D
ECO
NO
MIC
GR
OW
TH
Inno
vatio
n Fi
nanc
ing
Rou
ndta
ble
CO
NTE
NTS
19
•In
trodu
ctio
n
•R
&D
Bus
ines
s Fr
amew
ork
•In
nova
tion
Bon
ds
•Va
lue
Cre
atio
n: C
omm
erci
al A
gree
men
ts v
ia
Oth
er T
rans
actio
n A
utho
rity
•M
arke
t Gro
wth
and
Acc
eler
atio
n
•Im
pact
: Inn
ovat
ion
Pro
duct
s, J
obs,
and
E
cono
mic
Gro
wth
•Q
&A
•Que
stions, answers a
nd disc
ussio
n
For f
urth
er in
form
atio
n:
•Tin
a N
eal,
Prin
cipa
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