EIF s support in Innovation & Technology Investments. July 2015 Lisbon, Portugal

Transcription

1 EIF s support in Innovation & Technology Investments July 2015 Lisbon, Portugal

2 EIF in a nutshell We are a value-driven institution with 300 staff, committed to EU policy objectives and financial sustainability Shareholders 63.7% European Investment Bank (EIB), 24.3% European Commission (EC), 12% by 26 public & private financial institutions (FIs) Strong capital base of EUR 4.5bn AAA-rated by the three major rating agencies Over 20 years of market expertise 2

3 EIF: Mandate Manager We manage mandates on behalf of various stakeholders European Investment Bank Risk Capital Resources (RCR) EIB Group Risk Enhancement Mandate (EREM) European Commission COSME InnovFin EU Finance for Innovators SME Initiative (Spain, Malta) WB EDIF** ERASMUS+ Progress Microfinance National & Regional Funds Funds-of-Funds including in the Balkans, Germany, Poland, Portugal, Spain, Turkey, UK Holding Funds supported by structural funds **WB EDIF: Western Balkans Enterprise Development & Innovation Facility 3

4 EIF s counterparts We work with a wide range of counterparts to support SMEs Resources and Mandators European Investment Bank EIF own resources European Commission Member States/regions Managing Authorities Corporates/private Public institutions Other third parties Intermediaries and counterparts Fund Managers Commercial Banks Development & Promotional Banks Guarantee Institutions Leasing Companies Corporates Business Angels Microfinance Institutions microenterprises, Micro- PMEs SMEs et and les small mid-caps 4

5 Strategic Challenges EIF Current Investment Focus Business cycle Technology Transfer Accelerator Investing in VC funds Investing in Growth Capital Mezzanine Technology Transfer Proof of Concept Early Stage Business Angels Expansion/ Development Capital Lower Mid-Market Instruments to stimulate innovation, competitiveness and cross-border investment Fill funding gap left by institutional investors Support VC ecosystem and decrease dependency on public finance Catalyse hybrid debt finance for growth European Commission Resources EIB / EIF Resources Member States / Private Sector Resources 5

6 Equity Highlights (EUR / m) Equity signatures ( 12%) ( 9%) ( 20%) ( 21%) ( 27%) ( 79%) PE assets under management CAGR (equity signatures) 2009 to 2014 = 17.5% 6

7 TT Investments History of EIF Technology Transfer investments Scale-up of activities since TTA study (2005) EIF has been able to invest more and more resources to understand Tech Transfer, to create awareness and to develop new TT initiatives with leading research universities No dedicated mandate, did investments so far with own resources, Commission & EIB 30+ operations in total Several transactions in which EIF played a pivotal role (including SINTEF) Characteristics of Tech Transfer operations Hitherto focus is on research organisations, leaders in their respective fields and act in an entrepreneurial environment Take different shapes Long lead times and low transformation ratio Scale is key Challenge of fundraising not to be underestimated 7

8 EIF Technology Transfer aims at bridging the gap between research and the market R&D Technology Transfer technology IP Marketable Product prototype IP University / Research Organisation Spin-out Licensing Market IP / Idea Collaboration (contract research) 8

9 Catalysing commercialisation Research organisations and their TTOs can seize opportunities to increase and catalyse their competitiveness for innovation Engage with industry, develop partnerships, and encourage contract research Build networks to meet economic reality; inward looking vs. outward Become active participants in longterm TT vehicles / funds Research organisations to provide commitments for participating in TT structures, financially and / or with other resources Outsource with qualified and experienced partners willing to work in close collaboration Identify and work with trusted (fund) managers who can help select the best opportunities with commercialisation potential 9

10 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% 10

11 EIF Technology Transfer Investments Vintage Year Investment Country TT Funds Fund Size (EUR m) EIF investment (EUR m) T-Source France % Louvain Vives I Belgium % Leuven CD3 (Centre for Drug design and Discovery) Belgium % IP Venture Fund UK % Chalmers Innovation Seed Fund Sweden % Manchester UMIP Premier Fund UK % Karolinska Development Sweden % Leuven CD3 II (Centre for Drug design and Discovery) Belgium % Louvain Vives II Belgium % Telecom Technologies Transfert (3T) France % Demeter Cleantech seed fund France % Elaia Alpha fund France % Cancer Research Tech (CRT) Pioneer Fund (a) UK % Epidarex (formerly Rock Spring) UK % INRIA IT Translation France % IP Venture Fund II UK % Grand Ouest d'amorcage Sante France % Auriga Bioseeds IV France % SINTEF Venture IV Norway % VIB Innovation Belgium % Cancer Research Tech (CRT) Pioneer Fund (b) UK % Espirito Santo Ventures (ESV) Portugal % Diffusion Captial Turkey % [confidential] Turkey % [confidential] France % [confidential] Netherlands % [confidential] Netherlands % [confidential] Denmark % [confidential] UK % [confidential] UK % [confidential] Ireland % [confidential] Spain % TOTAL 1, % % Fund 11

12 Investment process and indicative timelines 12 mths First Screening Second Screening Due Diligence Board Approval Understand concept Investment readiness Stress testing and verification Legal documentation Based on preliminary questionnaire / concept note 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 After EIF BoD approval, legal docs drafted on behalf of Manager. EIF review Importance of legal counsel 12

13 Investment considerations 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 13

14 Criteria (1/4) Partner Institutions Market / competitors Investment strategy Metrics: research budget, peer group comparisons, invention disclosures, IP filed, IP awarded, growth rates, commercialisation income, encumbrances, 3 rd 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 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 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 14

15 Criteria (2/4) Dealflow and pipeline Potential investors Investment process 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 Pipeline: of current and future opportunities 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 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 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 15

16 Criteria (3/4) Team Track Record Governance Composition: envisaged team responsible for managing fund, key individuals from TTO / other, secondees, new recruits (profiles) Profiles / CVs: Full CVs of team members and key individuals, specific dates, positions held, achievements 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 Previous funds: metrics, vintage, total size, fund cash flows, net and gross IRR, LPs, amounts Companies: for previous / current funds, dates of investment, investment at cost, FMV (EVCA), gross multiples, forecast exit dates, exit scenarios 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 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. 16

17 Criteria (4/4) Management co. Economics Remun. / incentives 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 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 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) 17

18 EIF as entrusted entity for Horizon 2020 / COSME EIF crisis response toolbox Equity Instruments 2014 and beyond Social Impact Fund Corporate Innovation Platform Mezzanine Facility for Growth European Angel Co-Investment Fund COSME / Equity for Growth Horizon 2020 / Equity for Research and Innovation TT-POC-Start-up Tech Transfer Proof of Concept Business Angels Seed Stage Early Stage Expansion/ Development Capital Lower Mid-Market European Commission Resources EIB / EIF Resources Member States / Private Sector Resources 18

19 UMIP Fund (Manchester) Illustration: 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/

20 Centre for Drug Design & Discovery (CD3) 20

21 SINTEF Venture IV 21

22 IP Group: multiple partnerships 3 critical mass Illustration: IP venture fund UK Co-investment fund (seed, post-seed financing Critical mass reached through a network of universities 22

23 IP Group (IPVF II) IP Group Plc* ( IPG ) Key Executives 100% votes EIF Other LPs Top Technology Ventures GBP 20m GBP 10m IP Venture Fund I IP Venture Fund II (GBP 30m) 70% SMEs 30% 23

24 CRT Pioneer Fund Sixth Element Capital LLP (FSA Regulated) EIF 50% Sixth Element GP Ltd Carry vehicle CRT Pioneer Fund LP CRT 50% Investments Project 1 Project 2 Project 3 Project n Project Development CRT Third parties 24