ohio third frontier commission meeting february 22, 2012

Ohio Third Frontier Commission Meeting

February 22, 2012

Agenda

10:00 Call to Order Chris Schmenk Approval of 12/7/11 Meeting Minutes

10:10 Update on FY 2012 Program Implementation Lisa Delp

10:20 ONE Fund Evaluator Report: Request for Funding Invantage Group

10:45 Pre-Seed Fund Return Model: Request for Approval Lisa Delp

11:15 Other Business Chris Schmenk

11:30 Adjourn

Update: Program Implementation CATEGORY PROGRAM 2012

EntrepreneurialEntrepreneurial Signature Program ONE FundPre-see Fund Capitalization Micro Fund Growth Fund

Value Chain Jobs Ohio Network Commercial Acceleration Fund

Open Innovation Tech Validation & Start-upOpen Innovation IncentiveInnovation Platform FundIndustrial R&D Center Research Incentive

TalentThird Frontier Internship Program

Update: RFPs Schedule

(*) JONetwork Program – $14.9 million of the total $24 million available was awarded in FY2012. Remaining $9.1 million expected to be awarded in FY2013 based on performance of each of the six regional Network partners.

PROGRAM AWARD $$ RFP RELEASE PROPOSALS DUE AWARDS LOIs PROPOSALSEntrepreneurial Entrepreneurial Signature Program $40 million December 2011 February 2, 2012 Spring 2012 6 6

ONE Fund $1.6 million December 2011 January 18, 2012 February 2012 NA 9

Growth Fund $10 million April 2012 Rolling basis Rolling basis NA --

Pre-Seed Fund Capitalization $25 million April 2012 May 2012 Summer 2012 -- --

Micro Seed Funds Initiative $1 million May 2012 June 2012 Summer 2012 -- --

Value Chain JobsOhio Network $24 million (*) Complete Complete Complete NA 6

Commercial Acceleration Loan Fund $25 million TBD TBD TBD -- --

Open Innovation

Industrial R&D Center Program $25 million October 2011 Rolling basis Rolling basis NA 2 so far

Tech Validation & Start-Up Fund $6 million November 2011 February 1, 2012 Spring 2012 NA Phase 1 = 19 Phase 2 = 18

Innovation Platform Program $18 million November 2011 February 16, 2012 Spring 2012 88 37

Open Innovation Incentive $8 million March 2012 April 2012 Spring 2012 NA --

Research Incentive $8 million

Talent Internship Program $3 million March 2012 April 2012 Spring 2012 NA --

NOTICE: Proprietary and ConfidentialThis material is proprietary to Invantage Group. It contains trade secret and confidential information which is solely the property of Invantage Group. This material shall not be used, reproduced, copied, disclosed, transmitted, in whole or in part, without prior express consent.

© 2012 All rights reserved.

Ohio's New Entrepreneurs(ONE) Fund

FY2012

Start-up Accelerator ProgramEvaluation Report

February 2012

ONE Fund Accelerator Proposal EvaluationFebruary 2012 / Page #6

• Accelerator History◦ Model emerged in 2005 around Information Technology

Y Combinator founded in Mountain View, California in 2005 TechStars founded in Boulder, Colorado in 2006 Program success has triggered rapid proliferation

– Number of accelerators has grown rapidly, especially since 2010– Both US and worldwide growth

Program Background


• Accelerator Model◦ Seeks to connect emerging technologies with market needs

Typically applied to a relatively small group of entrepreneur teams– Utilize well-defined programmatic structure– Identifiable progression targets– Mentorship by seasoned entrepreneurs, technologists, and business experts

Focus on teams and concepts which can meaningfully benefit– Able to demonstrate a high likelihood of raising follow-on investment

Ability to quickly validate the business model– Often involves multiple concept iterations

Program Background

Accelerator model rapidly takes start-up teams through early stages of the commercialization framework


ONE Fund Desired Outcomes

• Program Goals & Objectives◦ Support accelerator programs with potential to become world-class◦ Attract and retain entrepreneurial talent in Ohio◦ Accelerate the formation and development of companies◦ Assist young companies in attracting follow-on investment◦ Foster a culture of entrepreneurship◦ Raise the visibility and excitement about entrepreneurship in Ohio


Requirements and Funding

• Program requirements◦ Program duration of approximately 10 – 12 weeks

Start-up “boot camp”

◦ Support between 5 – 10 teams◦ Strong team commitment and evaluate progress◦ Provide a dedicated, collaborative facility◦ High graduation standards◦ “Showcase Day” event to investors

• Funding and cost share requirements◦ Maximum of 10 teams with funding of $20k per team◦ OTF funding restrictions…

Used only to support the entrepreneurial teams Must use cost share funding for operating costs and overhead expenses


• Proposal evaluations◦ Develop evaluation paradigm based on stated criteria and goals◦ Review plans based on documented evidence within proposals◦ Three primary evaluation categories with weighted sub-components

Organizational Capabilities Program Capabilities Team Resources

Relevant experience, resources, & capabilities

Plans for executing the accelerator program

Commitment of resources and tools to assist teams

• Past performance or similar programming

• Leadership expertise• Organizational resources• Credible plans for achieving

the specified goals

• Potential to be world class• Understanding and planning

for an accelerator program• Methodology and execution• Team attraction and

program promotion• Credible funding from

private, non-state sources

• Breadth, depth, and commitment of mentors

• Access to target markets for feedback and validation

• Well-defined program management tools

• Ability to gain access to a broad investor network

Evaluation Process


• Two-stage evaluation process◦ First round review of written applications to identify best proposals◦ Second round review of supplemental information◦ Final recommendation

Stage 1 Review Stage 2 Review

Focus: Identify promising proposals Focus: Recommendations for funding

• Quick reading• Review in detail• Assign preliminary scores• Ensure consistent criteria application• Determine scoring gap• Identify best proposals for Stage 2• Identify information gaps/questions

• Submit customized questions• Review written responses• Face-to-face interviews• Second review• Final scores and rank• Recommend funding range• Provide supporting documentation

Evaluation Process


Summary of Evaluations

Summary of ONE Fund Proposal Evaluations

Proposals reviewed for Stage 1 9

Recommended for Stage 2 6

Recommended for funding 4

Lowest score recommended 81 points

Highest score not recommended 71 points

Summary of Recommended Proposals

Lead Applicant Accelerator Name Funds Requested Scores

Main Street Ventures, dba The Brandery The Brandery $200,000 90.3

Shaker LaunchHouse LaunchHouse Institute $200,000 88.7

Ohio State University The 10-Xelerator (10X) $200,000 87.8

Innov8, LLC Innov8 for Health $160,000 81.4


Applicant: Main Street Ventures, dba The BranderyAccelerator: The Brandery

Summary of key findings• Organizational Expertise

◦ Focused approach builds on regional strength in consumer marketing◦ Key personnel have extensive and relevant backgrounds in the program's focus areas◦ Previous program success attracting large applicant and investor interest◦ Class 1 raised > $2 MM in capital and Class 2 currently negotiating > $6 MM

• Program Capabilities & Plans◦ Distinct programming and strong national attention◦ Recognition as a top 10 accelerator program in a recent industry review◦ Member of the Global Accelerator Network (originally known as TechStars network)◦ Most funding comes from corporations and foundations

• Team Resources◦ Very deep mentor network in focus areas of consumer products, media, etc.◦ Significant emphasis on the importance of social and networking opportunities

Recommended Proposals


Applicant: Shaker LaunchHouseAccelerator: LaunchHouse Institute


◦ Three years of relevant experience with start-ups to accelerate development◦ Focus on business and healthcare software and web-based technology companies◦ Well developed curriculum and resources, though prior work not done within class cycle◦ Leveraged $130k in investment capital into companies raising $3 MM in funding

• Program Capabilities & Plans◦ Clear philosophy and systematic approach guides the program◦ Well defined team selection and multi-level screening process, including innovative ideas◦ Majority of funds come from private sources and proposed budget is fairly lean

• Team Resources◦ Well defined program curriculum with three threads and specifically designated leaders◦ Auditions, performance feedback, and tiered commitments for mentors across industries◦ Concept development and testing integrated into early stages of program



Applicant: Ohio State UniversityAccelerator: The 10-Xelerator (10x)


◦ IT focus including web 2.0, social, mobile, software development, and data services◦ Running second program with broad attraction of teams both domestic and international◦ Class 1 teams raised $2.4 MM and additional $2.1 MM currently under negotiation

• Program Capabilities & Plans◦ Clear philosophy and systematic approach guides the program, including well defined

four stage selection process with written, video, and in-person components◦ Member of the Global Accelerator Network (TechStars network), using programming

model with heavy dependence on fast iterations, deep mentor network, and collaboration◦ Investor group has already committed $200k to funding top teams from each class◦ Budget based on privately raised investor fund for operations and program management

• Team Resources◦ Use early experiences to adjust use of three-tiered mentor network and pairing process



Applicant: Innov8, LLCAccelerator: Innov8 for Health


◦ Specific focus on IT to improve the quality and affordability of health care◦ No previous accelerator experience, but recently conducted a successful initial event

which showed strong applicant involvement and investor interest◦ Key team leaders have strong backgrounds in focus area and have gained considerable

traction with several area corporate and healthcare partners• Program Capabilities & Plans

◦ All operating funding comes from private (mostly corporate) donations◦ Proposed facility and resource networks ideally located in healthcare cluster

• Team Resources◦ Deep and relevant core team experience is foundation primary mentors

– Supplemental support from a broader pool of subject matter experts◦ Curriculum derived from other healthcare start-up programs and investor inputs◦ Facility location and Customer Advisory Panel brings access to industry decision-makers



• Evaluation Summary◦ Higher rated proposals have stronger potential to compete and

succeed in a rapidly expanding accelerator marketplace• Stronger job addressing specified criteria and demonstrating capabilities• Greater chance of creating world class accelerator programs• Differentiating through distinct focus or membership in national networks• Innovating aspects in various areas of programming or funding

◦ Lower rated proposals have some common gaps• Less developed/innovative program and management plans• Smaller budgets either indicative of funding problems or inexperience• Smaller or more limited resource networks• Potentially limited or regional in focus and reach

◦ Evaluations and scoring as a future planning aid• Evaluation feedback effective tool for all applicants• Potential for solid local or regional accelerators in other programs

Conclusion

• Early-stage technology companies perform better and are less likely to fail when they have access to coaching, mentoring, and adequate capital.

• More hours spent in due diligence positively relates to greater returns for investors.

• Risk to investors can be reduced when there is access to companies have access non-dilutive capital and no cost business development services.

• A well-rounded state program to reduce the risk to investors should include: – Investment capital– Tax credits– Entrepreneurial support programs– Sources of non-dilutive capital

• Ohio has invested $105 M in early-stage technology company support through the Entrepreneurial Signature Program which provides, at no cost to the entrepreneur or investor, services to build stronger companies.

• Due diligence is ongoing due to the engagement of the ESP organizations with emerging companies, areas of concern are identified early in the company life-cycle and addressed before an investment is made.

• ESPs and Edison Incubators provide access to non-dilutive capital and no cost business development services which reduce risk for the investor.

• Ohio has made available more than $64 M in investment capital

• Issued nearly $40 M in OTITC credits

Pre-Seed Fund Return ModelReturn of

Capital Ratio 0X to .5X .5X to 1X 1X to 1.5X 1.5 to 2X >2X State Investors State Investors State Investors State Investors State InvestorsFull LP $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 Current $0.00 $1.00 $0.00 $1.00 $0.50 $0.50 $0.50 $0.50 $0.50 $0.50 Fund-Alt $0.00 $1.00 $0.00 $1.00 $1.00 $0.00 $0.00 $1.00 $0.00 $1.00 State-Alt $0.50 $0.50 $0.50 $0.50 $0.00 $1.00 $0.00 $1.00 $0.50 $0.50

Return of Capital $3.0M $6.0M $9.0M $12.0M $15M

State Investors State Investors State Investors State Investors State InvestorsFull LP $1.5M $1.5M $1.5M $1.5M $1.5 M $1.5 M $ 1.5M $1.5M $ 1.5M $1.5M Current $0.0M $3.0M $0.0M $3.0M $1.5M $1.5M $1.5M $1.5M $1.5M $1.5M Fund-Alt $0.0M $3.0M $0.0M $3.0M $3.0M $0.0M $0.0M $3.0M $0.0M $3.0M State-Alt $1.5M $1.5M $1.5M $1.5M $0.0M $3.0M $0.0M $3.0M $1.5M $1.5M

For-profit Fund capitalized with $3M State, $3M other Investors.

Total funds returned to State and Investors for any scenario is the cumulative amounts of all preceding levels. For example, in the State-Alt model at a return level of $9M, the State would receive $3.0M and Investors $6.0M

For-profit Fund; Assumes 1:1 ratio of state to investor cash; Does not take into account management fees and other allowable expenses

Other Business?

Next Scheduled Meeting:Combined Advisory Board & Commission

10am, March 14, 2012TechColumbus

ohio third frontier commission meeting february 22, 2012

Documents

2012na9growth fund

program success

jonetwork program

innovation platform

preseed fund capitalization

fund evaluator report

preseed fund return

accelerator modelseeks