1. Introduction

2. Funding Instruments

3. Public Funding

4. Support from Banks

5. Private Equity Investment

6. Venture Capital

2

1. Introduction

3

Challenges in Successful Technology Commercialisation

• Legal Frameworks as Obstacles

• Missing Awareness and Sensitiveness (Entrepreneurship Education for

Scientists)

• Missing Integrated Concepts

• Missing Integration of Engineering Competence with Business

Competence (Teamrekruiting)

• Missing Sales Forces

• R&D Results aren‘t Products

• High Risks in Early Stages (Gap of (Pre)-Seed Investment)

4

OnlineTicket-Technology

OnlineTicket-Technology

ProductProduct

Encryption of information by algorithmsin a 2D-Barcode

Ticket ID 82349294

Key ID F5CC06F1

From Technology…

ProductProduct

Benutzhandbuch

OnlineTicket

Version 2.0

Benutzhandbuch

OnlineTicket

Version 2.0

OnlineTicketOnlineTicket

Technology

Cash desk

Control center

Statistics

Ticketshop

Online payment

Online assistance

User Manual

Helpdesk

++++++++

… to Product

publicresearch facilities

Universities / patentcommercialisationagencies

medium-sizedenterprises

captive productdevelopment departments / supplier

software developer software developer

marketing and sales of technological products

Sales and licensing of technology

CustomerPartner

public research facilitiespublic research facilities

Screening/purchase

evaluation / choice

after-sales-service

marke-ting

sales

product-design

productdevelop-ment

information and communication technologies

7

Funding Requirements for Product Development

dxxixf )exp(2

1)(

?

InvestorInventor

?

? ????

8

Dilemma of Early Stage Financing

9

2. Funding Instruments

External Financing

Equity Loans

Equity FinancingMezzanine-Financing

LoanFinancing

• Private Equity• Venture Capital• IPO

• Loan• Warranties• Corporate Bonds• Leasing• Factoring• Asset Backed Securities

Internal Financing

10

Instruments for Financing

Ris

k

Sal

es

Company‘s Expansion

Stock Market

Venture Capital

Equity Gap

Family,

Fools, and Friends

Business Angels

Loan Financing

11

Phases of Financing

Germany Austria Switzerland GesamtFinancial Motivation (IRR; Profits) 47% 36% 41% 44%Expansion of Companies's Network 17% 15% 17% 17%Support of young Entrepreneurs 15% 21% 17% 16%Gaining Expertise in different Fields 7% 12% 12% 10%Access to New Technologies 7% 8% 7% 7%Support from Families and Friends 6% 3% 5% 5%Other Targets 1% 5% 1% 1%

100% 100% 100% 100%

12

Angel Investor´s Motivation

Losses

Profits

Break Even

Early Stage Phase Later Stage Phase

Expansion Phase

Seed Phase

Start-up Phase

EntrepreneurGrantsPrivate Pers.Business AngelsIncubators

Business AngelsIncubatorsStrategic InvestorsVC/CVC

VC/CVCPrivate EquityLoansGrants

Private EquityInvestment Bank

The Hockey Stick Effect

14

3. Public Funding

Sources of Public Funding

Free Consulting (Consulting Agencies)

Supplemental Funding

Equity/Shares

Warranties

Loans

15

HighTech Start-up Funds of KfW

Coach Start-up

Coaching Contract Shareholder‘s Agreement

Managementsupport Risk Capital

16

Example: High Tech Start-up Funds

Capital required

High

Low

Low High

Business Risk

Banks and venture capital firms

Venture capital firms

Financing gap which may be filled by the incubator

Banks

17

Sources of Funding in Relation to Business Risk

18

4. Support from Banks

Companies

Bank InvestorsCapitalMarket

Capital

UniversitiesR&D Institutes

Market ResearchInstitutes

AssociationsNetworks

Industry

Information

19

The Role of the Banks

Potential Support offered by Banks

• Management Support and Consulting

• Information flow to Assess HighTech Start-up

• Local, Regional Networks

• Co-operation within an Innovation Team

• Organisation of and Participation in Fairs

• Loans

But:• Rating Requirements

20

21

5. Private Equity Investments

Equity

Eq. Mezzanine

Loan Mezzanine

Loans

Private Equity

„Source of Equity Financing or similar Instruments without financing through the stock

market“

22

Private Equity

Institutional Investors

(Banks, Insurance Companies, Private Investors etc.)

Private Equity-Company/ Funds

Portfolio Company

Investment

Investment +

Management Consulting

Return

Return +

Fee

23

Private Equity

• Private Equity Investors are Co-Owners of the Company: They share Risks and Profits

• They target Investments in Companies that are not listet in Stock Markets

• Private Equity Investments target generally for both:Majority or Minority Participation

• Participation may be active or in-active as well

24

Private Equity

• Private Equity Investor targets a Return of 20% to 25%

• Normally they do not look for Desinvestments

• They use to take Management Responsability

• They target an Exit after 4 – 7 Years

25

Private Equity

0 24

First Meeting

IPR SituationTeam RecruitingBasic Business PlanMilestonesFinancial PlanningDraft ContratcsLOI and AssessmentTerm Sheet

Creation

Development Progress in BP Staffing Enhancement of

Management Proof of Concept

Negotiation

Exec Summary

Business Plan

Presentationen

Iterationen

Syndification

LOI and Valuation

Investment

Regulations

126 18Months

VC

26

How Investors Think

dxxixf )exp(2

1)(

Investor Inventor

?!?

Go for the Goal!

Thank youThank youOctober 2011