1.

• Bill Greener

Patent AttorneyBond, Schoeneck & King, PLLC

MemberSeed Capital Fund of Central New York

Tech-Transfer Challenges and Opportunities

Current state of Funding in New York

III. Snapshot of the Univ. of Utah Model

2. Bridging the Technology Commercialization Gap R&D Institutions Mission Commercial Sector Basic Research Applied R&D Business Development Full-Scale Commercialization

Early-Stage Capital

Market Insight

Human Capital

Source: Technology Commercialization OfficeUniversity of Utah 3. Opportunity & Challenge

US research Universities are an economic engine

• • conduct >2/3 of all basic research

• • are primary source of technology

• • produce >400 start-ups per yr

Universities vary dramatically in their ability to convert research into results.

Majority of Tech Offices cant hit break even

Pressure to produce results linked to Federal and State sponsored economic development

Companies and VCs still find it difficult to engage Universities in innovation development

Source: Technology Commercialization OfficeUniversity of Utah 4. WHATS REALLY HAPPENING?

2006--$32.5B in State Funds spent on building technology ecosystems from US Universities with broken infrastructure

• • $116 million in annual patent costs

• • 70% of patents will go unlicensed

• • 60% of TTOs arent even at breakeven

• • Avg revenue of ~$460,000 per office

• • Avg of 2.8 start-ups per year

• • 80% of venture funding targeted to 12 metro areas

Source:Technology Commercialization OfficeUniversity of Utah 5. The Case for University Spin-Outs

1. More likely to have large outcomes

Go public at 114x the rate of other startups

2.Less likely to fail Rate of Going Public Failure Rate Source:Technology Commercialization OfficeUniversity of Utah .07% 6. Start-up Activity Source: Technology Commercialization OfficeUniversity of Utah 7. Number Start-ups: US Universities - 2007 Source: Technology Commercialization Office University of Utah 8. Start-up Activity (by industry sector) Source: Technology Commercialization Office University of Utah 9. CRITICAL QUESTIONS

Can Universities drive economic development?

Can they effectively serve their communities?

Can you build a model that can be replicated?

Can you stimulate continued innovation?

Can you build business in the confines of a non-profit?

Can you generate a long term equity structure?

Source: Technology Commercialization Office University of Utah 10. Most Challenging aspects for TCOs Source: Technology Commercialization OfficeUniversity of Utah

Access to CEOs/executive management talent

Access to seed or venture funding

Access to entrepreneurs.

Access to start-up resources

Ability to create university start-ups in their environment

11. Seed Capital hasnt recovered Source: Technology Commercialization Office University of Utah 12. Traditional Funding Continuum VALUATIONS INCREASE BUSINESS RISKS DECREASE MENTORING NEEDS DECREASE $5M-20M $500K-5M $50K-500K >$20M Sweat Source: Technology Commercialization OfficeUniversity of Utah SEED/START-UP FUNDING DEVELOPMENT FUNDING EXPANSION FUNDING OPPORTUNITY DEVELOPMENT CONTINUED GROWTH ANGELS,FOUNDERS & SEED FUNDS VENTURE CAPITAL GROWTH EQUITY PE - PUBLIC MARKETS 13. Strong need for a new model Opportunity For Alignment Source: Technology Commercialization OfficeUniversity of Utah Stage Pre-Seed Seed/Start-Up Funding Gap between $100,000 and $2,000,000 Early Later Source Founders, Friends and Family Individual Angels Venture FundsInvestment $25,000 to $100,000 $50,000 to $150,000$2,000,000/$5,000,000 and up 14. Information courtesy of, and used with permission from, Excell Partners, Inc 15. Information courtesy of, and used with permission from, Excell Partners, Inc 16. Information courtesy of, and used with permission from, Excell Partners, Inc 17. Information courtesy of, and used with permission from, Excell Partners, Inc 18. Information courtesy of, and used with permission from, Excell Partners, Inc 19. Information courtesy of, and used with permission from, Excell Partners, Inc 20. Information courtesy of, and used with permission from, Excell Partners, Inc 21. 50/50 Information courtesy of, and used with permission from, Excell Partners, Inc 22. Information courtesy of, and used with permission from, Excell Partners, Inc 23. Information courtesy of, and used with permission from, Excell Partners, Inc 24. TAKE HOME POINTS

NYS isnotthe hub of venture activity that some might think

NY City VCs have not invested much in their own state

The problem for seed-stage start-ups is growing

Questions for thought:

*Are the companies in NYS not worth investing in?

*Are seed stage investments in NYS so low that we cannot feed thepipeline for later stage investments?

*Do we have a brain-drain problem?

25. Where do Tech Transfer Offices Start?

Know what you do best-do IT

Involve Everyone

Restructure Organization

Add Value in Every Transaction

Support all Phases of Start-Up Development

Streamline Processes

Identify High Value Collaborative Research

26. The Initial Want List

Build a community based fund

Engage the local VCs

Venture vs Angel

Have the follow-in funders at the table

Clog the pipeline

Closed vs Open

27. University Alignment 28. New Company Formation Source of Equity Funds Typical Year 29. Angel Organizations:

Investment Statistics:

• 70% of angel groups leave investment decisions up to the individual members

• 23% of the angel groups invest by majority group decision

• • Of those that invest by majority decision, 90% are structured as LLCs, supporting previous discussions that the LLC legal structure appears to be the preferred group investment vehicle

• 7% of angel groups invest through investment committee decision

• No responding angel group required unanimous decision for investment

Source: Center for Venture Research, University of New Hampshire 2005 Angel Organization Survey

30. Reasons For An Angel Organization

Quality deal flow

Greater investment clout from combined dollars

Collective due diligence

Education: formal and informal

Group social benefits

31.

Strategic Choices

Due diligence:venture capital-style due diligence pays off

Experience:engaging individual with direct industry experience

Participation:High participation is interacting with the company 1 or 2 times per month, Low is 1-2 times per year

1 HIgh due diligence was defined as > 20 hours spentSource:Kauffman Study: Returns to Angel Investors in Groups , 2007 Average Return Impact High 1due diligence: 5.9X Low due diligence: 1.1X High experience vs. low experience nearly 2X improvement:High participation: 3.7X Low participation: 1.3X 32.

Strategies for secondary cities:

Strengthen Clusters and Networks Use local groups and virtual organizations to bring together investors, entrepreneurs, researchers and other parties to establish formal and informal relationships.

Encourage a Continuum of Capital Support local angel capitalinvestors who can nurture early-stage companies

Investment Creativity Seek out alternative models of investment

Enhance Accessibility Create policies and programs to support entrepreneurship

Source: www.icic.org - 2007 The 10 highest-performing secondary cities in the U.S. (ranked by number of private equity deals per city) are (1) Boulder, Colo., (2) Salt Lake City, (3) Westborough, Mass., (4) Ann Arbor, Mich., (5) Norwalk, Conn., (6) Providence, R.I., (7) Southborough, Mass., (8) Stamford, Conn., (9) Melbourne, Fla., and (10) New Haven, Conn. 33. Post- Bubble Seed Capital Source: Venture Source, NASVF 34. Why a Venture - Seed model is critical

A great investment committee can:

• See around the corner

• Has the follow-on funding available

• Works full time fund manager

• Help sober up an entrepreneur art to saying no

• Provide necessary Board and mentor roles

• Provide some unrestricted capital

• Encourage entrepreneurship

35. Lessons Learned

Cant please everyone

• • No good deed goes left unpunished

Pick a lead

Business diversity the market knows

Dont focus on the Univ. needs-community needs also important

Full time commitment

Consider the economicsitmustwork!

36. SCF/CNY invests in and helps guide early stage companies in Upstate New York.Our goal is to create wealth for investors and assist with the regions transition to a successful, high-tech, high-growth economy. www.scfcny.com EXCELL PARTNERSRANUVANYBFLO ANGELSCVFBINGHAMTON OTTKAUFMANN FOUNDATIONSIMON SCHOOL ..