Carnegie Mellon Technology Transfer Enterprise Creation and Economic Development October 4, 2005

1. Carnegie Mellon Technology TransferEnterprise Creation and Economic DevelopmentOctober 4, 2005

2. Ben Franklin Technology Partner of Southwestern PA Key Issues • Help to Grow the Regional Technology Economy • The Ben Franklin Technology Center of SWPA was created 23 years ago by the PA General Assembly • Serves 9 counties in Southwestern PA • IW invests more money in more regional, seed-stage companies than any other private or public source • Mission • To increase the success rate of the region’s technology and • technology adopting companies through direct investment, • business expertise and hands-on support. Create Jobs, Create Wealth, Stimulate Investment, Create Competitive Advantage, and Retain Regional Talent

3. Regional Success Stories

4. Five Year Impact(as of December 31, 2004)

5. FY ’05 Banner Year for IW Entrepreneurs • More Growth Milestones Achieved Than Ever • Applications for funding increased 50% • Made first-time investments to 14 start-ups • 14 companies funded through new grant programs • Leveraged additional $38 million from angels, VCs and other sources • Federal grants to companies increased 32% • More signs of Company Growth: • 20% of portfolio reached $1 million in revenue • 100 new products launched • 171 jobs created and retained

6. Helping Speed University Technology Commercialization • University Innovation Grants assist technology transfer process at universities for: • Technology validation • Market research • Prototype development • IP protection and freedom to operate issues • Scope of the grant program: • Partnering with regional universities • Grants up to $25,000 • 10 – 12 grants expected FY ‘06 Increase Commercialization of University Technology

7. IW’s Current Programs for Startup and Early Growth Stages • Innovation Investment Fund • Investments in the form of convertible debt for: • Initial product development • Commercialization • Assist in funding strategy for portfolio companies • Cultivate relationships with angel investors and VC’s for follow-up investment • Portfolio Services • Market identification & business model refinement • Product development strategy • IP strategy, regulatory issues, etc. • Financial requirements & funding strategy • Team build-out • Beta partners, early customer acquisition Tab 7

8. Case Study: DesignAdvance Systems • Overview: • Provide design synthesis software tools to the EDA and CAD industries • CMU Tech Transfer spinoff • Since incorporation in late 2003 • Raised $3.2 million in additional funding and grants • Grown to 13 employees • Built strong Board of Directors and Advisory Board • Released and shipped initial product to early customers • Signed key partnerships within the industry

9. Case Study: DesignAdvance Systems • Background: • Underlying technology – software algorithms • Automate 3-dimensional design and packaging • Automate product design using shape grammars • $2.4 million in research, funded by automotive companies and government • 5 US patents – 2 issued • Developed in Mechanical Engineering Dept. at CMU under Professor Jonathan Cagan • Company formed in late 2003 • Randy Eager, CEO • 4 other co-founders, including Professor Cagan and two of his students • CMU License Agreement

10. Case Study: DesignAdvance Systems • Market Entry Focus: • Electronics Industry, PCB Design • Market Size Potential - $1.9 billion • Value Proposition – Automates component placement • Reduces design time by over 40% • Saves $100,000 a year per designer • Accelerates time to market and revenue

11. Case Study: DesignAdvance Systems • Path to Commercialization - Challenges and Success Factors: • Initial target market (automotive) was not attractive • Early assistance, support, and funding by Innovation Works, Tech Collaborative, and Compunetix • Initial customer validation from target market • Focus groups with 9 Customers, 50 Users • Dramatically increased understanding of product requirements, customer dynamics; formed basis for initial MRD and product specs • Significant infusion of follow-on funding • Secured alpha and evaluation customers • Successful launch at industry trade show • Initial product shipping to early customers Despite doing it right – 24 months from formation to product shipping

12. Case Study: DesignAdvance Systems • Innovation Works Role: • Provided feedback on initial business plan and market • Concerns regarding automotive market • Company examined other market opportunities • Due diligence by IW provided leads to angel investor and two alpha customers • Worked closely with company to develop its marketing and product strategies • Focus groups, marketing requirements document (MRD) • Marketing and launch plan • Provided early funding and direct support for follow-on funding • Initial funding gave company “stamp of approval” to enable follow-on funding • Additional funding and investor introductions

13. Case Study: DesignAdvance Systems • Key Takeaways: • Many steps from tech transfer to commercialization • Market strategy, requirements • Product development, customer acquisition • Funding • Initial market selection and early customer feedback critical • Involvement of inventors essential to application development • Understanding of core science and algorithms • Ability to adapt quickly and leverage prior learnings • Leverage regional resources and assets • Economic development – IW, Tech Collaborative • Local companies – Compunetix, Laurel Networks, Marconi

14. Innovation Works: Capital, Assistance and Resources for Southwestern Pennsylvania’s Innovative Companies