BIOE 4410 – Senior Design

1. BIOE 4410 – Senior Design Venture Capital K. Lang A. Pinkie • 04 Nov 2013

2. What is VENTURE CAPITAL? • Venture Capitalism is a way for businesses or individuals to obtain money and experience for a business via the private equity of Venture Capitalists • Venture Capitalists: individuals willing to invest in a start up • Looking for potential of high return, often technological companies • Raise money from institutional investors, wealthy • individuals or private and public entities • Money raised put into a fund, $50 million  $2 billion • Can offer expertise with finances and management

3. History of Venture Capital VENTURE CAPITAL • Some of the first Venture Capitalists include the following: • Vanderbilts - Railroads • Whitneys - Thoroughbred horseracing • Rockefellers - Oil business • Warburgs - physics, arts, pharmacology, physiology, finance, private equity, and philanthropy • The Small Business Investment Act of 1958 • Officially allowed for the Small Business Administration to license private "Small Business Investment Companies” • Allowed for creation of venture capital firms

4. History of Venture Capital • 1960s and 1970s, • VC firms focused their investment on starting and expanding companies in electronic, medical and data-processing industries • 1980s • Companies post losses for first time • The market for initial public offerings cooled in the mid-1980s before collapsing after the stock market crash in 1987 • The Small Business Innovation Development Act (1982) • Established the SBIR/STTR programs

5. History of Venture Capital VENTURE CAPITAL • The late 1990s were a boom time for VC, large returns with technology • Benefited from a surge of interest in the Internet and computer technologies • In the 2000s VC funding had spread widely through the medical field • Early disease detection and prevention NASDAQ Composite Index

6. Venture Capital: The Numbers 2010 Investments in Industry (In Millions of Dollars) Berkeley Entrepreneurs Forum Shaking the MoneyTree presentation: http://entrepreneurship.berkeley.edu/main/index.html

7. WHY VENTURE CAPITAL? VENTURE CAPITAL • New companies are small with little experience and VC’s bring capital and financial expertise • Seed Funding • Early prototypes and proof of concept • Start-up Funding (Often VC Funding) • Making investments in future rounds

8. Why Not a Bank Loan? VENTURE CAPITAL • Availability • Banks usually do not offer loans to startups without strict provisions to reduce the risk • Venture capital reduces overall risk of investment because of the pool of funding • Interest

9. Customers Public Investors Friends & Family SOURCES Of V.C. Banks Angels Venture Capital Government Grants Corporate Investment

10. Sources of Venture Capital Friends & Family Angels • Members of your personal network • Have adequate means to make an investment • Experienced investors using own wealth Venture Capital Corporate • Professional investment managers • Fund profile set up with industry and horizon time • Made by large companies for strategic reasons • Purchase equity supporting R&D or licensing agreement • Traditional venture investments

11. Sources of Venture Capital Banks Customers • Commericial/State institutes providing financial services • Loans and such • Customers make direct investment in the R&D of new products or services Public Investors Gov’t Grants • General public can invest by buying shares of the company • For established companies • May be awarded to companies that meet the size standards established by the Small Business Administration (SBA)

12. GOVERNMENT GRANTS • Government Grants • $2+ billion available each year to fund R&D at small companies (<500 employees) • Higher rate of success for receiving funding (9-12%) • 3 Stages for different steps of funding • SBIR • Small Business Innovation Research • Funding given to small technology companies or individual innovators who form a company • STTR • Small Business Technology Transfer • Funding given to small companies working in collaboration with a non-profit research institution (ie. university)

13. Pros/Cons of Funding Zenios, Makower, and Yock. Biodesign: The Processing of Innovating Medical Technologies. Ann Arbor, Michigan: Edwards Brothers Inc., 2010.

14. Pros/Cons of Funding Zenios, Makower, and Yock. Biodesign: The Processing of Innovating Medical Technologies. Ann Arbor, Michigan: Edwards Brothers Inc., 2010.

15. How to Obtain VC VENTURE CAPITAL • Does your company fit the VC fund profile? • Research & find your target • Best firm partner for your idea • Do they have a history of supporting ideas like yours? • What to do: • Have someone introduce you (e.g. LinkedIn) • Set up a meeting with the investors • NOT send a “cold” email

16. The ‘Elevator Pitch’ Know Who Tailor Your Speech Who are you speaking to? Know your audience. 30 sec Make them want to hear more. Concise Better What does your idea/product fulfill? Potential Rewards How do investors get their reward? Return Why How Much? How much capital do you need? $$ Needs

17. The BUSINESS PLAN VENTURE CAPITAL • Once Elevator Pitch worked, business plan is used to provide the detailed plan • Investors often check financials first and then assumptions page • The business plan answers all the questions VCs have before an investment is made

18. ALTERNATIVE PATHWAYS VENTURE CAPITAL • Partnering • Two entities share responsibility for the development or commercialization of an idea or invention • Licensing • Transfer of an idea or invention from the innovator to a licensee in exchange for ongoing royalties and/or other payments • Sale/Acquisition • Innovator chooses to sell an idea outright, completely relinquishing control to acquirer [2]

19. THANK YOU!!!