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Discussion Document: July 6, 2009

|. the center for. advancing innovation. Avon Foundation – The Center for Advancing Innovation Continued Innovation Proposal December, 2013. Discussion Document: July 6, 2009. Contents. Accomplishments to Date Proposed Next Steps Collaboration Proposal. 2.

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Discussion Document: July 6, 2009

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  1. | the center for advancing innovation Avon Foundation – The Center for Advancing Innovation Continued Innovation ProposalDecember, 2013 Discussion Document: July 6, 2009

  2. Contents • Accomplishments to Date • Proposed Next Steps • Collaboration Proposal 2

  3. Several key accomplishments have been made between the Avon Foundation and CAI • Evaluated 10 years of Avon Foundation Grantees against a robust framework and approximately 20 interviews • Created 62 recommendations for all inventions evaluated; prioritize future investments • Identified 6 gems from investments made; created specific roadmap of key roadmap • Drove translational research for 1 grantee through international start-up challenge • Successfully launched the first ever breast cancer start-up Challenge that is currently the largest global University based Challenge in the world • Performed deeper dive evaluation of ductal lavage and saliva test; identified the leading innovator in saliva test • Assessed other organizations that have reached out to Avon to request funding; provided recommendations Portfolio Assessment Translational Research Other Investigations 3

  4. How does the challenge benchmark against the “world’s richest and largest business plan competition” from Rice University; it’s larger! 4

  5. The Breast Cancer Start-up Challenge Results Have Been Significant Teams Desire to Enter: 150+ Universities contacted with approximately 200 teams with interest to join the Challenge Teams Successfully Entered: 46 teams across the world - this makes this the largest international university oriented business plan and start-up challenge in the world, the largest has 42 teams (Rice) Average Number of People/Team: 431 team members, 9+ people per team, compared to the average 3-5 per team in similar competitions;235% more team members CDAs in Place: 431 CDAs in place (a few more are being signed); 43 per invention Teams Consistency: Cumulative Experience (years) • 791 in start-ups • 1523 science/medical • 839 relevant consulting experience • 1203 Life Sciences business operations 5

  6. The team quality is high; teams have strong talent across disciplines; medical/scientific disciplines are most significant change Team Leaders: 46 Team Requirements Core Team Members: 232 Mentors/Advisors/Collaborators: 155 • Over 18 years old • At least three students on the team *Note: two inventions require additional disciplines Invention #1: computer science; invention #3: engineering 6

  7. Media have had significant interest and we’ve been invited to several speaking events. The White House is “watching our initiative with great interest and excitement” • Initial Joint Press Release • Media: CBS News (show and also 60 minutes), ABC News, Kansas City Star Newspaper • Supporting Partners who have blasted out our Challenge Information: BIO Association, AUTM, Federal Laboratory Consortium, White House, Society of Physician Entrepreneurs, 700 for Science, • Speaking Events: Faster Cures, Global Consortium of Entrepreneurship Centers (plenary), and the Federal Laboratory Consortium • Magazine Feature: Disease Models and Mechanisms http://dmm.biologists.org/ Doug Rand Assistant Director for Entrepreneurship White House Office of Science and Technology Policy Executive Office of the President “One of the most innovative and exciting initiatives to commercialize Federal inventions that has been pursued” 7

  8. OVERVIEW OF PROPOSALS

  9. CAI would like to assist the Avon Foundation with portfolio management initiatives to create the highest probability of successful investment returns Portfolio Management Accelerate Start-ups 1 Find the Best Inventions 2 Translational Research 3 $ $ $ New Market Identification Forecasting Customer Demand Sensing Solution Concept Creation Idea Selection Market $ $ $ $ $ $ $ $

  10. CAI would like to assist the Avon Foundation with elements of portfolio management to optimize success Executive Summary Proposal • Solicit patient advisory groups and others through an “idea jam” to understand their view of the largest unmet needs (note: our fact based analysis already exists and illustrates several facts, but Voice of the Customer is invaluable to test) • Scout globally for the best inventions that align with the Avon Foundation goals and unmet needs Find the Best Inventions 1 • Evaluate the new inventions to determine the best commercialization path; provide recommendations • Where there is a need for a start-up, conduct start-up challenge to create start-ups that will drive translational research Translational Research 2 • 90% of start-ups fail in the Life Sciences industry; no accelerator exists to focus on increasing the success rate of therapeutics, vaccines, diagnostics, etc. • Launch an accelerator to ensure the highest probability of success for newly created start-ups out of the collaboration between AF, NCI and CAI Create and Execute an Accelerator 3

  11. Spin-out into start-ups; put in accelerator to increase probability of success Inventions from Avon RFA Accelerator identifies collaborations/venture partners Start-upcompany inventions from scouting Research inventions from Scouting We believe our approach will redefine current paradigm of venture philanthropy and drive the highest probability of successful results HIT the Bull’s Eye with Products on the Market

  12. SCOUTING PROPOSAL

  13. Recommendations Scouting will focus on FINDING the best inventions that align with the Avon Foundation’s goals and unmet needs 1 13

  14. Recommendations Scouting: Timeline and Budget 1 Agree on Unmet Needs Potential Patient Need Survey Patents Companies Universities Invention DBs Clinical Trials Short-List Inventions and Disposition Evaluate Inventions Prioritize, Select and Create Recommendations Check-Point on Scouting Final Evaluation Agree on Unmet Needs Check-Point on Short-List Recommend-ations 14

  15. Key Assumptions and Budget 1 • Areas of unmet need will be broad in nature; for example, the need to have not only early stage diagnostics but also more efforts in behavioral change • Scouting: identifies 1000 inventions • Evaluation: short-listing brings inventions down to approximately 200 inventions/start-ups; then there is an evaluation (note: it takes one full day to one week on average for a comprehensive evaluation of an invention after ; so this could be shortened based on the number of inventions that are short-listed to the evaluation stage by 3 weeks) • Budget with start-up initiative simultaneous: $175,000 • Budget without start-up initiative simultaneous: $250,000 15

  16. START-UP CHALLENGE PROPOSAL

  17. Scope for Start-up Challenge – Key changes are to include start-ups and non-University participants, but evaluate them separately in the challenge 2 • Initial Scope: • 15commercially viable start-ups/inventions as “topics” not out of NCI • 5 commercially viable inventions part of NIH and potentially DoDin the contest • Early LOI entry • # of Teams: At least 10 teams for each invention (200 teams total) • Phases: Letter of intent; business plan and start-up • End-Point: • Start-up: seed funding • Invention: prize of $2.5K and seed funding • Participants/Coaches: (no size limit) • Disciplines: Cross-functional teams from medical/scientific, business,legal and seasoned entrepreneurs • Cross-University: Teams may cross universities and may include faculty • Coaching/Networking: Inventors, entrepreneurs, Avon Foundation leaders, CAI as well as VCs, PEs, etc. • Prize: • Part 1 - Business Plan: $2.5K for each winner • Part 2 – Start-up Grant: $100,000 - $3 million of seed investment • Post-Prize: Collaborate with inventors; market invention; participate in the CAI accelerator Proprietary and Confidential to The Center for Advancing Innovation. Do not distribute outside The Center for Advancing Innovation

  18. Our proposal is to have start-ups and PIs with promising inventions have their inventions “worked on.” This approach elongates the timeline by 4-5 months 2 Proposed Approach • Create business plan and start-up templates/guidance/webinars/seminars • Provide mentoring/guidance to teams • Receive questions and filter to SMEs as necessary • Work with core team to finalize criteria and other key decisions Ongoing Proprietary and Confidential to The Center for Advancing Innovation. Do not distribute outside The Center for Advancing Innovation

  19. Start-up: Timeline - 16 Months 2 Planning University Students Leaving for the Summer or Graduating Fed. Invention Selection Marketing Early LOI Entries and Evaluation Start-up Evaluation Select Start-ups/PIs Marketing Receive/Evaluate LOIs Assist Teams in Forming University Students Going Into Exams University Students Coming Back Business Plan Evaluation Training for Teams Manage Teams Plan Awards Ceremony Training for Teams Manage Teams 19

  20. Start-up Challenge: Budget 2 • 20 inventions/start-ups in the challenge: • 10 start-ups • 5 PIs with inventions - could be Avon Foundation current grantees or others • 5 inventions from the NIH • Prize money is $2,500 for the business plan phase of the Challenge • Scouting time/effort outlined in the first proposal is reduced due to heavy recruiting for start-ups and inventions 20

  21. ACCELERATOR PROPOSAL

  22. Start-ups are key to translational research, but the failure rate(5.4%) is growing faster than the start-up entry rate (-3.6%) Key Points • In 2002, for every 20 new start-ups, there was 10 failure • In 2009, for every 13 start-ups there are 10 failures • The growth rate of failures (5.4%) is outpacing the growth rate of new start-ups entry rates (-3.6%) Source: CAI Analysis and Business Dynamics Statistics Data (United States Census)

  23. Across industries, Life Sciences is second in failures in the first four years… start-up Business Failure Rate By Industry in the First Four Years Source: Entrepreneur Weekly, Small Business Development Center, Bradley Univ, University of Tennessee Research, 2013 23

  24. …given where we are in our process, we need to provide the highest probability of success for our start-ups, since 90% fail in the Biotech Industry Our Process What Could Happen? Probability Fail 90% Biotech Industry Living Dead ~60 Gems 30% CAI Analysis 4100 Inventions Drawn from the Avon Foundation and NCI portfolio ~30 Start-ups License Discontinued 70% NIH data Success Exit or Product 1-5% Biotech Industry 24

  25. ACCELERATOR VERSUS INCUBATOR - PROPOSAL

  26. Incubators and accelerators help start-ups address their challenges; accelerators are paving new ground with a more formal approach LEGACY MODEL Incubator Start-up Entry Real Estate; State Funding and Ad Hoc Training as long as bills are paid Early Stage Start-up Entry Training Funding Mentor/Alumni Support Network Demo Day Graduate NEW DEVELOPMENT Accelerator

  27. The key differentiators for the accelerator model is that they assist in getting start-ups funded by institutionalizing business skills! Key Accelerator Differentiators • Demo Day- formal opportunity to pitch idea to pre-selected group of investors; investors are more likely to give favorable terms because they want to be invited to future demo day events • Prestige from graduating from a top accelerator • Strong network of former accelerator graduates and mentors • Accelerator has a financial incentive to ensure your success • Investors are vetted as well as start-ups to enter the accelerator While there is prestige, from both incubators and accelerators, angel investors and VCs view accelerators as a filtering mechanism where they can focus their investments

  28. Start-up training service attributes of an accelerator are more structured than incubators; however, current accelerators have draw backs

  29. We hope to close the gaps so that Life Sciences therapeutics and diagnostic start-ups have a higher probability of success

  30. Our model is supported by proven trade secret growth breakthrough models and frameworks

  31. Our core tenets are focused on leveraging current incubators, building capabilities/networks and create a business model for self-funding

  32. Start-up Solutions offered by the accelerator

  33. Launching an accelerator could help to offer solutions across life cycle of a start-up Pipeline Management $ $ $ Solution Launch $ New Market Identification Forecasting Customer Demand Sensing Solution Concept Creation Idea Selection $ $ $ $ $ $ $ Requirements White Papers PoC Patent start-up Phase II/III Product & Services Scale Target Solutions

  34. CAI’s offering can be delivered in different models 1 2 3 4 5 6 7 8 9 10 34

  35. We’ve created a robust operating model framework to manage the accelerator and provide start-up company solutions 35

  36. Value Proposition for Avon Foundation • Maximize the probability of start-up success, progressing promising breast cancer research using a systematic methodology and framework • Leverage the accelerator for other “gems” in the Avon Foundation grantee portfolio (up to 20 in each “class”) • Continue to pioneer new models of progressing promising research; no foundation has ever created an accelerator. This accelerator is different because: • Life Sciences orientation • More than three months • More than training, ongoing coaching • Only 2% equity taken in order to a self-sustaining model for Avon • Proven methodology and frameworks to accelerate clinical research

  37. Accelerator Key Assumptions and Budget for Year 1 • 20 in the first year’s class; 10-15 from start-up challenge • Any grants that Avon provides to start-ups is provided via milestones: 30%, 30% and 40% • Connect with incubators in the following regions: DC, NY, AL, PA, Mid-west, CA, UK, • Activities Include: • Total Budget: $470,000 (includes $40,000 in travel to meet with incubators/start-ups)

  38. SUMMARY: Finding the right inventions; create start-ups and training/coaching start-ups Recommendations Outcomes • Best Inventions: Best inventions are selected for further R&D and commercialization • Start-up Exit/Success: Highest probability of success for inventions and companies • ROI: Improved use of scarce funds. Tangible impact on Breast Cancer translational research and commercialization 38

  39. APPENDIX: ACCELERATOR AND INCUBATOR BACKGROUND

  40. Incubators and accelerators help start-ups address their challenges; accelerators are paving new ground with a more formal approach LEGACY MODEL Incubator Start-up Entry Real Estate; State Funding and Ad Hoc Training as long as bills are paid Early Stage Start-up Entry Training Funding Mentor/Alumni Support Network Demo Day Graduate NEW DEVELOPMENT Accelerator

  41. The structural attributes are significantly different between incubators and accelerators Accelerator Incubator *One exception in Arizona, called the Arizona Furnace, which uses state-wide inventions as the subject for incubation; they offer $20K for each invention that an entrepreneur wants to work on

  42. Start-up training service attributes of an accelerator are more structured than incubators

  43. Key differences in services offered by incubators and accelerators The top 5 Accelerators have had a total of ~$2 billion dollars in funding go through the accelerators and have mentored more than 900 start-ups

  44. Great accelerators create an enormous impact…while the “classes” of start-ups in accelerators is very small (10-152), the exit rate is high for most… SOURCE: Business Accelerators The Evolution of a Rapidly Growing Industry May, 2013

  45. …however, there are no accelerators focused on therapeutics, diagnostics, vaccines or prognostics and a limited number for devices and Health IT Top 5 Accelerators Health-related • Y Combinator: Founded in 2005, has mentored and invested in over 500 companies with over $ 997 million of total funding going through the accelerator. Focus: web/mobile applications. Notable graduates include Dropbox and Airbnb • Tech Stars: Founded in 2007, has expanded to eight cities, 234 graduating companies; following graduation, each company raises on averages $1.5 million in outside capital. Focus: clean-tech, cloud, data/analysis, eCommerce, software, web/mobile applications • DreamIt Ventures:Founded in 2008, locations in 2 U.S. cities and Israel. Focus: cloud, data/analysis, life sciences Health IT, medical devices, software • AngelPad:Founded in 2010 by ex-Googlers. Focus: B2B, eCommerce, advertising, big data, social media • Launchpad LA: Founded in 2009, has the highest median funding rate of any accelerator in the world. Focus: cloud, mobile, software, web-based • RockHealth:Founded 2010, has mentored 50 companies. Focus: the next generation of technology transforming healthcare; only medical devices (hardware and sensors) • DreamIt Ventures-Heatlh: will begin in spring 2014 focused on early-stage health IT companies; anything that can be developed in 3 months • Lift1428-Miami: Spring 2014 with a focus on healthcare related technologies that “impact community and patient health” (really a consulting firm) Since 2005 til the present, the top 5 Accelerators have had a total of ~$2 billion dollars in funding go through the accelerators and have mentored more than 900 start-ups* *Y Combinator represents more than 50% of the start-ups and funding

  46. The key differentiators for the accelerator model is that they assist in getting start-ups funded by institutionalizing business skills! Key Accelerator Differentiators • Demo Day- formal opportunity to pitch idea to pre-selected group of investors; investors are more likely to give favorable terms because they want to be invited to future demo day events • Prestige from graduating from a top accelerator • Strong network of former accelerator graduates and mentors • Accelerator has a financial incentive to ensure your success • Investors are vetted as well as start-ups to enter the accelerator While there is prestige, from both incubators and accelerators, angel investors and VCs view accelerators as a filtering mechanism where they can focus their investments

  47. CAI’S ACCELERATOR PROPOSED DESIGN

  48. Significant gaps exist with the current accelerator models

  49. We propose to create an accelerator that has significant differences than current ones that exist

  50. We propose to create an accelerator that has significant differences than current ones that exist

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