Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Report
Prepared by Invantage Group June 2014
Pre-Seed Fund Capitalization Program 2014
Table of Contents Table of Contents ...... 2 Introduction ...... 3 Ohio Third Frontier ...... 3 Vision & Objectives ...... 3 Pre-Seed Fund Capitalization Program ...... 3 Program Purpose ...... 3 Fund Expectations ...... 3 External Evaluators ...... 4 Proposal Evaluation Scope and Criteria ...... 4 Evaluation Process ...... 5 Overview of General Findings ...... 6 Proposal Evaluation Summary ...... 6 Primary Fund Focus Area ...... 6 Recommended Funds ...... 7 Evaluation Summaries for Recommended Fund Proposals ...... 9 Impact Angel Fund, LLC ...... 10 East Central Ohio Tech Angel Fund II, LLC ...... 12 Development Projects, Inc...... 14 Cincinnati Children's Hospital Medical Center ...... 16 Cleveland Clinic Foundation ...... 18 Regional Growth Partnership ...... 20 North Coast Angel Fund III, LLC ...... 22 NCT Ventures Fund II, L.P...... 24 Bizdom Fund ...... 26 Lorain County Community College Foundation...... 28 Non-Recommended Fund Proposals ...... 30 Withdrawn Fund Proposals ...... 31
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Introduction
The Ohio Third Frontier (OTF) program was established to grow regional and statewide clusters of excellence, in targeted areas of technology, which sustains Ohio’s global competitive advantage in company and product formation, job creation and economic growth. To increase the availability of early-stage investment capital, the Ohio Third Frontier has created the Pre-Seed Fund Capitalization program. Over the past several years, the program has successfully expanded the number of professionally managed, pre-seed investment funds to support promising start-up technology companies.
Ohio Third Frontier Vision & Objectives The Ohio Third Frontier program was established to grow regional and statewide clusters of excellence in targeted areas of technology. All OTF Programs share a common goal — to promote technology-based economic development within Ohio by funding activities which move technology from idea to market. With this goal as a centerpiece, program development and spending are guided by the following targeted outcomes: Improve the capacity of Ohio’s entrepreneurial ecosystem to deliver services and attract capital; Increase the technical capabilities and business competencies of Ohio value chains; and Cultivate a highly collaborative and innovative environment.
Pre-Seed Fund Capitalization Program Program Purpose The Ohio Third Frontier 2014 Pre-Seed Fund Capitalization Program (PFCP) is a part of an on-going initiative to provide support to Ohio entrepreneurs. To that end, PFCP was created to increase the availability of risk capital at all stages of company development. The goals of the program are to: Increase the number of professionally managed Pre-Seed Funds investing throughout Ohio; Increase the amount of early stage capital being invested in Ohio technology-based companies in the Imagining, Incubating, or Demonstrating phases of commercialization; Create a risk capital climate which supports the development, retention, and attraction of investable technology companies in Ohio; and Build a pipeline of technology company deal flow that increasingly attracts the resources of venture capital firms both within and outside of Ohio.
Fund Expectations The Third Frontier will award funding in the form of a non-recourse loan. Award recipients are required to invest one hundred percent of Ohio Third Frontier funds and matching private capital in Ohio technology-based companies that are primarily in the Imagining, Incubating, or Demonstrating phases of commercialization. The Lead Applicant’s plan must meet the following expectations and requirements: Seek funding in the range of $500,000 -$3 million; Meet or exceed a 1:1 cash Cost Share commitment ratio; Invest the capital within a maximum of three years;
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May use up to 10% of funds awarded for Due Diligence and up to 10% of funds awarded for Enhanced Management Services, but these expenses must be matched on a 1:1 basis with cost share funds; and Invest in Ohio technology-based companies that are primarily in the Imagining, Incubating, or Demonstrating phases of commercialization.
External Evaluators In order to ensure a fair and thorough evaluation process, the Ohio Development Services Agency (“Development”) has engaged Invantage Group to provide expert, independent evaluation of the Pre-Seed Fund proposals for this program. Invantage Group is an experienced team of business strategy and finance professionals with significant experience in early-stage venture development and technology commercialization.
By understanding market development, critical metrics, technical requirements, and customer-centric strategies, Invantage Group assists clients in optimizing market entry and growth opportunities. A fundamental part of our business plan development and funding experience has focused on market entry and commercialization. The review team for this project has extensive experience with technology-based companies at all phases of commercialization and venture development.
Mr. Ted Bernard Mr. Bernard has extensive experience in analyzing markets and consumer behavior in order to develop market entry and growth strategies, including a deep understanding of venture development and how public policy impacts private capital formation.
Mr. Bill Tanner Mr. Tanner brings broad based experience in business strategy, corporate finance, venture capital and business valuation, having served as a CFO and advisor to a range of entrepreneurs and both public and private companies.
Mr. Ken Leachman Mr. Leachman provides accounting and financial management services to organizations in a variety of industries, particularly assisting with commercialization efforts for early stage companies.
Proposal Evaluation Scope and Criteria The purpose, goals, and evaluation criteria contained in the program RFP were considered in determining the quality of proposals for funding. In addition to the primary OTF goal to promote technology-based economic development within Ohio, the most important evaluation criteria include the following: Alignment with the purpose, goals, objectives, eligibility, funding, and cost share requirements as detailed in Sections 2 and 3 of the RFP. Demonstrated evidence to address the evaluation criteria defined in Section 4 of the RFP. o Degree to which the Lead Applicant is able to define a substantial source of targeted deal flow, unmet need, or need for additional capital funding; o Experience of the Lead Applicant and Collaborators in the successful management of pre-seed funds of comparable size, scope, and complexity; o Prior successful pre-seed fund experience as evidenced by the magnitude of reported metrics; and o Ability to integrate activities with other state-funded programs and regional ESPs.
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The amount of funds budgeted by Development for this program was not a proposal evaluation criterion and did not impact the review team’s evaluation.
Evaluation Process Invantage Group developed a proprietary, multi-stage evaluation process to provide a thorough analysis of the initial RFP responses and to gain additional insights from follow-up direct interviews with fund management. The following outlines the evaluation development and implementation process. Discussed primary program goals and evaluation criteria objectives with stakeholders at Development to ensure a thorough understanding and alignment. Developed an evaluation paradigm in accordance with the RFP criteria and program goals. o Created evaluation criteria with scoring ranges and point weighting. In recognition that various components have differential impacts, the evaluation process does not utilize a fixed set of equal weights, rather varying weights are assigned based on relative importance. o Defined six primary evaluation categories based on the most significant program criteria in the RFP. . Opportunity Assess the Lead Applicant’s focus, plans, and expectations based on the quality and specificity of information provided. This section focused on the ability to define an ideal opportunity within the identified Third Frontier targets, and then identify and generate relevant high quality deal flow to achieve the expected outcomes. . Operations Evaluate the Lead Applicant’s relevant organizational design, experience, relevance, and capabilities to manage a successful pre-seed fund. This section focused on the ability to secure available resources and to define an investment process which includes appropriate due diligence reviews and enhanced management services. . Relevant Success and Track Record Gauge the Lead Applicant’s relevant experience and success with similar technology-oriented pre-seed investment funds. This section included a review of management’s discussion and analysis of previous fund experience, explanations of material successes and failures, as well as a detailed assessment of all prior pre-seed fund investments. . Projected Economic Impact Assess the realism and magnitude of the projected economic impact of the proposed fund based on prior relevant experience and the ability to leverage all available resources. . Experience and Qualifications Evaluate the relevant experience and qualifications of the individuals or entities primarily responsible for the management of the proposed pre-seed fund. . Budget Review and weigh the Lead Applicant’s a detailed budget, forecast, and related commentary. This section ensured that the proposed cost share funding sources met program requirements, available resources were reasonable to support the described plans, and the underlying assumptions provided reasonable support for the projected activities. Assigned two independent evaluators per proposal. o Conducted a thorough conflict of interest review to avoid potential conflicts.
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Reviewed proposals using a two-stage process. o Stage One reviews . Conducted a thorough reading of assigned proposals by each evaluator. . Reviewed each proposal using the pre-defined evaluation matrix. . Independent assessment of preliminary findings and supporting commentary. . Preliminary discussion by the evaluator pair to reach consensus. . Evaluation team discussion to ensure consistent application of criteria. . Recommended to Development which proposals were deemed to merit Stage-2review. o Stage Two reviews . Identified gaps in information and developed questions to applicants addressing these areas. . The applicants provided direct responses to the questions, but no other supplemental information was permitted by Development. . Direct interviews with selected applicants to review their proposals and additional responses. . Detailed review of both the initial proposal and additional information provided. . Evaluator reviews to reach consensus assessments, including supporting information. . Finalized funding recommendations to Development. o Prepared materials for the Third Frontier Commission (“TFC”).
Overview of General Findings Proposal Evaluation Summary The review teams evaluated and scored twelve (12) Pre-Seed Fund proposals. After completing the Summary of Pre-Seed Fund Proposal Evaluations Stage-1 evaluation process and sharing recommendations with Development, eleven (11) Proposals received 12 proposals were accepted into the competitive range for further review.† Based on the deeper Recommended for Stage 2 11† evaluations conducted during the Stage-2 review process, the review team has offered a Recommended for funding 10 recommendation on ten (10) proposals which have sufficiently met the program criteria for Recommended funding amount $26 MM consideration of funding. Cumulatively, the ten †One (1) proposal was withdrawn by the applicant. recommended funds are requesting $26 MM in Ohio Third Frontier funding.
Primary Fund Focus Area The Pre-Seed Fund Capitalization Program is specifically designed to increase the availability of risk capital at the earliest stages of company development. While many funds mention a willingness to invest across the spectrum of early-stage commercialization, a review of the ideal opportunity description, pipeline opportunities, and past investment experience provides a clearer view of the primary focus. Not surprisingly, given the risks involved in pre-seed investing, more funds show a focus on the latter phases of early-stage commercialization. A few of the
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funds did mention other forms of available early- stage capital, such as ESP “imagining” grants, which aids potential quality deal flow to pre-seed funds.
Recommended Funds Proposals were assessed using the information provided by the applicants and evaluated against standards based on the degree to which they provided credible support to meet the criteria and goals set forth in the program RFP. In addition to the quantitative metrics already described, the evaluators also reviewed many qualitative aspects. The table below provides an “at-a-glance” summary, though important definition distinctions should be noted. While the evaluation process is extensive, some applicants are simply better at expressing fundamental details. The best proposals included clear and compelling information (“green”) to support their propositions and plans. Other proposals contained sound arguments, but were not as strong in providing supporting evidence (“yellow”).
Overall recommendations are based on a preponderance of supporting information and the potential for positive impacts on the entrepreneurial ecosystem. Two fund proposals, Impact Angel Fund and Regional Growth Partnership, demonstrated interesting opportunities and contained a variety of solid components, but also contained some elements which may take longer to develop or require stronger oversight (as noted in the fund evaluation summaries). The evaluation team felt that in each case, the overall strength and potential benefits of these funds outweighed any lesser concerns, therefore they ultimately merited recommendations.
Evaluation Categories and Relative Weighting Sorted by Proposal # within each section 20% 15% 20% 15% 25% 5% 100%
Funds Fund's Primary Fund Relevant Economic Experience & LOI # Lead Applicant Region Opportunity Operations Budget Total Req'd Focus Area History Track Record Impact Qualifications
Recommended Funds 14-100 Impact Angel Fund, LLC $1,000,000 Northeast Incubating/Demonstrating New Fund 71% 86% 67% 72% 85% 83% 77% 14-101 East Central Ohio Tech Angel Fund II, LLC $1,375,000 Southeast Incubating/Demonstrating Previous Fund 84% 86% 86% 81% 86% 82% 84% 14-102 Development Projects, Inc. $3,000,000 West Central Incubating/Demonstrating Previous Fund 80% 86% 76% 76% 84% 87% 81% 14-104 Cincinnati Children's Hospital Medical Center $3,000,000 Southwest Imagining/Incubating Previous Fund 88% 87% 82% 81% 80% 93% 84% 14-105 Cleveland Clinic Foundation $3,000,000 Northeast Imagining/Incubating Previous Fund 98% 99% 99% 100% 100% 100% 99% 14-106 Regional Growth Partnership $3,000,000 Northwest Incubating/Demonstrating Previous Fund 80% 77% 68% 65% 83% 81% 75% 14-110 North Coast Angel Fund III $3,000,000 Northeast Incubating/Demonstrating Previous Fund 84% 89% 90% 98% 94% 94% 91% 14-114 NCT Ventures Fund II, L.P. $3,000,000 Central Imagining/Incubating Previous Fund 80% 88% 80% 78% 94% 82% 84% 14-117 Bizdom Fund $2,812,500 Northeast Incubating/Demonstrating New Fund 94% 88% 72% 89% 90% 87% 87% 14-118 Lorain County Community College Foundation $3,000,000 Northeast Imagining/Incubating Previous Fund 96% 85% 80% 87% 97% 96% 90%
Withdrawn from Consideration 14-103 Queen City Angels $1,000,000 Southwest Incubating/Demonstrating Previous Fund withdrawn withdrawn withdrawn withdrawn withdrawn withdrawn withdrawn
Non-recommended Funds 14-107 OneCommunity $1,500,000 Northeast Imagining/Incubating New Fund 30% 46% 0% 25% 11% 65% 22%
Evaluation Definitions 80% Strong supporting evidence 60% Moderate supporting evidence 0% Weak supporting evidence
Please refer to the following sections for more detailed fund summaries and specific evaluation information.
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Invantage Group thanks the Ohio Development Services Agency and the Ohio Third Frontier Commission for the opportunity to review these proposals and to provide our recommendations. It is hoped that the evaluation process provides helpful insights and directions to assist Development and the Pre-Seed program in the successful development of a world-class entrepreneurial ecosystem.
This analysis and report was prepared by: Invantage Group New Albany, Ohio 43054 United States of America Ted Bernard, Managing Principal
For more information or to obtain additional copies of this report, contact Invantage Group at [email protected].
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Pre-Seed Fund Capitalization Program 2014
Evaluation Summaries for Recommended Fund Proposals
(In order of Proposal #)
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Fund’s Primary Focus Area Summary
Proposal #: 14-100
OTF Fund History: New Proposal Evaluation Summary Funds requested: $1,000,000 Cost share proposed: $1,000,000 Impact Angel Fund, LLC Impact Angel Fund Cost share committed:* $875,000 *Commitment data as of 5/2/2014 Fund Overview improving. There have been increased ESP efforts to grow qualified deal flow, The Impact Angel Fund (IAF) is a newly Evaluation though the target area is on the outer formed pre-seed capital fund targeting edges of the two regional ESPs. underserved early-stage technology-based Category Status companies in the mid- and east-central One of the most promising deal flow Ohio region. IAF is a spin-out from the sources could come from collaborative Fund Opportunity East Central Ohio Tech Angel Fund I efforts of the SDB. Over the past three (ECOTAF) group and looks to extend the years, they have identified qualified early- prior experience of ECOTAF members as stage technology deal flow of around 100 Fund Operations part of the IAF start-up team. prospects per year within the target area.
Additionally, in the past two years, two Relevant Track Record Fund Opportunity microfinance programs have begun IAF identifies a clearly defined “targeted operating in the targeted area (Innovation investment area” in eastern Ohio. The Fund and Canton Entrepreneur Launch) Projected Economic Impact majority of the nine-county targeted area, and IAF could fill a gap by providing with the exception of Stark County, is follow-on funding to these very early located in the Appalachian Region and stage funding sources. Experience & Qualifications classified as either “transitional” or economically “at risk.” Significant weight The proposal refers to a few sources as is placed on the ECOTAF experience, evidence of quality opportunities, though Fund Budget especially a sub-group known as the Tusc only one existing pipeline prospect Angels. One member of this group has remains viable. References to deal flow taken a leadership role in forming the IAF sources and a belief that microfinance and will serve as Fund Manager. groups are identifying deal flow not being Northeast & Southeast Region accessed by other sources is not The Fund is working to develop a regional unreasonable, but no strong quantification network of educational and economic or qualification of deal flow is available. development partners – including the Stark Development Board (SDB), regional SBDCs, IAF did provide some additional and Tuscarawas Port Authority. The region information about deal flow history over has developed solid collaborator networks the past couple of years. While the to identify and develop early stage deal quality of deal flow is not immediately flow, which has mostly focused on ascertainable, the data show some advanced materials, software applications, reasonable potential to find the goal of and emerging shale gas technologies. five deals over the next three years.
Deal flow within the target area has been The evidence of emerging quality deal slow to develop, but appears to be flow and the argument for likely future
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Proposal Evaluation Summary (Continued)
Impact Angel Fund, LLC Impact Angel Fund I deal flow opportunities are still evolving a combination of local members and ECOTAF and IAF can be valuable starting and the goal of investing in a relatively periodically engaging specialized points which align with regional goals. underserved region is compelling, though assistance. A lead IAF member works with the extent of the opportunity is difficult to the appropriate ESP to develop a scope of Experience & Qualifications gauge at this point. work for any required assistance and also IAF will be led by a fund manager with aids in the identification and selection of early-stage, technology-based investment the appropriate resource. In addition, IAF Fund Operations experience. The Fund’s founding members will utilize JumpStart’s salesforce.com IAF plans to utilize investment processes and leadership team have relevant business tools for tracking and reporting purposes. from ECOTAF and Ohio Tech Angels Fund and entrepreneurial experience.
(OTAF). Fund leaders recognize a need to Relevant Track Record customize the commercialization model to a Budget rural setting. ECOTAF partnered with The IAF fund manager has relevant IAF is a committed capital angel fund TechGROWTH to create the Rural experience with angel funds and through which has secured 28 investors for a total Acceleration Model™ as a commercialization his involvement with ECOTAF. Additionally, of $875k in cash cost share commitment. development process better suited to the an Advisory Board comprised of the fund Fund leadership is working to secure region. TechGROWTH and JumpStart have advisor, and representatives from both additional investors, but no additional been using this model for the past three JumpStart and TechGROWTH (ESPs for the timing information was available. This years and will manage processes for IAF in overlapping area) will advise the fund proposal seeks to create a $2MM fund their respective counties. manager. The proposal makes an effort to with 15% budgeted for management fees, provide several examples, but review of the fund expenses, due diligence, and The model places strong emphasis on track record was hampered by limitations enhanced management services efforts. recruitment of an investor “champion,” on data access and applicability of the early engagement of industry or subject examples provided to IAF’s specific model. matter experts to provide consulting Recommendation services and positioning strategies to ECOTAF is the most directly relevant IAF fits with the program intent by prepare prospects for pre-seed fund experience for both the fund leadership focusing on pre-seed technology investment. The model has shown some and model. While it has taken over three companies in an underserved region. success, with the strongest example from years for the Fund to become fully There is a belief that the regional culture the ECOTAF portfolio being the successful invested, all six investments are active and makes it hard to generate activity and high growth and exit of Arkovi. several of the older investments have quality resources in the absence of local achieved co- and follow-on investment. connections. Gaining commitment from The primary components of the Two portfolio companies have been area accredited investors is a strong signal investment process are: 1) monthly acquired, which has returned 80% of fund of resources and intent. investment screening meetings, 2) a members’ investment unit cost. presentation to full membership before IAF previously submitted a proposal for due diligence, 3) investment due Projected Economic Impact the FY12 pre-seed fund program. While diligence, 4) due diligence team the region could benefit from greater IAF expects to invest $1.65MM in five presentation, and 5) portfolio monitoring. direct investment, that proposal needed companies. Projected outcomes for co- improvement in fund operations, deal /follow-on investment ($25 MM), jobs The due diligence process will require at flow sources, and regional ESP (60), and revenue ($17 MM) are least three IAF members to participate collaboration. IAF management has aggressive best case scenarios, which will and will utilize materials from the well worked to address these concerns, require a few strong successes, but are documented OTAF process manual. IAF showing improved regional support loosely based on the actual outcomes members will work closely with ESP networks, greater deal flow, and scalable generated by the ECOTAF portfolio. The resources to ensure early involvement operations. While still a relatively area does not have a well-established throughout the entire process. immature regional entrepreneurial entrepreneurial or risk-capital ecosystem, ecosystem, the potential for furthering so it is difficult to estimate how quickly it Both the due diligence and enhanced this underserved region makes IAF an will be able to develop or expand, though management services will be managed by opportunity worthy of recommendation.
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Fund’s Primary Focus Area Summary
Proposal #: 14-101
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $1,375,000 Cost share proposed: $1,375,000 East Central Ohio Tech Angel Fund II, LLC 1 East Central Ohio Tech Angel Fund II Cost share committed:* $875,000 *Commitment data as of 5/2/2014 Fund Overview The Fund actively “mines” for deal flow opportunities through TechGROWTH’s The East Central Ohio Tech Angel Fund II Evaluation close collaboration with OU’s Technology (ECOTAF-II) is a follow-on fund to ECOTAF- Transfer Office, the Edison Biotechnology I and will partner with the southeast ESP Institute, the Center for Entrepreneurship Category Status TechGROWTH as its primary region-wide at OU, and the cross-college University deal flow partner. ECOTAF-II’s investment Business Development Committee. Fund Opportunity focus is on early-stage companies, Additionally, OU-affiliated researchers primarily at the Imagining, Incubating and, have been able to spin-in research from to a lesser extent, Early Demonstrating other universities through licensing Fund Operations phases. agreements to new companies formed at
OU with TechGROWTH’s assistance. Relevant Track Record Fund Opportunity Targeted opportunities will be primarily in a The Fund intends to make six investments six county region within TechGROWTH’s 20 in new portfolio companies. ECOTAF-II Projected Economic Impact county area in advanced materials related will typically use convertible debt to several areas of focus. While the fund instruments for investment in the $250k notes an interest in Imagining through to $350k range, reserving an additional Experience & Qualifications early-Demonstrating stage opportunities, $50k to $100k for runway extension as the ideal opportunity is a multi-application needed. ECOTAF-II aims to be an active, platform technology beyond the engaged investor with board Fund Budget imagination phased of development. representation and enhanced services to monitor resource use, ensure milestone Several pipeline opportunities already achievement, and prepare portfolio exist and the majority of deal flow is companies for the next funding round. Southeast Region generated from Ohio University, which has five colleges that produce research Fund Operations and innovations from faculty and students The ECOTAF-II investment methodology with near-term commercial potential and follows a clearly defined 5-stage process TechGROWTH which serves as the hub for which goes from opportunity regional deal flow generators such as identification through qualifications, Muskingum County Business incubator investment decisions, tracking, and and OSU South Centers. Qualified deal portfolio company oversight. The flow in the southeast region is not investment process requires an ECOTAF currently well served by other sources of member to take a lead role and at least early-stage capital. Prior regional funds three other members to be part of the TGF-I & II, as well as ECOTAF-I, are fully due diligence team in order for an invested. opportunity to progress.
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Proposal Evaluation Summary (Continued)
East Central Ohio Tech Angel Fund East Central Ohio Tech Angel Fund II
ECOTAF-II will contract with independent Projected Economic Impact lengthy experience with early stage service providers and subject matter companies and early stage risk capital. On the basis of the track record experts to assist with both due diligence Mr. Glazer's role with TechGROWTH has demonstrated by ECOTAF-I, ECOTAF-II and enhanced management services. Due been positive and it has improved its expects to make investments in six new Diligence teams will be led by a senior ability to serve and grow the companies, create 100-150 new jobs, and group member with experience and skills entrepreneurial ecosystem of the achieve in excess of a 20:1 leverage ratio in effective diligence, and aided by others Southeast region. They have served over for co- and follow-on investments. These with specific prospect opportunity 475 “clients” and achieved a 12:1 leverage expectations are reasonable based on industry experience, when applicable. ratio of external dollars to state dollars. past fund performance.
Each ECOTAF-II portfolio company will Mr. Butterworth is an experienced fund In addition to the purely economic impact, have a fund board member who will work manager with 17 years of early stage successful outcomes breed opportunities with the Fund Manager and TechGROWTH investing. The Fund leaders and external to leverage other resources. The to develop an appropriate scope of work advisors are all reasonably experienced partnership of ECOTAF-II and for any EMS assistance required and will with technology commercialization and TechGROWTH provides Local assist in locating and selecting the have extensive industry contacts. Development Districts with appropriate resources. implementation strategies for their goals
of increased entrepreneurship and job Budget ECOTAF-II plans to use up to 15% of the creation through start up enterprises. This proposal requests $1.375MM for a total funds for due diligence, enhanced This partnership supplements the total budget of $2.750MM. Current cost management services, and management attraction, expansion and retention goals share commitments total $875k (though fees over the life of the fund. of traditional economic development with one commitment letter was missing) and a
the missing link to entrepreneurism. plan for securing the remaining cost share Relevant Track Record ECOTAF-II also fills an identified gap in the goal was discussed.1 If unable to increase ECOTAF-I is fully invested with $2.2MM funding continuum between their cash cost share ECOTAF-II indicated committed in six companies. Two of the TechGROWTH pre-seed funds and larger the Fund will likely need to eliminate one six portfolio companies have achieved angel or venture capital funds. investment. Of the total planned budget, successful exits through acquisition. The $2.3MM will be used for investment, with remaining four portfolio companies are The area does not have a well-established the remaining 15% of funds for, due performing well and valued at cost or entrepreneurial or risk-capital ecosystem, diligence, enhanced management services, above. The portfolio companies have so it's hard to know how quickly it will be and management fees. achieved co-investments of $8.6MM and able to develop or expand, but ECOTAF follow-on investments of $16.5MM, as and similar efforts can be valuable starting Recommendation well as generating aggregate revenue of points. Federal entities, such as The The ECOTAF-II fund fits with the intent of $16.7MM. Appalachian Regional Commission and the the program by focusing on companies in Economic Development Administration the early stage commercialization phases One of the portfolio companies is in due have previously provided funding to of the targeted technologies in the diligence with a venture fund to lead a development efforts in the region and southeast region. ECOTAF-II has $10MM Series A round. Of the two exits, would most likely continue to fund or submitted a reasonably well-documented one provided a 3.3x return and the other a even grow funding with additional early proposal, acknowledged some valuable 4.6x return. Sixty jobs have been created stage capital funding efforts. lessons learned in its operations in order at an average salary of $40k, which is 1.6x to improve fund activity, and has satisfied the average salary in the region. Experience & Qualifications the requirements of the Ohio Third
The Fund's two lead players, Mark Frontier RFP to qualify as recommended
Butterworth and John Glazer, have for funding.
1 ECOTAF-II submitted a revised cost share commitment budget form of $900k. The revised form was received after the deadline and did not include any updated commitment letters. Nonetheless, the change is minor and does not materially impact the analysis, so it is not reflected in this evaluation report.
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Fund’s Primary Focus Area Summary
Proposal #: 14-102
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $5,815,000 Development Projects, Inc. Accelerant Fund I Cost share committed:* $5,815,000 *Commitment data as of 5/2/2014 Fund Overview Air Force and Department of Defense activities in the region. Although Development Projects, Inc. (DPI) is a non- Evaluation Accelerant continues to try to work with profit economic development and support any new start-ups from these organization formed in 1995 to help high- sources, they have come to understand Category Status potential technology-based companies the constraints and do not expect a large located in region. DPI is an affiliate of the amount of qualified deal flow or future Fund Opportunity Dayton Development Coalition, Inc., which investments from these sources. has served as the manager of the Dayton
Region Signature Fund (DRSF) and two Instead, management has developed a Fund Operations prior traditional venture funds, Miami multi-step process, which includes Valley Venture Fund L.P. (MVVF) in 1997 building broader community support and Miami Valley Venture Fund II, L.P Relevant Track Record through improved branding and public (MVVF II) in 2001. relations, re-educating the community
about the ESP’s role, providing greater The Accelerant Fund I (AFI) can be seen as Projected Economic Impact transparency and visibility throughout the a successor to DRSF, which was created in region, creating significant regional 2007 by the initial funding of the regional involvement in events, and becoming the Entrepreneurial Signature Program (see Experience & Qualifications expert commercialization evaluation the section Relevant Track Record for a source for area research entities. discussion of DRSF’s performance history).
Fund Budget These efforts over the past year have AFI seeks to aid the regional economic helped to create a stronger network and a development by providing pre-seed significant increase in qualified deal flow. funding of technology innovation to It appears that most of the newly West Central Region capitalize on key intellectual assets of the identified deal flow was unknown and not area. No other local entities currently being served elsewhere. exist to lead a syndicate of investors and support the development of new For example, in the second half of 2013 technology start-ups. over 120 qualified deals were identified
and 15 opportunities are currently in due Fund Opportunity diligence. With increased deal flow, fund The organization has taken a new, management has seen a definitive shift in proactive approach to addressing previous the type of opportunities arising within concerns about improving the the region. In the past, many collaborator network and identifying opportunities were in Advanced improved deal flow opportunities. Past Manufacturing, Materials, and Sensors. strategies have relied on an assumed Recently, more opportunities are found in abundance of opportunities from the vast the IT and Bioscience industry sectors.
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Proposal Evaluation Summary (Continued)
Development Projects, Inc. Accelerant Fund I
Fund Operations Aggregate investment was $11.1MM, with fund can identify an adequate volume of the portfolio and returns to-date valued at high quality deal flow. Significant changes The proposal outlines a fairly rigorous $13MM. in investment structure and portfolio investment identification and qualification company support are all good steps, but process. Once an opportunity is identified The DRSF portfolio has attracted $22MM the potential efficacy is difficult to assess as qualified, it is assigned to an analyst or in co-/follow-on investment, which since they are all untested in this region. EIR for initial due diligence review. The indicates a very low leverage ratio. Six best opportunities get presented to the companies have successfully exited the full team, which requires a unanimous Experience & Qualifications fund returning $2.9MM in cash, though vote to be labeled a “prime qualified” The AFI management team is all new. Joel mostly from portfolio companies repaying opportunity and move into deep due Ivers, the general manager, has significant notes and interest. AFI has revised the diligence. To expand opportunities, AFI leadership experience in several early- terms of the DRSF Debt Agreement to be will collaborate with ESP funded stage companies and has either led or more favorable to follow-on investors and “Imagining Grants” to seek assistance for been a part of pre-seed funding. increase potential returns from equity companies addressing crucial needs. After conversion. due diligence, opportunities are presented The other members of the fund leadership to a 7-member independent board which team are experienced with investing in represents the investor groups and makes Projected Economic Impact early-stage companies and bring relevant final investment decisions. AFI plans to invest in 22 companies over industry experience within the segment. the three year investment horizon. The Due diligence and Enhanced Management typical AFI investment size will range from Budget Services will be primarily provided by AFI $100,000 to $500,000, via 2 to 4 tranches The single greatest indicator of renewed Investment Managers, especially EIRs, but based on risk management milestones. community support for the recent outside resources will be utilized when changes in management and operations needed for specific skills. To measure the DRSF has a very limited history of can be seen by a strong $5.8MM in impact of the Enhanced Management attracting additional investment capital or current cost share commitments – over 5x Services provided, semiannual reporting generating strong returns, though that greater than their 2012 proposal. The on portfolio company status and may have been primarily influenced by funding comes from a variety of sources, valuations will be submitted to the prior management practices and poor deal including institutions, corporations, and Limited Partners (LPs). structure. AFI will require co-investment individuals, as well as representing both as an indication of opportunity value and public and private sectors. No State funds The fund does not plan to use any state investment risk sharing. Accelerant plans will be used for due diligence, enhanced funds for either due diligence or enhanced to attract co-investors, sidecar investors, management services, or management management services. AFI plans to raise and follow-on investment through more fees, which will be contributed from additional funds from the LPs to cover aggressive relationship development with additional funding commitments. these expenses, though it is unclear at this other investment entities and using point how much will be raised. investment structures which are more attractive to follow-on investment. Recommendation The new fund management team is well The quality of the new management qualified and deeply committed, but may DRSF has seen a few early portfolio team, smart changes in investment be stretched thin in order to handle all companies achieve solid success in structure, significant improvements in the current and planned activities. revenue and employment growth, regional collaborator network, and strong although overall returns to the Fund financial support from the community Relevant Track Record have been limited. provide a solid case for overcoming past problems. While some open questions The predecessor fund (DRSF) has made The fund forecasts a reasonable 37x remain, the proposed Fund merits investments in 34 companies through follow-on investment leverage and recommendation. tranches spread over time. Four $172MM total A-metrics (65% follow-on companies have been written off, and investment & 35% revenue). The twenty-four active companies remain. projected A-metrics are reasonable if the
Page 15 of 31 June 11, 2014
Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-104
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 Cincinnati Children's Hospital Medical Center Tomorrow Fund III Cost share committed:* $3,000,000 *Commitment data as of 5/2/2014 Fund Overview involved in laboratory services, clinical trials, and research. Despite the typical Cincinnati Children’s Hospital Medical Evaluation commercialization challenges of life Center (CCHMC) is seeking to develop an science initiatives, CCHMC emphasizes additional pre-seed fund to focus on early they do not wish to shy away from this Category Status stage biomedical company opportunities focus. Ongoing discussions regarding based on Cincinnati Children’s discoveries investment and technology development Fund Opportunity with high commercial potential. The includes representatives from the life Tomorrow Fund III (Fund-III) is an extension science investment community such as of the original Funds, which similarly CincyTech, Triathlon Medical Ventures, Fund Operations focused on early stage opportunities. Charter Life Sciences, Draper Triangle,
Fort Washington Capital Partners, and CCHMC established the original Tomorrow Relevant Track Record Blue Chip Venture Company. Fund I in 2005, which gained TFC funding in 2007, and Tomorrow Fund II which was In FY 2013, CCHMC expended over funded in 2011. Both Funds focus on Projected Economic Impact $337MM on research, a 7% increase over early stage commercial opportunities the previous fiscal year. Since Fund-I was prior to Series A investments. created in 2005, CCHMC’s Center for Experience & Qualifications Technology Commercialization (“CTC”) has Fund Opportunity become more proactive in working with Fund-III will focus on Ohio‐based clinicians and has seen a nearly 10x Fund Budget companies created around CCHMC increase in submission of invention discovered and owned biomedical disclosures. Fund-II has $2.8MM in intellectual property. Fund-III expects to existing funds, but CCHMC has built a invest from $100k - $500k in eight new considerable pipeline of invention Southwest Region companies and expects to generate disclosures in the therapeutics, $111MM in A-metrics and create/retain diagnostics, medical devices and medical 241 jobs with an average salary of $109k. IT/software categories. Fund management expects existing funds to be Investments can be in any of the early invested within 12 months. The stage phases, though past Funds have development plan is to invest in a select focused on imagining and incubating number of commercially viable phase opportunities. The Fund expects to technologies and nurture them closely. syndicate with other pre-seed funds, angel groups, high net worth individuals Given the long cycle times and capital and strategic investors. intensive nature of life science opportunities, it is unlikely that the region The region has extensive biomedical would have much (if any) life science activity with more than 220 businesses investment in the absence of this Fund.
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
Cincinnati Children’s Hospital Medical Center Tomorrow Fund III
nearly $45MM in revenue. Portfolio The investment committee is mostly Fund Operations companies have created 201 jobs at an comprised of hospital executives (with average annual wage over $109k. both medical and business backgrounds) Invention disclosures to CTC routinely go and CincyTech executives. Many of the through an assessment process (covering The Fund’s strategy is to focus resources CCHMC executives have experience with technology status, potential as a start‐up and funding on a limited number of high medical research and technology opportunity, interest of the lead scientist potential, commercially viable commercialization efforts, but not to actively participate, and the appropriate opportunities, instead of funding a larger necessarily in pre-seed investing. Thus commercialization phase) to determine range of opportunities with various the partnership with CincyTech, and other the appropriateness of due diligence prospects. All seven portfolio companies regional venture capital firms, brings efforts which are conducted by CincyTech. are active and have received external valuable complementary skills to the
follow-on funding, though one big success, decision-making process. Promising opportunities may receive other AssureX, accounts for 83% of all follow-on program support or funds (e.g. Innovation investment attraction. Fund grants which are a CCHMC program Budget supporting promising early-stage projects The budget projections are based on an with up to $200k) to validate or advance the Projected Economic Impact assumed $250k average investment. technology for future funding. The Fund-III is projected to invest in eight new Recognizing the longer maturation period Investment Panel (consisting of CCHMC and companies and attract $54MM in for biomedical commercialization, the CincyTech executives) review each additional investment capital and budget assumes that each investment investment opportunity to determine the generate nearly $55MM in revenue. takes and average of five years to see any desired course of action. CCHMC and These A-metrics are within line with financial return. CincyTech maintain independent investment existing portfolio performance. The committees, requiring both entities to development of A-metrics forecasted are All due diligence and enhanced approve each investment by the Fund. relatively conservative and reflect lifecycle management services will be provided timing typical of life science internally or by CincyTech. None of the The fund will outsource all due diligence commercialization. proposed $6MM in funds will be spent on to CincyTech, who will cover the expense these services, leaving the entire capital as part of their normal operations. The The Tomorrow Funds have helped CCHMC available for investments. Investment Panel, CincyTech, and to leverage other funding sources that leadership within CCHMC will provide support the institution. Over the past Recommendation Enhanced Management Services with several years, there has been a steady CCHMC understands the critical nature of funding coming from outside of the increase in total research expenditures, funding and support for each step in the investment Fund-III. including NIH and other biomedical commercialization process. Their industry sources. The Funds have aided application of resources, funding, and CCHMC has been a past OTF funding CCHMC’s ability to increase research and access, indicates a commitment to growing participant and has experience with development spending, resulting in the potential biomedical opportunities tracking and reporting, but tracking attraction of additional external funding successfully. Increases in research funding appears to be in spreadsheets, which may sources. have helped to strengthen quality deal flow work fine for the limited portfolio size, but in order to generate more investable the Fund should consider stronger tools as Experience & Qualifications opportunities, but the Fund strategy will the program grows. The Fund management team has continue to focus on deep nurturing of
extensive experience across the spectrum select opportunities over a large volume. Relevant Track Record of biomedical commercialization, from Since the inception 2005, CCHMC Funds identification and assessment of early With the opportunity for both the have invested $4.8MM in seven start-up stage discoveries, to creation and funding creation and nurturing of pre-seed biomedical companies. Portfolio of a company to advance the technology, biomedical concepts, the review team companies have attracted over $45MM in and through market entry. recommends this proposal for funding. follow-on investments and generated
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Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-105
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 Cleveland Clinic Foundation Ohio BioValidation Fund VI Cost share committed:* $3,000,000 *Commitment data as of 5/2/2014 Fund Overview imaging, and regenerative medicine sectors. The Ohio BioValidation Fund VI (OBVF-VI) Evaluation is designed to build on the success of the Information Technology and service Cleveland Clinic’s prior Ohio Third Frontier companies will be priority investment Category Status supported pre-seed funds. The long-term areas given the direction of the healthcare vision of the OBVF program is to create a industry and the chance for an exit within Fund Opportunity self-sustaining capital pool which will help 3-5 years of company formation, to secure the Clinic’s and Ohio’s position compared to other medical sectors which as an internationally recognized leader in could take up to 10 years. The fund has a Fund Operations healthcare innovation. stated effort to increase the percentage of
investment in companies which do not OBVF intends to continue investing Relevant Track Record require extensive FDA testing. exclusively in early pre-seed stage Investments will range from $250,000 to companies in the imagining and $500,000, with funds typically used to incubating phases. The fund will focus on Projected Economic Impact conduct proof-generating activities in opportunities in northern Ohio and which order to advance to the next phase of have a strong affiliation with the Clinic commercialization. itself or its extensive network of Experience & Qualifications
Innovation Alliance partners. (The There is strong evidence of high quality, Innovation Alliance is a growing network on-going deal flow unique to the Clinic to of large hospital systems and selected Fund Budget support the target of 15 investments by universities which have contracted the OBVF-VI. The Clinic alone generates Clinic to implement and manage about 300 potential deal opportunities innovation and commercialization per year, and a growing collaborator Northeast Region operations for partnering organizations. network provides an additional 200
opportunities annually. Over the last 10 Fund Opportunity years, CCI has enabled the launch of 66 With Cleveland Clinic Innovations (CCI) companies, including 25 from Third having direct access to an abundant Frontier supported funds, which have volume of physicians and researchers, generated over $800 million in equity many early stage ideas receive the benefit financing and created hundreds of jobs in of direct exposure to point-of-delivery the State. patient care experiences. OBVF-VI will focus exclusively on companies which are Fund Operations developing technologies in the medical CCI has developed a well-established technology industry, including healthcare investment process which provides a information technology, services, medical rigorous and comprehensive system for device, biopharmaceutical, diagnostic, managing deal flow in a timely manner.
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
Cleveland Clinic Foundation BioValidation Fund VI
Each opportunity is assigned to an OBVF the Clinic’s IT services including its 100- strengthening the innovation, research team member for evaluation and logged person Quantitative Health Sciences and commercialization capacity and into Knowledge Sharing Systems (KSS) department. effectiveness. OBVF-VI fits well with all of TechTracS, a leading technology these priorities and past portfolio commercialization project management Relevant Track Record companies have attracted significant software application. additional investment capital and other The Clinic has a strong record of business funding sources, such as SBIR/STTR and and job creation over the past decade, The due diligence process is well-defined parallel programs at the National including prior OBVF Funds. Since 2002, the with clear steps, expert review, and Institutes of Health, Department of Clinic has spun-off 66 new companies, expected outcomes based on historical Defense, and the Department of Energy. created over 500 direct jobs with an experience. The Clinic will cover due average salary of $102k, and its portfolio diligence costs and provide management, companies have raised more than $800MM Experience & Qualifications oversight, and resources, thus no state in equity financing. Since 2005, the first The OBVF-VI will be managed by funds are allocated to due diligence or four OBVF Funds have invested $11MM in fundamentally the same key personnel enhanced management services. 25 companies. These companies have and management team as previous OBVF
created over 300 jobs with an average funds. The five primary leaders have a Once funding decisions have been made, salary of $97k, and have received more combined 160 years of medical the Clinic and collaborators have strong than $100MM in follow-on financing. technology commercialization experience, internal access to resources and operations, fund raising, as well as proven connections to partner resources. Funding for OBVF Fund V, capitalized at successes in early stage companies. Services provided by personnel employed $10MM, with $5MM in Third Frontier by CCI help to ensure that a robust funding and $5MM of cost share match business creation environment is present Budget from the Cleveland Clinic, was delayed for stage-appropriate companies. On- The Clinic has committed to matching the due to legal issues related to changes in going enhanced management services state funds requested with $3MM in cash the pre-seed fund program structure. The (EMS) will be available through an cost share. All budget forms are in order. issues appear to have been resolved and extensive network of EIRs, IAB (Industrial All funds will be utilized for direct the agreement is expected to be Advisory Board) members, and clinical and investment in early stage biomedical completed promptly. Due to the delays in technical leaders. companies. No state funds are being launching OBVF-V, CCI has a significant budgeted to support due diligence or pipeline of investment opportunities. Six OBVF portfolio companies are supported enhanced management services. investments for OBVF-V have already by CCI’s staff and other experts in the been approved for investment and there Clinic. CCI resources are used to aid are 14 opportunities in the pipeline. Recommendation portfolio companies in developing Consistent with past Ohio BioValidation strategy, assessing markets, accessing Funds, the Clinic intends to invest in capital, creating and meeting Projected Economic Impact proprietary deals which are initiated at development milestones, and other key OBVF-VI’s target is to invest in 15 new the Clinic or in collaboration from a areas. Many of the portfolio companies companies. These investments are network of partners. With the ability to are housed in CCI’s accelerator building, projected to generate over 300 high generate a very robust deal flow that has along with the CCI team, allowing salaried jobs and generate $184 MM of A- been properly vetted by the Clinic staff, frequent interaction between support metrics. The projected economic impact the evaluators believe that OBVF-VI will staff and the portfolio companies. is consistent with OBVF’s historical be in a position to invest in high quality performance. deal flow. With one of the highest quality OBVF-VI companies will have access to responses to the request for proposal, it is Cleveland Clinic research services, The Regional Economic Competitiveness recommended that the OBVF VI be including the Lerner Research Institute Strategy (RECS) is seeking to accelerate approved for funding. and its 23 Research Cores, which include the growth of target emerging industries, imaging, genomics, proteomics, polymers, growing and fostering the region’s computing, and biological resources, and entrepreneurial environment and
Page 19 of 31 June 11, 2014
Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-106
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 Regional Growth Partnership Rocket Venture Fund II Cost share committed:* $2,450,000 *Commitment data as of 5/2/2014 Fund Overview comprehensive regional network. While many local economic development Regional Growth Partnership (RGP) is a Evaluation groups, SBDCs, and community banks may privately led nonprofit organization, provide only a few opportunities each, founded in 1994, to serve as Northwest “casting a wider net” should help to Category Status Ohio’s lead economic development improve visibility throughout the region. organization. The Rocket Venture Fund II The inclusion of ProMedica, the premier Fund Opportunity (RVF-II) is a joint collaboration between healthcare network in the region, is a RGP and Rocket Ventures to be a significant addition to the collaborator successor fund to RVF-I, created in 2007 network and could bring a boost to Fund Operations by the initial funding of the regional qualified deal flow. Although ProMedica Entrepreneurial Signature Program. is engaged in the Cleveland Clinic's Relevant Track Record Innovation Alliance, ProMedica is RVF-II will have an investment focus on committed to keeping innovations in the promising early-stage companies in the 18 NW Ohio region and has indicated a clear county region served by the regional ESP, Projected Economic Impact commitment to RV via significant cash Rocket Ventures (RV). RVF-II will focus on cost share and service collaboration. This providing early stage capital to companies should allow RVF-II to be involved with in the incubating and demonstrating Experience & Qualifications qualified ProMedica deal flow. phases of commercialization in a few primary clusters, with particular focus on Since 2011, qualified deal flow has nearly regional technology companies within the Fund Budget tripled in volume. Although RVF-I still has medical technologies and software remaining funds available, it expects to be applications sectors (and secondary focus fully invested by mid-2014, leaving a on energy, advanced materials and reasonable deal flow pipeline for RVF-II. Northwest Region sensing/automation technologies). During the past few months, the Fund has
been actively vetting 21 qualified leads Fund Opportunity and has the capacity to continue to build a The fund expects to focus on incubating pipeline. In addition, to avoid conflict, and demonstrating phase companies, RVF-I and RVF-II will have different rather than imagining opportunities which investors and investment committees, so may take more commercialization cycle any Fund I companies seeking funding time. RVF-II plans to use either preferred from Fund II will need to stand on their equity or convertible debt to structure own merit. investments of $250k-$750k. Fund Operations To improve raw and qualified deal flow, The Fund Manager will collaborate with RV appears to have responded to past Rocket Ventures during the investment evaluator comments to develop a more review and preparation process to discuss
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
Regional Growth Partnership Rocket Venture Fund II prospective investments. The Fund has made 20 investments totaling $9.7MM aggressive forecast in the absence of a Manager will be directly involved with in mostly incubating or demonstrating comparable track record. leading company interactions and due stage companies since 2008, though it has diligence. Details on the due diligence shown relatively minimal outcomes. Experience & Qualifications procedures, checklists, standards and The fund manager, Bob Savage, has ample structures appear to be fairly standard Through 2013, three portfolio companies experience in both early-stage companies and have been developed from the Fund have ceased operations and there are no and investing. For the past 15 years, he Manager’s personal experiences over 20 financial exits. The portfolio has has primarily focused on developing years of early-stage investing. generated total A-metrics over $87MM management and financing strategies for and 140 jobs created or retained. A early-stage and high tech companies. He The regional ESP and fund manager will significant portion of A-metrics come from is widely known throughout the area and handle due diligence services and will seek one company which received a concurrent has relationships with most of the pre- additional technical assistance when investment of $33MM and has since seed and venture capital funds which required for some specialized need. Fund experienced significant financial operate in the Great Lakes region. The Management expects to maintain regular difficulties. Despite this one large rest of the management team has contact with portfolio companies and will concurrent investment, the overall A- appropriate experiences in order to assist determine the need for enhanced metrics leverage ratio of 8.9x is relatively with fund operations. management services, typically to be small compared to peers. delivered by either fund management, Rocket Ventures EIRs, or other partners in In 2012, the Fund changed its strategy to Budget the Fund’s stakeholder network. The plan invest more in less capital intensive Rocket Ventures has been able to indicates that 10% of funds have been businesses, draw additional capital generate some regional support, budgeted for both due diligence and partners into the deals earlier, ensure that providing cost share commitment letters enhanced management services. company management lead additional for $2.45MM in funding. Though at this fundraising efforts, and add outside time these “technically” do not fulfill the RV and the Fund Manager will collaborate management/directors earlier. These complete definition of firm cost share to collect and track accurate data for changes should improve near-term A- commitments. The RFP allows only metrics reporting requirements. Metrics metrics and the Fund has been gaining limited contingencies and each of these will be self-reported by the portfolio some momentum in generating A-metrics commitments include other, albeit minor companies, then checked against the over the past two years. contingencies. There are potential portfolio companies' quarterly financial commitments for the remaining $550k in statements and audited or reviewed year- Projected Economic Impact cost share funds, though not all include end statements. During the proposal specific funding amounts. Fund Management forecasts a modest evaluation process, evaluators had frequent $120MM of overall A-metrics (25x difficulty getting data to match across leverage ratio), with most of it coming Recommendation various reports, with several reports using from company revenues and $16MM from Recent changes in organizational structure different data and including or excluding follow-on investment (3x leverage ratio). and investment strategy improve certain portfolio company names. As the operations and performance. RVF-I has legacy fund has grown and the new fund With the shift in investment strategy to not had great success, but a pre-seed fund prepares to launch, fund management is less capital intensive and quicker is important to the region. An expanded urged to upgrade tracking tools, similar to investment lifecycle businesses, RVF-II collaborator network, revised investment the salesforce.com tools widely used for expects as many as seven exits within the strategy, and more active portfolio other pre-seed funds. ten year Fund time horizon, out of the 11 oversight should bring improved results.
total investments. The investment Although some areas of caution exist, and Relevant Track Record strategy shift should expand opportunities the fund needs to secure its cost share RVF-I has been slow to develop and with the potential for shorter investment commitment, the potential regional produce outcomes. Fund management cycles. While the overall A-metrics and benefits outweigh and this pre-seed fund has admitted that the “portfolio hasn’t the project exit revenues are modest, the is recommended. grown as quickly as expected.” The Fund number of exits seem to be a fairly
Page 21 of 31 June 11, 2014
Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-110
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 North Coast Angel Fund III, LLC North Coast Angel Fund III Cost share committed:* $1,425,000 *Commitment data as of 5/2/2014 Fund Overview economic development organizations, research universities and hospitals, and North Coast Angel Fund III (NCAF-III) is a Evaluation regional events. Fund members have for-profit, angel investment fund. NCAF-III directly identified 5 of the 35 past is a new legal entity, but the management investments and about 67% of Category Status team and many of the member investors investments are done as co-investments and collaborators are the same as the two with other Ohio-based angel funds. Fund Opportunity prior NCAF funds (established in 2006 and
2010). The group structure is designed to Fund Operations be a catalyst for engaging private investors Fund Operations in the activities of identifying, evaluating, The investment process includes extensive investing in, and supporting promising membership involvement, with additional early-stage technology companies. subject matter experts (SMEs) used as Relevant Track Record needed. NCAF has a fairly well defined Fund Opportunity investment process which has been used successfully for the prior two funds. Projected Economic Impact NCAF-III's primary focus will be incubating and early demonstrating stage companies The detailed process includes the in the NE Ohio region. Although there is a following steps: Experience & Qualifications range of potential sectors, due to the High-level screening of opportunities; challenging later-stage funding Monthly Investment Screening environment and uncertainties in the life Committee meetings to select Fund Budget science sector, the fund will seek to place presentation candidates; more focus on non-life science and capital Monthly membership meetings to efficient opportunities (e.g. information select companies for in-depth due technology). Northeast Region diligence and to identify due
diligence teams; The Fund plans to invest in 15 companies Member-led due diligence team ($250k each and $100k follow-on for up to augmented with technical SMEs, two-thirds of the portfolio). They also when needed; and expect $15MM of member sidecar Develop deal structures, company investments. oversight, and board membership
representation. NCAF-I and II have created strong visibility across the region and the state. The funds NCAF seeks to build a membership with have engaged with over 200 raw deal flow targeted skills and backgrounds in order opportunities per year in several recent to make the investment and enhanced years. Deal flow comes from a variety of management service (EMS) processes sources, including collaboration with more impactful. EMS is provided through other angel/VC entities, regional the direct participation of Fund
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
North Coast Angel Fund III, LLC North Coast Angel Fund III management, individual NCAF members, subsequent sidecars, the average NCAF appear to have good, relevant experience. and NCAF collaborators. portfolio company received over $425k in Mr. Rankin was previously the director, sidecar investments. but has moved to lead the executive NCAF-III has budgeted the allowable 10% committee. of funds each for due diligence and NCAF-II is approximately 80% invested enhanced management services, which is and has three deals in due diligence, it is Budget consistent with the management fee that expected to be fully invested during 2014. NCAF does a fairly comprehensive job of the Fund pays on members’ capital. applying historical metrics and budget These fees cover a variety of Fund To date, NCAF-I & II have invested items to forecast outcomes and expenses expenses, including Fund management $10.2MM in 35 portfolio companies (28 in line with past experience. salaries and external SMEs. are still operational, 1 exit, and 6 ceased
operations). Portfolio companies employ NCAF-III focuses member recruitment Processes are in place to collect the over 500 people generating over $40MM efforts on assembling a high quality required tracking data and NCAF reports in annual payrolls. investor group with the necessary industry deal flow and metrics quarterly. NCAF III and functional experience to augment the will continue to leverage the JumpStart Overall, the two funds have achieved group. The Fund has raised approximately Salesforce system to capture metrics of $356MM in A-metrics with members 50% of the cost share goal and will portfolio companies and will conduct providing $17MM of sidecar investments, continue membership development semi-annual portfolio company surveys. approximately $250MM from follow-on efforts. Fund management has indicated investments (VCs, angels, and strategic that the pace of fundraising is in-line with partners), and over $100MM in portfolio Relevant Track Record the experience of Fund-I & II. company revenue. The A-metrics The deal flow history and due diligence represent a strong 56x leverage of State funnel shows good volume, stage- Given NCAF’s history of achieving the full matching funds. appropriate opportunities, and process cost share commitment within a few control. NCAF-I & II have made direct months of award notification, Fund investments in 35 early-stage Ohio Projected Economic Impact management is optimistic they can companies and have made 29 follow-on Historically, NCAF-I &II has led 19 of 35 achieve the goal. If the Fund does not investments in 23 of these companies. investments, demonstrating an ability to reach its goal, Fund management expects mobilize early-stage capital. NCAF-III that it will reduce some investment In addition, portfolio companies have plans to invest in 15 incubating or amounts. raised over $200MM in follow-on demonstrating companies which will investments from 33 venture capital funds attract $180MM in co-/follow-on Recommendation and strategic investors. investment and generate 350 jobs at an NCAF has a solid record of both identifying average salary greater than $80k. new opportunities and collaborating on Membership has been active with co- early-stage investments with other funds. investments and the prior funds have These projections are in-line with prior Based upon results of NCAF-I & II, and the successfully led many joint/cooperative Fund outcomes. Nearly one third of quality of the current Fund proposal, it is investments. Over 75 N CAF members NCAF’s initial investments are related to recommended that NCAF-III be funded. have augmented their NCAF fund the healthcare sector, which has a investment with one or more direct growing importance to the region. NCAF-III will need to obtain the remaining investments in portfolio companies. cash cost share commitment in order to
Experience & Qualifications receive full funding. The average NCAF portfolio company The management team of Todd Federman attracted 8 member sidecar investors, (executive director), Clay Rankin who together committed an average of (executive committee member, co- over $200,000 in the initial investment founder), and Barbara Morgan round. Sidecar investments in subsequent (investment associate) have shown rounds more than doubled initial Fund success with the previous funds and all investments. Combining initial and
Page 23 of 31 June 11, 2014
Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-114
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 NCT Ventures Fund II, L.P. NCT Ventures Fund II Cost share committed:* $3,000,000 *Commitment data as of 5/2/2014 Fund Overview NCT-II plans to invest in approximately 12 companies, with an initial investment of NCT Ventures Fund II (NCT-II) is a follow Evaluation $250k to $500k. NCT-II will pursue and up to NCT Ventures Fund I (NCT-I). NCT invest in new opportunities and not Ventures provided $1.5MM in matching merely provide follow-on investment to Category Status cost share for the state-sponsored portion existing portfolio companies. of NCT-I, but also raised additional capital Fund Opportunity for a significantly larger overall While the Funds are separate, the investment fund. NCT-I, formed in 2008, principals plan to continue their invested $20MM in 12 companies in Ohio methodology of tranche investment Fund Operations and the Midwest. funding to incentivize the portfolio
companies to achieve milestone targets in The three Fund principals have significant Relevant Track Record order to receive subsequent rounds of start-up and early-stage investment financing and limit the downside loss experience, and intend to follow their potential for the Fund. strategy of hands-on, value-added Projected Economic Impact investing in early stage disruptive The ideal opportunities for NCT-II are marketing and logistics technology Ohio-based technology companies with companies to produce superior long term Experience & Qualifications disruptive marketing and logistics returns for their investors. technologies. The fund prefers to target
technologies of greatest familiarity, such Fund Budget Fund Opportunity as marketing, logistics and technology- The primary source of deal flow for the based opportunities which apply the Third Fund is the principals’ existing network Frontier target sectors, though the fund from over 20 years of doing early-stage will invest in any good opportunity which Central Region investing in Ohio and the Midwest region. falls within the target sectors. The Fund NCT Ventures reviews approximately 300 seeks “disruptive” technologies which can opportunities per year which primarily have dramatic impacts on industries. come from the principals’ long-standing relationships with entrepreneurs, NCT prefers to be the first institutional investors, attorneys and other community investor in an early stage company. Deal and business leaders. structure will be convertible debt and equity with a target initial investment size The principals also have strong of $250k-$500k. institutional ties to The Ohio State University Fisher College of Business Fund Operations Center for Entrepreneurship and NCT’s investment process is thorough and TechColumbus. time tested. The primary components of
the investment process have been
Page 24 of 31 June 11, 2014
Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
NCT Ventures Fund II, L.P. NCT Ventures Fund II developed by the principals over 20 years Projected Economic Impact The managing principal of the Fund was of early-stage investing. The principals NCT did not provide detailed A-metrics involved in forming the Center for have learned through years of building projections of the economic impact of the Entrepreneurship at The Ohio State and investing in companies that the proposed Fund. Instead, the proposal University, helped develop the quality of the management team and provides an overview of the successes to entrepreneurship curriculum at the OSU founders is the most critical factor in a date in NCT-I and commentary outlining Fisher College of Business, and has taught company’s success. about how NCT-II will follow a similar path entrepreneurship courses at OSU. He is to success. also a four-time finalist for Inc. Magazines Accordingly the due diligence process “Entrepreneur of the Year” award. focuses significant attention on the Fund management strongly expects that capabilities, quality, experience and ethics the economic impact of NCT-II will be at Budget of the management team. The due least as beneficial as NCT-I, which had a NCT Ventures II L.P. has closed on $12MM diligence process also focuses significant 38x A-metrics leverage ratio on State in Limited Partner commitments, of which resources on understanding the market matching funds. $3MM will be used for cash cost share and competitive dynamics of each commitments for the Third Frontier potential investment. In terms of success metrics, NCT-I has portion of the project.
achieve one of the better records of After the due diligence process is successful exits to date of any Third NCT-II has budgeted the permitted 20% of completed and acceptable terms have Frontier supported pre-seed fund. funds to cover due diligence, enhanced been negotiated with management, the management services, and management unanimous written approval by the three NCT strongly prefers to be the first expenses. The remaining $4.8MM is principals is required for an investment to institutional investor in early-stage expected to be invested in 12 new be completed. opportunities. They have the funding to companies over a three year period. All
make their own additional investments budget forms have been properly NCT has allocated the maximum 10% of and do not always seek external co- or prepared and 100% of the cost share project funds for due diligence and the follow-on investors before achieving an commitment is firm. maximum 10% for enhanced management exit strategy. services. These costs are consistent with Recommendation the management fee which is paid by the Although A-metrics from NCT-I have been private investors to the Fund manager. solid, it is difficult for the evaluation team NCT Ventures has an experienced to quantify the full projected A-metrics management team with successful track Relevant Track Record and related benefits for NCT-II. Given the records as entrepreneurs and investors in early-stage technology investments. The The principals have significant experience experience and qualifications of the Fund managers all have strong ties to the State in start-up company operations and principals, it is not unreasonable to expect and region. investing. However, the most recent that NCT-II will have solid beneficial relevant track record is that of NCT-I, economic impact on the State. The leadership team has demonstrated which was formed in 2008 and has with NCT-I the ability to generate quality invested $20MM in 12 companies. Experience & Qualifications deal flow and nurture strong outcomes, as
The Fund principals have managed NCT-I evidenced by two successful exits to date. To date there have been two successful since 2008. Two of the principals have Given the experience and track record of exits and no write-offs. NCT-I companies significant experience in founding and the Fund principals, and their work with have generated $57MM in A-metrics, and building successful technology companies NCT-I, it is recommended that NCT-II be NCT-I companies that received state prior to forming NCT Ventures, and the approved for funding. funding created or retained 55 jobs at an third principal has 20 years of experience average salary of $67k. in the financial services industry as a senior executive.
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Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-117
OTF Fund History: New Proposal Evaluation Summary Funds requested: $2,812,500 Cost share proposed: $2,812,500 Bizdom Fund Bizdom Cleveland Pre-Seed Fund Cost share committed:* $2,812,500 *Commitment data as of 5/2/2014 Fund Overview served. Bizdom believes that it uncovers, or jointly supports, significant early stage The Bizdom Cleveland Pre-Seed Fund Evaluation deal flow from the Bizdom Accelerator, PR (BCPS) was created by Dan Gilbert to help efforts, and other internal sources. provide the support and resources Category Status necessary for aspiring entrepreneurs to BCPS expects 75 inquiries per year from grow their businesses in Cleveland and is qualified candidates, primarily through Fund Opportunity an offshoot of the Bizdom Accelerator and the Bizdom Accelerator, its national the Bizdom Fund. marketing efforts, the FOC, and its
collaborators. The Bizdom Accelerator Fund Operations BCPS will focus its investments on early has accepted 27 businesses since its stage companies in the incubating or inception in early 2013. Six graduates of demonstrating phases in Northeast Ohio. Relevant Track Record the Bizdom Accelerator are seen as prime Although not exclusively focused on Bizdom pipeline opportunities and are anticipated Accelerator graduates, the Fund sees itself to immediately pursue funding from BCPS. filling a gap in the commercialization Projected Economic Impact continuum by helping early-stage In addition, BCPS anticipates receiving an companies with investment funds. average of 33 qualified investment Experience & Qualifications candidates from the FOC with about one- BCPS will have special regional emphasis third of these opportunities coming from on software and web technologies Detroit Venture Partners (an FOC designed for business and healthcare. Fund Budget member), and an additional 15 BCPS will leverage the resources and opportunities from the JumpStart contacts of the 110+ companies in the network. Quicken Loans Family of Companies (FOC) Northeast Region nationwide, particularly the twelve that BCPS will utilize a standard convertible are operating in Cleveland. debt instrument to make investments in
approximately 25 companies over a three- Fund Opportunity year period. Investments are expected in BCPS provides a sound analysis of the range of $125k to $300k. Portfolio potential deal flow sources, including businesses will use the investment to Bizdom Accelerator graduates, national position the company to attract venture marketing and media efforts, Quicken capital funds or other forms of investment Loans FOC, and regional collaborators. financing. The ideal opportunity will be While some of this deal flow could be companies with a market opportunity of served by other pre-seed players in this $250MM and a CEO that is viewed as mid-phase (incubating & demonstrating) “fundable” by next round investors. of commercialization, it is highly that additional opportunities can easily be
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
Bizdom Fund Bizdom Cleveland Pre-Seed Fund
Fund Operations Since January 2012, the Bizdom New, innovative businesses not only Accelerator and Bizdom Fund have create jobs for Cleveland residents, but BCPS follows a clearly defined process invested $940k in 46 companies located in they also introduce the region to the which goes from opportunity inner-city locations with 24 businesses team members from outside the region identification through qualifications, being led by women or minorities. Five in an effort to strengthen Cleveland’s decision making, and the management of companies have received services in urban core. portfolio companies. The BCPS Fund exchange for equity. Manager reports to a 9-member Bizdom Experience & Qualifications
Fund board and is responsible for The Fund manager has over 20 years of The combined entities have created 112 quarterly update presentations regarding experience managing investment funds or direct jobs with an average salary of $46k. portfolio companies. operating early stage technology Overall, since 2012, portfolio companies businesses. In addition, within the FOC, have generated over $7.5MM in A- Due diligence will be performed by the exist the venture capital firms, Rockbridge metrics, having raised $3.9MM in total Deal Team Leader, the Fund Manager, Growth Equity and Detroit Venture follow-on investment and $3.6MM in Administrative Team Leader and FOC Partners. Management from these two revenue. members as required. The FOC members organizations are not only Bizdom Fund that are utilized will bring broad industry board members, but also will be relied These companies have attracted expertise to the due diligence process. upon to provide guidance and services, as investments from 15 venture capital needed. companies and angel investors. The A- Enhanced management services will metrics represent a reasonably strong include business coaching and the ability leverage for such a short timeframe on Budget to network with the FOC. Business very early-stage companies This proposal requests $2.813MM for a coaching includes monthly strategy total budget of $5.625MM. Current cost sessions with coaches coordinated by the share commitments of $2.813MM is firm. Administrative Leader. Coaches will assist Projected Economic Impact Of the total budget, $4.5MM will be used founders with sales, strategy, finance and BCPS anticipates making 25 investments for approved investments with the technology. over a three year period creating a remaining funds to be used for due projected 242 jobs with an average salary diligence and enhanced management Bizdom and the FOC have a committed of $45k and cumulative revenues of services. network of more than 300 coaches. In $6.2MM. Over the life of the fund, it is addition to the monthly coaching sessions, projected to achieve an 18:1 leverage on businesses will receive coaching on key State funds. Recommendation components of compelling investor BCPS fits with the intent of the program presentations in an effort to attract the The Bizdom Accelerator has a successful by focusing on companies in the next round of funding. track record of attracting business and incubating and demonstrating phases of talent to Ohio, attracting five businesses targeted technologies in the northeast Relevant Track Record and eight founders from outside Ohio to region. BCPS has submitted a well- relocate to Cleveland. BCPS anticipates documented response to the RFP and has BCPS is a new fund and as such does not attracting an additional 5 businesses to satisfied the requirements of the Ohio have a specific track record. However, the relocate to Ohio. Third Frontier to qualify as recommended Bizdom Accelerator and Bizdom Fund for funding. have been making investments up to $25k Dan Gilbert and the members of the for business in the imagining phase of Quicken Loans FOC have been a major development. In addition, there will be a influence in the Cleveland regional close working relationship with Detroit economy by assisting in the transition Venture Partners and Rockbridge, both from what was primarily a manufacturing later stage venture capital collaborators economy, to a more technology driven and members of the FOC. economy.
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Pre-Seed Fund Capitalization Program 2014
Fund’s Primary Focus Area Summary
Proposal #: 14-118
OTF Fund History: Previous Proposal Evaluation Summary Funds requested: $3,000,000 Cost share proposed: $3,000,000 Lorain County Community College Foundation Northeast Ohio Innovation Fund Cost share committed:* $3,000,000 *Commitment data as of 5/2/2014 Fund Overview returns from A-Awards. B-Awards are expected to be repaid if the venture is The Innovation Fund (IF), a not-for-profit Evaluation successful and are typically repaid from fund, seeks additional funding to continue follow-on funding. To date approximately its mission which launched in 2007. The 80% of B-Awards have been repaid. Category Status Fund identifies and invests in opportunities located or willing to locate within the 21- The Fund has a solid history of fundable Fund Opportunity county Northeast Ohio region. The Fund deal flow from its regional partners sees its role as having a special focus on the (JumpStart, Cleveland State University, very earliest stages of commercialization Northeast Ohio Medical University, Stark Fund Operations (imagining and incubating). State College, Youngstown State
University and Youngstown Business The Fund does not make awards to Relevant Track Record Incubator). In addition, GLIDE, located on opportunities that have already received LCCC's campus, identifies ample funding from a “later stage fund” in the opportunities as one of 12 Edison regional network. The Fund is often the Projected Economic Impact Technology Incubators. The IF receives first investment into a company outside of over 200 inquiries per quarter and has the entrepreneur’s personal assets. A reviewed 884 deals, which are defined as unique educational objective requires Experience & Qualifications a completed application in which the each award recipient to provide a hands- company meets the targeted size, location on entrepreneurial internship for a and technology sectors. student from one of the IF higher Fund Budget education partners. The Fund grants awards on a quarterly
basis and has historically budgeted $300k Fund Opportunity of awards per quarter (three to six Northwest Region The Fund maintains a clear set of criteria awards). The Fund reviews between 30 for investable opportunities and focuses and 50 deal opportunities per quarter, on early-stage opportunities in targeted with generally 7 to 12 opportunities sectors (advanced energy, advanced deemed fundable and three to five materials, advanced propulsion, ICE, & opportunities awarded. Management biomedical). The Fund permits awards to believes it has the resources and quality IT opportunities if they are connected to deal flow to support doubling the number one or more of the core target industries. of awards each quarter and plans to increase the quarterly budget to $600k There are two award types, “A-Awards” (five to ten awards) with more funding. (up to $25k) to prove technology concepts and “B-Awards” (up to $100k) for proof of Fund Operations business concept. A-Awards are grants The Fund has a well-defined 6-step and IF does not realize any financial process which is repeated quarterly to
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Pre-Seed Fund Capitalization Program 2014
Proposal Evaluation Summary (Continued)
Lorain County Community College Foundation Northeast Ohio Innovation Fund manage everything from lead qualification have secured $145MM in co-/follow-on experience and have worked with early to due diligence and investing decisions. funding. There is a broad range of stage ventures. The Innovation Fund Each step has a clear process with a set of companies in the portfolio that have Committee is comprised of regional serial tools and reports. The partners and received follow-on funding. entrepreneurs, investors, resource collaborators play key roles, providing providers, and educational leaders in expert resources for the process. Each funding round has shown a timely order to make funding and strategic use of funds and strong outcomes, decisions for the Fund. The IF vetting process is supported by two achieving a 39:1 leverage ratio from the committees comprised of individuals who first four funds. In addition, the portfolio Budget are serial entrepreneurs, investors, companies have created over 165 Committed cost share of $1.2MM is from educational leaders, and resource internships for college students at the LCCC Foundation. The original providers to ensure an effective due partnering institutions. proposal indicates remaining cost share diligence and investment process. The will come from the B-Award matching Screening Committee’s evaluation process Similar to other not-for-profit funds which funds. However, DAS has determined that narrows the number of quarterly deals received OTF support during the FY2012 the matching B-Award funds do not that advance to the Innovation Fund PFCP, funding had not yet been released by qualify as committed cost share. Fund Committee of the LCCC Foundation, which early 2014 due to on-going loan agreement management has indicated the LCCC makes all final investment decisions. negotiations. Legal issues are expected to Foundation will provide the remaining be resolved soon and the funds released for $1.8MM of cost share commitment, but B-Awards require the entrepreneur to use. If this current request for funding is this will need to be secured before provide matching funds from other approved, the IF will have in excess of program agreements can be finalized. sources. This creates valuable market $10MM in dry powder for investment and experience and validation both for the Fund expenses. Fund management firmly Of the $6MM budget, 20% has been idea and the entrepreneur. In the past believes it has sufficient quality deal flow to allocated to due diligence and EMS. seven years only three B Award recipients double the historical investment pace, Historically, LCCCF and GLIDE have were unable to obtain matching funds. resulting in a deployment FY2012 program provided due diligence support as an in- funds within 12 months of release. Funding kind contribution. They plan for this to The Fund uses a variety of means to from this current round will be fully continue, but as deal flow has expanded capture information, including web-based invested within three years. and the portfolio has grown, there is a tools and administrative support. They need for more dedicated resources to are connected to JEN and utilize Projected Economic Impact manage the fund. Some funds designated JumpStart's CRM system. The Fund is The Fund expects to make 60 A-Awards in for due diligence will be specifically used built upon partner collaboration and all late-imagining opportunities and 24 B- to support an Innovation Fund manager partners provide expertise and resources Awards in incubating opportunities. IF for the grant period. Existing in-kind for enhanced management services projects 84 jobs with a $50k average salary resources provided for administration and (EMS), however, they may rely on third and 84 internships with educational due diligence will continue to be provided party consultants and contractors to opportunities will be created from this by the respective entities. support specialized needs for some round of funding. The Fund expects portfolio companies. portfolio companies to attract $45MM in Recommendation follow-on investments. The projected IF plays an important role as an early Relevant Track Record economic impact appears reasonable in funder within the regional ecosystem, Since inception in 2007, the LCCCF has light of IF’s historical performance. providing high quality opportunities to seen a 60/40 split between applications later stage funds. The IF has a strong deal for A-level and B-level opportunities, Experience & Qualifications flow, a sound review process, strong respectively. The Fund has managed four The IF has assembled a solid team by management and solid performance as Pre-Seed Fund Capitalization Program leveraging resources throughout the measured by A-metrics. The IF has shown (PFCP) funding rounds, making 140 region. The Fund’s core management its ability to meet program goals and is awards ($7.6MM) to 117 companies. team members have successful business recommended for additional funding. From those awards, portfolio companies
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Pre-Seed Fund Capitalization Program 2014
Non-Recommended Fund Proposals
OneCommunity Broadband Innovation Fund Lead Applicant: OneCommunity PFCP 14-107 The OneCommunity Broadband Innovation Fund requested $1.5MM to invest in early-stage businesses focused on information technology related products and services. The Fund’s vision is to invest seed capital of $25k-$50k in start-up (imagining stage) ventures with a focus on advanced digital capabilities and the effective use of technology to build a national hub within the Northeast Ohio region. The Fund expected to give significant consideration to opportunities which utilize high capacity broadband services for the delivery, distribution, or development of products or services in the healthcare, education, and government sectors. While the Fund’s proposal provided a clear technology sector focus, it contained several areas with less than clear commentary which limited the impact of its proposal. More challenging, the application did not fully cover several of the critical elements outlined in the RFP. Given the lack of relevant information and track record, the evaluators were unable to assess the proposed fund on many of the most critical program elements. As a result, the proposal scored poorly and is not recommended.
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Pre-Seed Fund Capitalization Program 2014
Withdrawn Fund Proposals
QCA First Fund IV Extension Lead Applicant: Queen City Angels PFCP 14-103 QCA First Fund IV was awarded $3MM in the Pre-Seed Fund Capitalization Program FY2012 funding round. The award amount was increased, along with several other Funds, to $4MM prior to the award contract being finalized. The Fund was planning to seek an additional $1MM of funding along with an equal cost share match. The proposed additional $2MM would be invested without any anticipated incremental Fund expense. During the evaluation process, QCA FF-IV indicated that even stronger than anticipated deal flow was allowing the Fund to accelerate investments from the existing capital base. Therefore, QCA decided to withdraw the current application, focus on existing fund investments, and begin planning for a future QCA First Fund V.
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