ENTREPRENEURSHIP Lecture No: 35 BY CH. SHAHZAD ANSAR

Sources of Capital

R & D Limited Partnership This method of financing provides funds from inventors looking for tax shelters. A typical R&D partnership arrangement is established with a sponsoring company developing the technology with funds being provided by a limited partnership of individual investors. Research and development limited partnerships are particularly good when the project involves a high degree of risk

R & D Limited Partnership Contd… Major Elements Contract Sponsoring Company Limited Partners General Partners 4

R & D Limited Partnership Contd… Procedure: (1) Funding Stage contract is established and the money invested (2) Development Stage The company performs the actual research (3) Exit Stage In which with both parties reaping the benefits

R & D Limited Partnership Contd… Benefits It provides the needed funds with a minimum of equity dilution The sponsoring company’s financial statements are strengthened It reduces the risk

R & D Limited Partnership Contd… Costs There is considerable time and money involved. Most R&D limited partnerships are unsuccessful. The restrictions placed on the technology may be substantial. The exit from the partnership may be too complex.

SBIR Grant Program The SBIR grant program has three phases. Phase I awards are up to $50,000 for six months of feasibility-related experimental or theoretical research. Phase II is the principal R&D effort. Phase II awards are up to $500,000 for 24 months of further research and development. The money is to be used to develop prototype products. In Phase III funds from other sources, such as the private sector or regular government contracts, are needed to commercialize the developed technologies.