Technology Transfer Accelerator Turkey (“TTA Turkey”) IP Conference Turkey 30 October 2014 Istanbul

Agenda About EIF About TTA Turkey EIF Resources, Governance and Investments Equity Highlights EIF Technology Transfer: History and Characteristics About TTA Turkey Background, Structure and Objectives TTA Turkey Fund Targets, Investment Criteria, Investment Process and Structure Main Terms & Conditions, Flow of Funding, Time Frame and Process Investment Considerations and Assessment Criteria

What is the EIF? “ The leading developer of risk financing for entrepreneurship and innovation across the EU ” Helping SMEs, micro-enterprises and European regions innovate and grow by making finance more accessible Fulfilling our dual goal and pursuing EU policy objectives as well as financial sustainability Addressing market needs by acting as a countercyclical investor in tough economic times Working with financial intermediaries across the 27 EU countries, EFTA and all Accession countries

Involved throughout the Business Cycle Technology Transfer Accelerator Investing in VC funds Investing in Growth Capital Mezzanine EIF Current Investment Focus Technology Transfer Proof of Concept Business Angels Seed Stage Early Stage Business Angels Expansion/ Development Capital Lower Mid-Market Instruments to stimulate innovation, competitiveness and cross-border investment Fill funding gap left by institutional investors Support VC ecosystem and decrease dependency on public finance Catalyse hybrid debt finance for growth Strategic Challenges European Commission Resources EIB / EIF Resources Member States / Private Sector Resources

European Investment Bank National & Regional Funds EIF’s Resources “ EIF manages resources from different stakeholders ” European Investment Bank Risk Capital Mandate (RCR) EUR 5bn Mezzanine Facility for Growth (MFG) EUR 1bn European Commission Competitiveness and Innovation Framework Progr. (CIP) EUR 1bn allocated to equity and guarantees Risk-Sharing Instrument (RSI) EUR 120m Progress Microfinance EUR 200m National & Regional Funds 20 European and regional Funds-of-Funds including Germany, Portugal, Spain, Turkey, UK 14 Holding Funds supported by structural funds EUR 1.3bn

Equity Highlights 2013 2012 2011 2010 2009 2008 Equity Signatures (EUR / m) 2013 2012 2011 2010 2009 2008 Equity Signatures 1 468 1 350 1 126 930 733 409 PE Assets under Management 7 904 6 952 5 919 5 367 4 103 3 535

EIF’s Governance “ Committed to the highest standards of governance and integrity ” Board of Directors has a supervisory role and approves all EIF transactions Chief Executive is responsible for the day-to-day management of the EIF Audit Board and both in- and external auditors oversee Chief Executive and Board of Directors Risk Management, Legal and compliance units

Marketable Product “Prototype IP” University / Research Organisation EIF Technology Transfer Aims to Bridge the Gap between the Research and the Market R&D Technology Transfer “Technology IP” Marketable Product “Prototype IP” University / Research Organisation Spin-out Market Licensing Collaboration (Contract Research) IP / Idea

EIF Technology Transfer History and Characteristics History of EIF Technology Transfer Investments Scale-up of activities since TTA study (2005) No dedicated mandate Investments so far with own resources, the European Commission and the EIB 33 operations in total Characteristics of Technology Transfer Operations Different shapes and sizes Long lead times and low transformation ratio Key point: Scale Difficult fundraising periods

Long-term, Sustainable Vehicles With Like-Minded Investors  Close collaboration with TTOs  Access to good scientific research  IP adequately protected under relevant legislation  No direct financing of research  Governance - no investor involvement in investment decisions  Independence and non-competition of Management Team  Adequate incentives to Management Team  Alignment of interests with long-term focus, up to 10-20 years  Minimum critical size ca. EUR 20-30m

EIF Technology Transfer Investments To Date

Agenda About EIF About TTA Turkey EIF Resources, Governance and Investments Equity Highlights EIF Technology Transfer: History and Characteristics About TTA Turkey Background, Structure and Objectives TTA Turkey Fund Targets, Investment Criteria, Investment Process and Structure Main Terms & Conditions, Flow of Funding, Time Frame and Process Investment Considerations and Assessment Criteria

TTA Turkey This project is co-financed by the European Union and the Republic of Turkey This financing is provided from IPA funds allocated to Regional Competitiveness Operational Programme which is supported by EU and Republic of Turkey. The Contracting Authority of this Project is the Ministry of Science, Industry and Technology, DG for EU and Foreign Relations, IPA-PO, and final beneficiary is the Scientific and Technological Research Council of Turkey.  

TTA Turkey – Project Level Background Funded by IPA monies Deadline for Project Implementation: 31 December 2017 End Beneficiary: The Scientific and Technological Research Council of Turkey (TÜBİTAK) Project Amount: EUR 30.5 million Project Components: Cornerstone TTA Turkey Fund – EUR 26.3 million Advisory Services and Networking for TTOs and TÜBİTAK – EUR 1.35 million Visibility – EUR 200,000 Impact Evaluation – EUR 100,000 2012 2013 2014 Market Needs Assessment carried out Business Plan for the Project submitted Negotiations and Approval Signature Date: July 2014 2015 2016 2017

TTA Turkey Project Structure and Main Objectives IPA Resources EIF as Advisor & Project Manager IPA Commitment to TTA Turkey Fund Advisory Services and Networking (Technical Assistance) TTOs TÜBİTAK Visibility Impact Evaluation proceeds TTA Turkey’s main purpose is to: Establish an independently managed Technology Transfer Accelerator Fund that invests in commercialisation of technology intensive research coming out of universities and research centres Increase the R&D commercialisation capacities of TTOs so that they can play a successful interface role between the industry and the university

TTA Turkey Fund Target Investments and Region TTA Turkey to invest in: proof of concept generation projects university / research center spin-offs, start-ups intellectual property (IP) assets / projects return for equity into start-ups, spin-offs, and SMEs 100% of the investments to be made in Turkey A minimum of 30 projects to be selected by the Fund Manager by 31 December 2017 At least 15 projects shall be identified and invested in the Target Region (12 NUTS II, 43 provinces)

TTA Turkey Fund Structure

Main Terms & Conditions Target Fund Size Indicative Maximum Amount of Funding EUR 30 million EUR 40 million Maximum Contribution from IPA Funds Minimum Third Party Capital (Private Investors) Applicant’s Own Commitment in the Fund EUR 26.3 million EUR 2.8 million 1-5% of the total Fund size Maximum Investment Amount to a Single Company/Project EUR 2.5 million Over 12 months Maximum Duration of the Fund 10 years Possibility of extension for 1+1 years  12 years Deadline for the Fund’s Investment / Selection Period Deadline for Disbursements by the Fund 31 December 2017 Portfolio Diversification Minimum of 30 projects/companies Target Industry Sectors Generalist with preferred and excluded sectors as covered in details in the Call for EoI

Flow of Funding IPA Contracting Authority EIF Special Account TTA Fund Co A Co B Co C Co D Start up 1 2 3 4 5 6 Monies to Special Account Monies to Fund on Capital Calls from Fund Manager based on establishment of Companies once start up invested Monies to Companies once Projects identified – before 31 Dec 2017 Monies to projects on milestone basis during the Term of the Fund Monies to Contracting Authority from Special Account – after 31 Dec 2017 Thereafter from whomever transfer of holding has been made to (if anybody) on receipt from TTA Fund Monies to Fund due to project spin-outs, licensing, contract research with consequent dividend payment Monies to Companies from successful projects on spin-outs, licensing, contract research, other Co D Start up

Time Frame and Process Next Steps Deadline Requests for Clarifications from Applicants Accepted Friday, 15 August 2014 EIF to Reply to Clarification Requests Friday, 22 August 2014 Call for EoI Open for Applications Thursday, 11 September 2014 First Screenings September 2014 Scoring and Second Screenings October 2014 Due Diligence of Shortlisted Applicants Legal Negotiation & Execution December 2014

Assessment Criteria & Scoring QUALITY ASSESSMENT CRITERIA WEIGHTING 1   Project Relevance, Quality and Coherence Evaluation of the Fund focus and proposed investment strategy, including viability of Fund’s size. Evaluation of the Fund Manager’s team profile, including but not limited to: Team stability and dynamics. Its ability to implement the Financial Instrument Operational, financial, technical and VC competences. Capabilities as members of Boards and/or committees of an investment and/or advisory nature. Prior experience in technology transfer field, commercialisation of research and development, business development, IP law. Evaluation of Applicant’s investment processes, including deal flow generation, ability to invest, ability to add value to companies and exit strategy. 40 points 2 Project Maturity, Investment Readiness Demonstration of ability to raise at least EUR 2.8 million of the Fund from private investors. Demonstration of ability to source deals in Turkey (SMEs/projects). Investment readiness of the proposed structure like maturity of the proposed legal structure, including internationally proven best market practices; outline of any different legal entities required; planned establishment costs and details thereof; detailed term sheet; proposed law firm etc. in order to execute the closing of the fund timely and efficiently. 3 Institutional Capacity & Sustainability Fund Manager organisation, structure and long-term viability. Assessment of the corporate governance in place. Assessment of legal structures and independence. Terms and Conditions, including management fee and profit share arrangements. Assessment of the alignment of interests between the Fund Manager and the Investors. Assessment of Reporting and Control Procedures. 20 points

Investment Process and Indicative Timelines First Screening Second Screening Due Diligence Board Approval 12 months Understand concept Based on preliminary questionnaire / concept note Investment readiness Physical meeting (typically in Luxembourg), opportunity to articulate investment opportunity, understand EIF Stress testing and verification EIF team conducts on site visits (min. 2 days). May, or may not lead to term sheet Legal documentation After EIF BoD approval, legal docs drafted on behalf of Manager. EIF reviews importance of legal counsel

Investment Considerations First Screening Second Screening Due Diligence Board Approval Partner Institutions Market Investment Strategy Deal flow Potential Investors Investment Process Team Track Record Governance Management Company Economics Remuneration / Incentives

Criteria (1/4) Partner Institutions Deal flow and pipeline Investment strategy Metrics: Research budget, peer group comparisons, invention disclosures, IP filed, IP awarded, growth rates, commercialisation income, encumbrances, 3rd party agreements Structure: Organisation structure of TTO, roles, ownership of TTO Policies: IP policy, rules, regulations, ownership rights Activities: Industry co-operations, advisory services, contract research, etc. Financials: For TTO; revenues, royalty income, grants, licenses, cost of sales, gross profit, operating costs, gift aid, dividends Origination: Source of projects, networks (formal and informal), privileged / preferential access, rights of first refusal, option rights Fees: Payments in lieu of access to pipeline Historical Analysis: e.g. 3-5 years evolution of deal flow by source, sector, etc. Selectivity Ratio: Historical examples / experience Pipeline: Current and future opportunities Licensing / Spin-outs: Proposed route for commercialisation Strategy: Geographical focus, stage focus, sectors, investment sizes, follow- on and reserve policy, holding periods, role in financing rounds Fund Size: Justification for size through bottom-up analysis, min / target / max size, modification to strategy according to size scenarios Target Profiles: Criteria for investment targets (company profiles) Co-investors: Envisaged co-investors at different stages of investments Exits: Strategies based on previous examples 24

Criteria (2/4) Market / Competitors Potential Investors Investment Process Trends: Targeted sectors, challenges faced, evolution in previous years Competitors: Financing, other sources of finance, private / public Demand Side Economics: Analysis and evidence of demand for targeted projects Sponsors: Main investors , anchor investors , special rights (e.g. fees, carry, information, co-investment, etc.) Names / Profiles: Like-minded, long- term investors with soft and hard commitments Team Investment: Investment to fund, e.g. 1%, 2%, 5%, absolute amount, split between team members (see also remuneration / incentives) Fundraising Strategy: List of other potential / targeted investors, status of contacts, potential commitments Process: Origination, screening, project / deal review, due diligence, deal approval, deal structuring, negotiation, deal completion, contracting third parties Decision-making Bodies: Bodies, or individuals take final decisions at each stage, delegations foreseen

Criteria (3/4) Team Track Record Governance Composition: Envisaged team responsible for managing fund, key individuals from TTO / other, secondees, new recruits (profiles) Profiles / CVs: Full CVs of team members and key individuals, specific dates, positions held, achievements Experience: Collective team experience in IP management, licensing, creation of companies, investing,, strategy, consulting, etc. Team Collaboration: Years worked together, prior collective working relationships Workload: Time commitment to fund vs. other activities, activity allocation, other board seats Board Members: CVs Previous funds: Metrics, vintage, total size, fund cash flows, net and gross IRR, LPs, amounts Companies: Previous / current funds, dates of investment, investment at cost, FMV (EVCA), gross multiples, forecast exit dates, exit scenarios Individuals: Track record of individuals, other investment / relevant activity (e.g. licensing deals) Partner Institutions: Licensing and spin- out company creation, notable success stories (e.g. Nobel prizes), products developed Structure: e.g. UK-LP, SCR, FCR, NV, SPRL, SICAR, KB, etc. Relationships: Overall structure and relationships between governing and decision-making bodies. Role and function of each of the bodies. Specific individuals involved and respective voting powers and rights CoI: Conflict of interest management, for example with (other) investors in fund, any investor (LP) involvement in decision-making Advisory Board: Composition, largest investors, etc.

Remuneration / Incentives Criteria (4/4) Management Company Economics Remuneration / Incentives History: Evolution, founders, key dates and events in development, significant changes in organisation, strategy, ownership Legal Status: Capital structure, ownership Regulation: How the management company shall be regulated, adherence to AML/KYC Budget: Detailed forecast budget for Management Company over lifetime of the fund, under different scenarios, e.g. min / target / max size Management Fee: Justification for level of management fee, use of fees, fee offsets Alignment of Interests: Team investments to fund align with investors, long-term time horizon, team stability / instability Remuneration: Detailed breakdown of remuneration for all team members including base salaries, bonuses Evolution: Historical evolution of remuneration for individual team members in previous years Incentives via Carry: Repartition of carry to individuals, unallocated carry if applicable, carry to partner institution(s)

Thank You! Jose Romano Head of Region j.romano@eif.org European Investment Fund 37B, Avenue J. F. Kennedy L-2968 Luxembourg Tel.: (+352) 42 66 881 Fax: (+352) 42 66 88 200 www.eif.org

Technology Transfer Accelerator Turkey (“TTA Turkey”) IP Conference Turkey 30 October 2014 Istanbul