Dag Finne Senior Business Developer Bergen Teknologioverføring AS Presentation at NRI-Conference 2014, Day 2 Ways to finance innovators' relieve of present duties in the clinic

Agenda Introduction Case Solution Elements of the solution Conclusions CV BTO Different interests and difficulties BTO and the model envisaged Agreements and associated duties Compatibility with the expectations

CV Engineer Marine Tech, Master in Management at NTNU, BI Styrekompetanse Established 8 startups Experience as CEO, Chairman and Board Member in software companies Experience from ICT industry since 1993 in development and sales Joined BTO in April 2006 as the Senior Business Developer Focus on ICT projects and early stage funding Responsible for 5 startups Dag Finne 3 Bergen Teknologioverføring (BTO) Technology transfer office (TTO) that supports 8 research institutions in commercialising research results and handling all intellectual property aspects. Owned by the University of Bergen, Haukeland University Hospital and the Institute of Marine Research

Innovators Wish to continue as academic employees Want a position (can be any) Department Positive, but afraid of being depleted Start-up Needs the innovators for months more (based on needs, can be any) Has limited cash Be aware of the limits of soft funding (ESA)ESA Case; Ways to finance innovators' relieve of present duties in the clinic Different interests have to be accounted for 4

Net negative CF Net positive CF Funding Development Grants Friends, Family, Founders 5-50k Angel Investors 50k-500k Early Stage VC 500k-2M PE, Project Financing 2M-50M Applied Research Proof of Concept Target Market Business Plan Working Prototypes Founding Team Engineering Prototypes Supplier Contracts VC 2M-50M Production Prototypes Distribution Contracts IPO, M&A 25M+ Product Introduction Revenue Growth Stage of Venture Development ‘Valley of death’ Source: Adopted from UCDAVIS Center for Entrepreneurship 5 Research Grants Basic Research

Problem formulated How to facilitate research based innovation and optimize growth of start-ups without compromising obligations of clinical duties How to avoid infringement of ESA’s rules restricting public subsidies to private entities These are apparently conflicting obligations set by national legislation and EU regulations (soft funding limited to 200,000 EUR) 6

University Hospital BTO Start-up University Hospital Department Related parties Extra Funding Accounts Receivable Invoice Payment Framework agreement Buy-out agreement Agreement 2 Utilization of personnel Agreement 1 Utilization of personnel Agreements Funding Payment Solution 7

University Hospital BTO Start-up University Hospital Department Accounts Receivable Invoice Payment Framework agreement Buy-out agreement Agreement 2 Utilization of personnel Agreement 1 Utilization of personnel Extra Funding 8

The university hospital in Bergen acknowledges the obligation of and a wish to promote research based innovation at the hospital to the benefit of society and the inventors. The hospital has committed to lay down guidelines to allow innovators to dedicate time to work at their innovation project (the start-up). The hospital will allocate an additional budget for the purpose of co-funding innovation generated by the hospital employees, in accordance with underlying agreements. University Hospital BTO Framework agreement 9

University Hospital BTO Start-up University Hospital Department Accounts Receivable Invoice Payment Framework agreement Buy-out agreement Agreement 2 Utilization of personnel Agreement 1 Utilization of personnel Extra Funding 10

This agreement is subject to the Framework agreement. BTO will make a draft and present this to the university hospital and the department for signature. Sets terms and conditions for allocating innovators (medical doctors) to perform work task to further develop their start-up. Each innovator will be able to spend up to 50 % of their regular work hours at the university hospital department. University Hospital BTO University Hospital Department Agreement 2 Utilization of personnel Agreement 1 Utilization of personnel Agreement - utilization of personnel 11

The department shall maintain responsibility for payment of salary, social costs, insurance and other duties of the employer. The department will be granted funding from the hospital in order to cover additional costs, such as employment of subsidiary personnel for a limited time period. BTO is responsible for managing this arrangement on behalf of the hospital. 12 Agreement - utilization of personnel, cont’

University Hospital BTO Start-up University Hospital Department Extra Funding Accounts Receivable Invoice Payment Framework agreement Buy-out agreement Agreement 2 Utilization of personnel Agreement 1 Utilization of personnel 13

BTO Start-up Buy-out agreement Governed by the framework agreement and reflect the terms and conditions as agreed by the arrangement of drafting of personnel. BTO shall invoice the start-up an amount equal to regular salary for the innovators/doctors plus associated interest. The start-up will be responsible for payment of the total invoice as well as the value added in accordance with regulations. The accounts receivable from the start-up shall be handled by BTO on behalf of the university hospital. The hospital will take the risk of non-refundable costs. In case of non-repayment, the costs will be converted to shares or, in case of bankruptcy, written-off. Buy-out agreement 14

The medical doctors/innovators will be able to stay in their positions and at the same time perform R&D activities to benefit the start-up The hospital department will not suffer financially by these agreements The start-up keeps competent personnel to enable growth The ESA terms of minor financial support are met No financial benefits or risks are claimed by the tech transfer office from those agreements – role of facilitator. Return is based on the exit/selling shares of the start-up Conclusions 15

Thank you for your attention Q&A