Investing in TT / Acceleration 1 October 2015 – ISTANBUL J DARCY

Lower Mid-Market Expansion/ Development Capital Early Stage Business Angels Involved throughout the business cycle 2 EIF Current Investment Focus Strategic Challenges Technology Transfer Proof of Concept Business Angels Seed Stage Technology Transfer Accelerator Catalyse hybrid debt finance for growth Support VC ecosystem and decrease dependency on public finance Fill funding gap left by institutional investors Instruments to stimulate innovation, competitiveness and cross-border investment Investing in VC funds Investing in Growth Capital Mezzanine European Commission ResourcesEIB / EIF ResourcesMember States / Private Sector Resources

EIF resources 3 EIF manages resources from different stakeholders “ ” European Investment Bank  Risk Capital Mandate (RCM) 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

Bridging the gap between research and the market 4 R&D Technology Transfer “technology IP” Marketable Product “prototype IP” University / Research Organisation Market IP / Idea Spin-out Licensing Collaboration (contract research)

Catalysing commercialisation Engage with industry, develop partnerships, and encourage contract research Build networks to meet economic reality; inward looking vs. outward Research organisations / TTOs are key counterparts Become active participants in long- term TT vehicles / funds Research organisations to provide commitments for participating in TT structures, financially and / or with other resources Outsource with qualified and experienced partners willing to work in close collaboration Identify and work with trusted (fund) managers who can help select the best opportunities with commercialisation potential 5

UK: IP venture fund UK UK: UMIP Premier Fund Sweden: Chalmers Innovation Belgium KU Leuven CD3 Latvia: Imprimatur Capital, Seed and VC fund Sweden: Karolinska Development 3T (Telecoms Institutes) EIF TT Transactions France: Inria IT2: Digital technologies Bulgaria : LaunchUp Start-up accelerator Greece: Openfund, Seed Fund UK: Cancer Research Technology Elaia (Applied Maths – ENS, Dauphine, Collège de F, X) Business Creation and Acceleration Research commercialisation / TT Bulgaria : Eleven Start-up accelerator Greece: Piräus Fund, Seed Fund Lithuania: Practica Incubator and follow-on fund Lithuania: Strata/Mes Business Angel Co-investment fund Belgium: NausecaBusiness Angel fund 6 Norway: Sintef Turkey : Diffusion - ICT

Research Commercialization / TT Based on innovative / disruptive technologies Partnering with Research Projects and IP licensing Spin-out funds

TT Fund 8 Fund-of-Funds managed by EIF Private Investors TT Fund Private Investors [90%] funding [10%] funding TT Fund Manager Deal sourcing Expertise contribution University 1 University 2.. Tech Park 1 Science Lab 2.. Industry Contacts IP / patent experts Test Labs Corporates Patents Licenses Spin-offs Start-ups

Business incubation and acceleration Development of innovative businesses Bases on innovative ideas and business models Incubators Accelerators With Business Angels

Acceleration and Seed Fund 10 Pre-Seed Seed Start-up Fund-of-Funds managed by EIF Fund Manager Acceleratio n Compartme nt Seed Compartmen t Max [90%] contribution Private Investors Min [10%] contribution Acceleration and Seed Fund Selection

11 Snapshot

BA Co-investment Facility Structure 12 Fund-of-Funds managed by EIF SMEs 50/50% BA Co-investment Facility (e.g. EAF national compartment) Business Angel 1 (Trustee) Trust 50/50% Selection Co-Investment Agreements Full delegation of investment decisions, monitoring, exit; definition of co-inv. terms & guidelines Business Angel 2 (Trustee) Trust In case of EAF: (a) EIF as advisor to umbrella structure (b) Local Advisor if needed

Find the appropriate counterpart (linked with knowledge provider / acceleration) Small amounts, legal framework, time spent… High added-value! Contribute to a system Get 2014 – 2020 EU Funding! EIF challenges 13

14 BACK UP SLIDES

EIF TT investments 15

Selected EIF Transactions: Research Commercialization and TT 16

IP markets 17

Selected Transactions: Business incubation and acceleration 18

Accelerators Starting companies from scratch Small investments (about EUR20k) in a large number of start- ups Incubation phase to elaborate BP or build prototype Demo day: present businesses, find investors, mentors, business partners, exchange experience…. Follow on financing from the Accelerator (up to EUR 200k) Organization and investment lead by experienced entrepreneurs and investment professionals International setup Creates an environment of entrepreneurship with mutual support Attracts plenty of interests at large corporates

20 Acceleration & Seed Fund - Process Application Window Selection & Funding Acceleratio n Graduation day SEED Portfolio ACCELERATION STAGE SEED STAGE  Application process: Fully online, held every 3 – 4 months or continuous  Indicative investment: EUR [25,000 – 50,000]*  Equity share: ~10%  Stage term: 3-12 months  Goal: Working prototype, beta version *Depending on the sector focus and market characteristics  Indicative investment: up to EUR [xx] (including follow on investments). Substantial portfolio share in start- ups from acceleration stage  Equity share: % (on aggregate)  Stage term: months  Goal: Commercialization, internationalization Seed investments in other companies

Incubators Starting companies from scratch Small investments (about EUR10k to 30k) in start-ups Incubation phase to elaborate BP or build prototype Specialized support organized by the Incubator (funding, legal, accounting, marketing,…) Network of entrepreneurs, located in the incubator Follow on financing by the incubator (up to EUR 200k) Connected to a VC fund, managed by the same manager Organization and investment lead by experienced entrepreneurs and investment professionals International setup Creates an environment of entrepreneurship with mutual support Attracts plenty of interests at large corporates

Co-Investment Funds Managed by experienced managers with full alignment of interest (substantial investment by the fund manager <5%) Co-investments with Business Angels and other qualified investors Investments in early stage companies or start-up companies Specialized support organized by the Co-investor (funding, strategic advice, marketing,…) Network of entrepreneurs, managed by the fund manager Leverage of fund monies with qualified third party funds No fundraising necessary for the fund manager Fund investment strategy for relatively short fund terms

Co-Investment Fund Structure 23 Fund-of-Funds managed by EIF Co-Investment Fund SMEs Private Co-investors Selection [50%] of the capital in a transaction -Sourcing of co-investors -Compliance check on co- investors [50%] of the capital in each transaction Ca. [95%] committed by the FoF Ca. [5%] committed by the Fund Manager Fund Manager

Indicative Timelines 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 review Importance of legal counsel 24 First Screening Second Screening Due Diligence Board Approval 12 mths

Long-term, sustainable vehicles with like-minded investors Close collaboration of investment vehicle with TTO Access to good science Adequate incentives to management team Governance - no investor involvement in investment decisions Independence and non-competition of management team No direct financing of research Alignment of interests with long-term focus, up to 15-20yrs IP adequately protected under relevant legislation         Min critical size ca. EUR 20-30m. EIF can fund up to 50%  25

■10 year Limited Partnership. ■Managed by VC firm: MTI partners ■GBP 32 m raised. 18 months between first pitch to EIF and first closing in 4/2008 Manchester: Largest UK University Research Budget Manchester University / UMIP Premier Fund

CD3 PHARMA/BIOTECH COMPANIESUNIVERSITIES CD3 (K.U.Leuven) - Next Generation Licensing - Empowering Universities Drug development process steps CD3 portfolio Chemical libraries Structura l biology … Bench synthesis Parallel synthesis Early toxicology … CD3 addresses a demand from both ends of the chain ■ from Universities: be able to offer more finished drug candidates to the industry ■ from the Industry: enrich their pipeline with more proven candidates ■Partnership with university ■Managed by TTO ■Invests in drug development projects Target ID Target validation Screening Lead ID Optimisation Pre-clinical development Clinical I Clinical II Clinical III Leuven CD3 (Centre for Drug Design and Discovery)

IP Group: Bringing together 12 Universities - 26 Spin-Outs in Three Years ■Co-investment fund (seed, post-seed financing) ■Critical mass reached through a network of universities ■Liquidity vs listing Deal flow and critical mass IP Venture Fund UK

SINTEF Venture IV

30 Due diligence

Taking the lid off EIF’s Due Diligence process (1/5) 31 First ScreeningSecond ScreeningDue DiligenceBoard Approval Partner institutions Market Investment strategy Dealflow Potential Investors Investment process TeamTrack record Governance Management co. Economics Remuneration / incentives

Taking the lid off EIF’s Due Diligence process (2/5) Partner InstitutionsMarket / competitors Metrics: research budget, peer group comparisons, invention disclosures, IP filed, IP awarded, growth rates, commercialisation income, encumbrances, 3 rd party agreements Structure: organigramme 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 Investment strategy Trends: in targeted sectors, challenges faced, evolution in previous years Competitors: for financing, other sources of finance, private / public Demand side economics: analysis and evidence of demand for targeted projects 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, for example on previous examples 32

Taking the lid off EIF’s Due Diligence process (3/5) 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 yrs evolution of dealflow by source, sector, etc. Selectivity ratio: historical examples / experience Pipeline: of current and future opportunities 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 remun. / 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: which bodies, or individuals take final decisions at each stage, delegations foreseen Potential investorsInvestment processDealflow and pipeline 33

Taking the lid off EIF’s Due Diligence process (4/5) 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: yrs 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: for 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. TeamTrack RecordGovernance 34

Taking the lid off EIF’s Due Diligence process (5/5) History: evolution, founders, key dates and events in development, significant changes in organisation, strategy, ownership Legal status: capital structure, ownership Regulation: how management company shall be regulated, adherence to AML/KYC Budget: detailed forecast budget for management company over lifetime of 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 investment to fund aligns 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) Management co.EconomicsRemun. / incentives 35

36 EXAMPLES

Technology Transfer Financial Facility (TTFF) 37 provide support for attainment of proof of concept, help prototyping and initial development, through to growth “ ” PoC + Up to EUR 750k Co-investment 30% Seed Up to EUR 3m Co-investment 60% Operation Available to TTOs Evaluation 4-5wks Pilot EUR 60m PoC EUR 100 – 250k No co-investment

European Investment Facility (not a subsidy programme) Imperative of commercialisation: industry/investment community involved from the earliest stages Rigorous governance: professional, independent decision-making at every step Legal robustness, simple, cost-effective Key features of TTFF 38

EAF mandates as of today  EAF Germany:  Virtual structure within ERP/LfA mandates managed by EIF  Volume 70m€ (ERP/EIF 60m€, LfA/EIF 10m€)  Top-up to 135m€ (ERP/EIF +60m€, LfA/EIF +5m€) about to be signed/in final negotiations  EAF Austria:  Compartment of EAF SICAR structure advised by EIF, AWS supporting as sub-adviser  Volume 22.5m€ (AWS 15m€, EIF 7.5m€)  EAF Spain:  Compartment of EAF SICAR structure advised by EIF  Volume 30.0m€ (Axis/ICO 10m€, Neotec 10m€, EIF 10m€)  New compartments to be set-up early 2015  EAF Netherlands: 45m€ (DMEA/PPM Oost and EIF via DVI),  EAF Irelands: 20m€ (Enterprise Ireland 10m€, EIF 10m€) 39

Mandators / Investors LP Commitments Umbrella Structure with national Compartments EAF Co-Investment under CFAs Intermediaries Portfolio Companies PU n PU 3 Institutional Investor Institutional Investor *Structure is currently being set-up and not operative yet. European Angels Fund- Structure* Institutional Investor 1 European Angels Fund EAF Compartment 1 EAF Compartment 2 EAF Compartment n EIF / EIB Private Investor Private Investor Private Investor 1 Public Mandator Public Mandator Public Mandator 1 … EAF Compartment X BA 1 (Trustee) … PU 2 PU 1 Trust PU n PU 3 BA n (Trustee) PU 2 PU 1 Trust …