Start Up Boot Camp Start Up Boot Camp for University TTO Professionals and Inventors Money Matters Session 2: Money Matters Presents: 1www.technologytransfertactics.com

In Partnership With:

Your Panel of Presenters Gerard Eldering is Founder and President of InnovateTech Ventures, specializing in venture creation based on inventions licensed from universities and research institutions. Since the company’s founding in 2007, InnovateTech has supported numerous mid-Atlantic universities and co-founded three start-up companies including AlphaDetect and Trilumen. Gerard has been working in the technology transfer community for more than a decade and is passionate about the creation of professionally managed and funded start-up companies. Prior to launching InnovateTech, he founded and served as Director of the Technology Transfer Office at The MITRE Corporation. He is an MBA and a registered patent agent. Moderator:

Brian Cummings is the Executive Director of the Technology Commercialization Office at the University of Utah and Assistant Vice President for Technology Ventures. In the two and a half years that he has been in this role, the office has produced record revenues and successfully started 51 new technology-based companies, 80% of which have received initial funding and beyond. Brian has started three companies in his entrepreneurial career, and his latest endeavor is a technology based start-up utilizing RFID. He is also President of a university-based personalized medicine company. Previously, Brian led the life science commercialization efforts at the University of Texas and prior to that was the Director of Business Development at Micro-Bac International. Jack Brittain is the University of Utah’s Vice President of Technology Venture Development. He received his Ph.D. in Business from the University of California, Berkeley. A professor for 15 years before becoming Dean of the David Eccles School of Business ( ), he published numerous studies of strategic change in dynamic environments, research recognized by the Academy of Management with two outstanding paper awards. Professor Brittain is the recipient of five teaching awards, including the University of Texas Chancellor’s Council Outstanding Professor Award. In 2005 he received the Best of State Award in Education for the David Eccles School’s innovative entrepreneurship and non-profit consulting programs. In 2006 and 2007 he was selected as one of the v|100 by Utah’s leading venture capitalists, an award that recognizes Utah’s most successful entrepreneurs, and was featured as one of Utah’s “25 most influential business people” in 2006 and 2007 by Connect, and was named one of “Utah’s 100 Most Influential People” in 2008 by Utah Business. In 2008 he was named the first recipient of the Pierre Lassonde Presidential Chair in Entrepreneurship by the University of Utah. He serves on the boards of Junior Achievement, the Governor’s Office of Economic Development, the University Venture Fund, the Lassonde New Venture Development Center, the Sorenson Innovation Center, and the University of Utah Research Foundation. Troy D'Ambrosio is the co-founder of multiple start-up companies which have attracted over $500 million in capital. Some of his earliest successes include founding Transworld Telecommunications which was sold to Sprint in 1998 and Convergence Communications which was sold to Lockheed Martin in He was co-owner and President of D’Ambrosio Chrysler Jeep (sold 2007). He served as the VP of Investor Relations and Corporate Communication for American Stores Company and the Director of Mutual Fund Operations for Wasatch Advisors. Mr. D'Ambrosio is currently the Director of the Pierre Lassonde Entrepreneur Center and Lassonde New Venture Development Center where he has been mentoring students for the past eight years. He graduated from the University of Utah in 1982 and was named the Ernst & Young Entrepreneur of the Year in 2000, a v100 Technology leader in 2008 and Best in State Educational Program Administrator in Your Panel of Presenters

Legal Expertise Provided by: Adam Klotz, heads GTC Law Group’s Los Angeles affiliate office (formerly Lenard & Klotz LLP) and specializes in business transactions, with a particular focus on mergers and acquisitions, venture capital and private equity financings and the structuring, formation and financing of complex joint ventures, partnerships and limited liability companies. He has extensive experience handling these and other types of complex transactions for entertainment and technology clients. Previously, Adam practiced at Riordan & McKinzie (now Bingham McCutcheon LLP) and Paul, Hastings, Janofsky & Walker LLP. Adam holds a B.A. from Columbia College in the City of New York and a J.D. from the University of Virginia School of Law. Your Panel of Presenters

The Realities… The knowledge and skills that are required to build a company to exploit new technologies and products often are very different from those that were required to invent them. The typical inventor can therefore benefit from having a strong team of advisors to select the appropriate commercialization team, partners and financing

US Venture Capital Concentrated 2007 Money Matters: Access to Capital

Myths: Avoid the VC’s like the Plague No such thing as free money Non-dilutive capital is out there SBIR, Foundation, State, U Grants, Debt Angels are better than VC’s Start-ups can’t be financed with debt. Debt is more common than equity – 53% It takes a lot of money to finance a start-up Not true. The typical start-up requires about $25,000 to get going

Angel vs VC In the current economy, institutional investors (venture capital funds) are increasingly seeking companies that have already demonstrated significant traction (e.g., customers, contracts or even revenues) and wanting to invest only large amounts ($3 million or more). Angel investors, whether individuals or organized funds, can be a good source of seed capital

Alternatives 10 Many professional firms (accounting, law, consulting, engineering) will contribute services on a contingent and/or deferred fee basis and/or for equity in order to help start-ups, both for potential economic rewards and to build new clients.

Valuation Issues Valuation of a pre-revenue company is a negotiation, not a science. The process fundamentally depends upon the investor’s belief in the company’s potential and whether it has alternatives

Equity Allocations Founders often focus too much on the capitalization (“cap”) table. It is much better to own a smaller percentage of a huge enterprise than 100% of a non-operational entity. The key is to focus on the size of the pie, not just the slice you own. Savvy investors are concerned not only with return on their investment, but also with ensuring that capital structure creates proper incentives

Option Pools and Other Equity Dilutions The typical VC term sheet will reserve 10-20% of the unissued equity for future issuances to management and other service providers. This impacts valuation and needs to be taken into account in comparing various offers

Investment Schedules/Tranches Investments may be staged over time or conditioned upon the achievement of milestones.

Milestones Crucial to make certain that: Milestones are achievable Funding amounts match needs Appropriate penalties exist for investor breaches

The University Stake

Negotiation points: Preferred vs Common University negotiation Inventor negotiation Equity vs Royalties Valuation Options and warrants in the license Participation in future rounds Fair market value The University Stake

Inventor Stake Inventors should think about: The critical role they play But only to a degree – Executive team Conflict of interest Double dipping? Role in Company Board, SAB, Founder, Employee How much equity is enough? Don’t be greedy

Walk-Through of Sample VC Term Sheet

Q&A Utilize the chat box to the bottom left of your screen to submit a question to the panel. Please address your question to a specific presenter. Or Press * 1 on your touchtone phone and this will place you into the phone queue.

Introduction to Session Three (June 17, 2010) Creating A Solid Business Plan Creating A Solid Business Plan Managing risk – Audience, market, product – Executive team, financial, etc. Problem and solution statement Mistakes to avoid