1. Endowment and Foundation Venture Investing
Anlyan Center Auditorium
Yale University
New Haven, Connecticut
May 10, 2012
www.cvg.org

2. Welcome
Welcome
Gregg Lallier
Partner
Updike, Kelly & Spellacy
www.cvg.org

3. CVG Sponsors
Deal Lead
B Round
www.cvg.org

4. Our Sponsors
A Round
Venture Capital Sponsors
Professional Service Firms
www.cvg.org

5. Legislative Update 2012
Gregg Lallier
Partner
Updike, Kelly & Spellacy
www.cvg.org

6. CVG
Panel Moderator
Stephen Bloch
General Partner
Canaan Partners
www.cvg.org

7. About Canaan Partners
» 20 year old global firm with offices in
Silicon Valley | New York Corridor | India | Israel
» $3 Billion assets under management across 8 funds
» Technology + Healthcare focused
» Early-stage investments (Series A/B)
» 122 successful exits
» 164 years investing experience
» 142 years operating experience
» 4 former CEOs
» 3 MDs and 2 PhDs
www.cvg.org

8. Canaan IX
• $600 M closed January 2012
• Diversification strategy
– 1/3 Healthcare, 2/3 Technology
– 75% U.S., 25% India & Israel
• Primarily early-stage focus >75% of investments
• Lead or co-lead >90% of transactions
www.cvg.org

9. Business Models
Business Approach
• How we find interesting opportunities
– Network, network, network
– Repeat entrepreneurs in 20% of our companies
– Constant marketing to entrepreneurs in various forums
• What we look for in start-up companies
– Large market opportunities
– Teams that can execute and that have a track record
– Highly-differentiated technologies
• Team-oriented assessment process
– 1st and 2nd for each investment opportunity
– ALL investments go through the same process
– Weekly, monthly, and quarterly discussions of all investments
www.cvg.org

10. Facts and Figures
Venture Capital Investors
Private & Public
Pension Funds, 42% Finance & Insurance,
25%
Corporations Endowments &
Operating Funds Foundations, 21%
(not pension), 2% Individuals &
Families, 10%
Source: 2004 NVCA Yearbook prepared by Thomson Financial using 2003 data
www.cvg.org

11. Facts and Figures
Active Private VC-backed companies*
United States Europe Israel
n=
n= n=
n = 2968 2877 2890
2750 199 n=
110 230 2606 207 n =
183 2419
663 863 203
884 978
798
803 n=
695 n= 1603 n =
722 183 1384 n=
705 711 1375 n=
707 158 189 1176 1247
554 468 162
298 171 n=
395
361 414 822
87
1,282 1,184 358 358
1,058 918 328 302
994 859 275 295
561 594 472 186 n= n= n= n=
369 376 247 n= n=
160 183 164 117 87 69
IT Healthcare
Product Other
s and
Services
*Private and independent VC-backed companies that received at least one round of financing in the prior six years
Source: Dow Jones VentureSource
www.cvg.org

12. Facts and Figures
Healthcare: Number of VC-backed Companies *
United States Europe Israel
n= n=
n= n= n=
722 711
695 704 705
48
65 49 73 64
n=
554
280 61
288 285
277 290 n=
n=
358 n= n=
356 n=
52 225 65 48 327 295
55 49 53 49 274
45 64
118 110 73 n=
46 109 186
15 97
16 94 61
9 11
342 318 309 10
298 297 76
222 207 215 192 6 n=
158 175 n= n=
99 50 n= n= n=
49 45
28 25 20
Biophar Healthcare Medical Medical
ma Services Devices & Softwa
Equipment re & IS
*Private and independent VC-backed companies that received at least one round of financing in the prior six years.
Source: Dow Jones VentureSource
www.cvg.org

13. Facts and Figures
Cumulative Capital Invested*
United States Europe Israel
$34B
$30B
$31B $30B $3.9B
$1.3B $2.9B
$4.6B
$5.3B $25B
$6.7B $2.4B $14B
$24B
$8.2B $3.0B
$9.0B $8.2B
$10.1B $8.2B
$8.6B
$8.1B
$7.7B
$6.0B
$14.3B $7.9B $7.1B $6.4B
$11.5B $5.6B $3.0B $6.4B
$9.2B
$7.1B $8.2B $6.8B
$0.9B $1.9B $3.9B $$1.6B $4.0B
$2.0B $2.0B $1.6B $1.8B $$1.4B
$2.0B $2.2B $1.7B $1.3B $2.2B $1.0B
$1.1B
$1.1B
$0.7B $0.8B $1B $0.4B $0.6B $0.4B
IT Healthcare
Product Other
s and
Services
*Private and independent VC-backed companies that received at least one round of financing in the prior six years
Source: Dow Jones VentureSource
www.cvg.org

14. Facts and Figures
Healthcare: Cumulative Capital Invested*
United States Europe Israel
$10.1B
$0.3B
$9.0B
$0.4B $8.6B
$0.4B $8.1B
$3,.7B $7.6B $0.4B
$0.4B
$3.0B
$3.3B $2.5B $6.0B
$0.4B $2.9B $0.4B
$0.8B
$0.4B $1.4B $2.5B
$0.4B
$5.7B $0.4B
$4.9B $4.5B $3.9B
$3.8B $2.0B $2.1B
$0.3B $0.4B $1.6B $1.8B
$2.6B $0.4B $1.3B $0.4B $1.2B
$0.3B
$1.6B $1.5B $1.1B $0.4B
$0.9B $1.3B $0.8B
$0.2B $0.2B $0.2B $0.1B $0.2B $0.1B
Biophar Healthcare Medical Medical
ma Services Devices & Softwa
Equipment re & IS
*Private and independent VC-backed companies that received at least one round of financing in the prior six years.
Source: Dow Jones VentureSource
www.cvg.org

15. The Bad News…
Healthcare VC Fundraising Down Sharply
Amount Raised ($M) # Funds
$200,000
236
222
$150,000
$ Raised (in millions)
145
$100,000
$50,000 62
38
$-
2006 2007 2008 2009 2010
Data from Thomson Reuters
www.cvg.org

16. The Good News…
Healthcare VC Investments Holding Steady
Biotechnology Medical Devices and Equipment Healthcare Services
2000
1800 152 100
147 114
1600
93
1400 671 717
630 677
Number of Investments
1200 608
1000
800
600
1067 1004 1051
998
895
400
200
0
2006 2007 2008 2009 2010
Data from Thomson Reuters
www.cvg.org

17. Five Year
Liquidity: IPO Market Rebounding
Biotech Medical Devices & Equipment Healthcare Services Total Amt
35 $3,000
1
30
$2,500
10
25
$2,000
Total $ Raised (in millions)
10
Number of IPO's
20
$1,500
15 1
3
$1,000
10 21
17
12 $500
5
1
2 3
0 1 $-
2006 2007 2008 2009 2010
Data from Thomson Reuters
www.cvg.org

18. Five Year
Liquidity: M&A Activity Increasing
Biotech Medical Devices & Equipment Healthcare Services Total Amt
70 $9,000
$8,000
60 12
9 $7,000
50 5
$6,000
Total $ Value (in millions)
21
Number of Deals
40 21 4 $5,000
23 3
30 $4,000
19
14
$3,000
20
32 $2,000
29
24
10 19 19
$1,000
0 $-
2006 2007 2008 2009 2010
Data from Thomson Reuters
www.cvg.org

19. Introduction
Panelist
Lynne Garner
President and Trustee
The Donaghue Foundation
www.cvg.org

20. Who is Donaghue
• Who is Donaghue, our grant programs,
and what we need help with
• Impact investing from our perspective
• How can entrepreneurs help Donaghue
and similar foundations
• Final thoughts
www.cvg.org

21. The Patrick and Catherine Weldon
Donaghue Medical Research Foundation
• Private foundation; Current assets $62M
• >$83M in grants
• Investments:
– 2.8 cash
– 58.7 equities
– 33.1 fixed income
– 2.4 real estate
– 2.8 commodities
• No alternatives
www.cvg.org

22. Donaghue’s purpose
“to provide financial assistance for research in the
fields of cancer, health disease and/or other
medical research to promote medical
knowledge which will be of practical benefit
tothe preservation, maintenance, and improvement
of human life”
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24. Grant Programs
www.cvg.org

25. Ex: Program for Research Leadership
• Team-based award – team often includes someone
from outside academic community
• 4 years - $220,000 each year
• 3 components to application: research, knowledge
uptake, team-building
• Non-researcher on review committee to “kick the
knowledge uptake tires”
www.cvg.org

26. New grant program – R3
• $30K-$50K for 18 month
• Purchase consultation to bridge from research to
users
– Market analysis, focus group of potential users
– Graphic design & digitizing intervention materials
– Programming for use in HER
– Develop prototype
• Applications would not get a research-methods
review
• Open to former Donaghue grantees
www.cvg.org

27. Beyond Grant Programs
www.cvg.org

28. Opportunities to gain expertise
Social marketing Effective communications
Sharyn Sutton PhD, AARP Foundation Chip Heath, PhD Stanford University
Venture capital investment Scaling up evidence -based programs
Guy Fish, MD, Fletcher Spaght Ventures Peggy Hill, MS, National Replication office, Nurse-Family
partnership
www.cvg.org

29. Grantees with specific “after the grant”
projects
Donaghue grant-7 yrs, $3M Donaghue grant-4 yrs, $.9M
Study interventions reduced falls through risk factor Faith-based weight loss intervention program
identification, and changing provider, health care developed
organization and patient practices by/for African -American
women effective in
producing modest,
sustained outcomes
Donaghue grant-5 yrs, $1.2M Donaghue grant-2 yrs. $245K
Study primary care based Use of medical simulation to improve leadership &
physician interventions teamwork in addressing patient safety issues
improved asthma
management & reduced
medical cost s for high risk
children
www.cvg.org

30. Initiatives to advance the scale-up field,
contribute to community building
Funders Forum Scale up conference
Generate discussion/action by funders of health Participate in collaborative, multi-stakeholder
interventions efforts
Commissioned white papers Think Tank support
Survey of university technology Academic researchers & community-
transfer offices based physicians discuss collaborating to Improve
patient care
Scale-up of evidence-
based community
Health programs
Market receptivity to
adopting interventions
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31. Impact Investing
Mission-related investing
Program-related investing
www.cvg.org

32. IRS rules for private foundations
• Restrictions on self-dealing
• Must annually distribute 5% for charitable purposes
• Limit on their holdings in private businesses
• Investments must not jeopardize charitable purpose
• Expenditures must further charitable purpose
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33. “Should a private foundation be
more than a private investment
company that uses some of its
excess cash flow for charitable
purposes?”
Luther Ragin, F.B. Heron Foundation

34. Mission Related Investing – the 95%
• Most foundations invest in fund of funds
• Questions regarding MRIs (esp. for single-fund
investments)
– How does the investment align with mission?
– Structure of investment and level of risk?
– What due diligence is needed to evaluate?
– What benchmarks are used to monitor?
• Easier for you; harder for us
www.cvg.org

35. Program Related Investing – the 5%
• Provides grant with returns
• Purpose of investment must advance charitable
mission
• Investment return cannot be primary purpose
• Same questions as for MRIs
• Easier (and more advantageous) for us; probably
harder for you
www.cvg.org

36. Considerations for both MRIs and PRIs
• How does investment further the mission?
• Is it an investment for income (95%) or a program
(5%)?
• Jeopardizing investment rule – risk may be too high
and/or return too small
• Cost of monitoring the investment
• How does it fit with the foundation’s overall assets
www.cvg.org

37. Emerging models
• B corps - “Firms with benefits” The Economist 1/7/12
• Social Impact Exchange – creating capital markets to fund
high-impact non-profit ventures
• Social Impact Bonds – NYT Economix blog
http://nyti.ms/gxBwqQ
• MX.com – “a marketplace for healthcare innovations”
www.cvg.org

38. Can entrepreneurs help us?
• Significant capital & business expertise is required to
launch evidence-based innovations
• Assist in the challenge of monetizing social, clinical
innovations
• Partner in a more problem-solving philanthropic
enterprise by promoting new paradigms, methods,
rewards
www.cvg.org

39. Final thoughts
• Foundations have a social mission
• Are challenged in getting their “products” sustainably
implemented
• Have limited resources to spend on seed-capital
investing
• If your innovation can help with a foundation’s social
mission, you may have a match
www.cvg.org

41. CVG
Panelist
Kevin Edwards
Vice President of Finance and Chief Investment Officer
The University of Connecticut Foundation Inc.
www.cvg.org

42. The UConn Foundation - Organization
• 501(c)(3) tax exempt corporation
• Institutionally related foundation separate from University
• Mission exclusively to provide private financial support to the University of
Connecticut
– Fundraising and stewardship
– Asset management
• Volunteer Board of Directors including ex-officio University representatives
• Board delegates work to established committees
– Investment Committee manages portfolios; recommends policy changes
– Staff and outside consultants support and bring recommendations
• Assets $387 million at December 31, 2011
– Endowment $320 million (includes all endowment supporting UConn)
– Non-endowed and other $67 million
• Sole Shareholder of UConn Research & Development Corp.
– Tech transfer of University IP
www.cvg.org

43. Long-term Pooled Investment Portfolio
Asset Allocation at December 31, 2011
Equity-like risk TIPS 5%
High yield debt 5% Natural resources 8%
Global equities 26%
Private capital 16%
Real estate 7% Inflation
Opportunistic 5% hedge, 14%
Growth, 72%
Lower risk hedged Risk
minimizing, 14
strategies %
Long/short equities 9%
Global macro 3% Investment grade debt 5%
Event driven 3% Relative value 6%
Cash 2%
Downside and inflation protection with growth to meet goals
Diversified risk
www.cvg.org

44. Venture Capital Program
• ~25% of Private Capital program (3%-4% of total endowment)
• Fund of Funds – Primary and Secondary
• Diversification by vintage year and manager
• International exposure increasing
– 32% of latest fund outside US
– China approximately half of non-US exposure
• IT dominates with Life Sciences and Energy rising
• Denominator effect still an issue
www.cvg.org

45. Venture Capital Environment
• Capital inflows to funds rose slightly in 2011 – late stage dominant
• New fundraising flat year over year (2011 vs. 2010)
• Investment rose: software, biotech, med. devices, alt. energy
• Exits similar to 2005 – 2006; IPO’s down from 2010; M&A flat
• Valuations highest since 2000 – driven by late stage
• New company formation upward trending near 2006-2008 levels
www.cvg.org

46. UConn Economic Development Programs
UConn Research and Development Corp
• Commercialize University IP
• Tied into University Office of Economic Development
• 100% focused on business formation
– Work with faculty through proof of concept to full operations
– Raise funding – Grants, Angel, Venture, Internal Fund
– Identify entrepreneurs and management teams
Knowledge Portal and Incubation Programs
• Tech Knowledge Portal assists existing companies with tech issues
• Incubators - infrastructure and support to help create businesses
– Facilities – labs, office space
– Access to faculty experts, research, student employees/interns
www.cvg.org

47. Discussion
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48. Q&A
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49. Closing
Liddy Karter
Executive Director
Crossroads Venture Group
www.cvg.org

50. Upcoming Events
Become a member at cvg.org/join-now and attend all these events free!
6/14: Business Process Outsourcing, Stamford
7/12: Corporate Venture Investing, Hartford
8/9: Summer Networking, New Haven
9/13: Tech Enabled Marketing Services, Stamford
10/11: Tech Transfer Summit, Hartford
11/8: Medical Devices, New Haven
12/6: Investment/Tech Community Holiday Party, Stamford
12/13: Digital Media, Stamford
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