1. University of Twente
Funding your company, opportunities, rules
26 January 2012
Harm de Vries - Twente Technology Fund
2. A technology spin-off
i s a n e w c o m p a ny f o u n d e d
to exploit a piece of
i n t e l l e c t u a l p ro p e r t y
created in an academic
institution or company
Harm de Vries - Twente Technology Fund
3. Creating a company is not a
new research project;
it is a business project that
is able to turn a technology
or an invention into a
shareholders’ return.
Harm de Vries - Twente Technology Fund
5. Why Commercialise IP?
• Non-core business, thus more focus / less distraction
• Better development in entrepreneurial environment
• Better external financing solutions (share risk and
rewards with other parties)
• Expand presence in the marketplace
• Allow quicker growth than in the mother company
• No more drain on mother company’s resources
Harm de Vries - Twente Technology Fund
6. Spin-off or License?
Spin-Off
+
•
•
•
Upside potential
Control
Focus
-
•
•
•
Financial risk
Active role
Wait for return
• Employment
• Quick return Royalties • Limited upside
License • No further investments /
involvement
• Loss of control
(shelving)?
• Sit back and wait • Finding a proper licensee
Harm de Vries - Twente Technology Fund
7. Venture
Capitalist
Common Labour &
s
re
know-how
a
Shares
Sh
IP Transfer
d
re
Research Coll. Capital
er
ef
NewCo
Pr
Office space
Separation Phase Post Separation
Harm de Vries - Twente Technology Fund
8. Separation Phase
• Transfer of IP (how?)
• Future Collaboration (R&D, launching
customer)
• Transfer / use of personnel
• Investment in cash or in kind
Harm de Vries - Twente Technology Fund
9. Post Separation Phase
Financing
• Bank loan
• Grants
• Friends & family
• Venture Capital
Harm de Vries - Twente Technology Fund
10. VC Criteria
• Unique product(s) and/or technology platform
• Skilled and committed team (with entrepreneurial spirit)
• Solid IP and IP ownership
• Clear market and medical need
• Exit potential within 3-5 years
• High expected internal rate of return (IRR)
• Realistic valuation
Harm de Vries - Twente Technology Fund
11. Investment Process
Sourcing
Syndication &
Contract drafting
due diligence
Meetings
Closing Term Sheet
Due diligence Negotiations & Structuring
Harm de Vries - Twente Technology Fund
12. Term Sheet
• Focuses parties
• Secures exclusive position
• Reduces future misunderstandings
• Sets a time line for negotiations and closing
• Addresses the main concerns of VC investors
1. Did I pay the right price?
2. How will the funds be used?
3. How and when can I exit?
4. How can I retain the key persons?
Harm de Vries - Twente Technology Fund
13. use of anti-dilution
syndication
milestones protection
Did
36. Incorporation
Incorporation
Common %
Shares Holding
Professor A 600,000 60%
University 400,000 40%
Total 1,000,000 100%
Harm de Vries - Twente Technology Fund
37. Angel Round
Pre financing Seed round Post financing
Common % Shares Total %
Shares Holding Amount issued # Shares Holding
Professor A 600,000 60% 600,000 40%
University 400,000 40% 400,000 27%
Angel 0% €250,000 500,000 500,000 33%
Total 1,000,000 100% €250,000 500,000 1,500,000 100%
Valuation Pre-money €500,000 Price per share €0.50
Investment round €250,000
Post-money €750,000
Harm de Vries - Twente Technology Fund
38. Series A Round
Pre financing Series A Post financing
Common % Shares Issuance Total %
Shares Holding Amount issued ESOP # Shares Holding
Professor A 600,000 40% 600,000 27%
University 400,000 27% 400,000 18%
Angel 500,000 33% 500,000 23%
VC 1 €2,000,000 600,000 600,000 27%
ESOP 110,000 110,000 5%
Total 1,500,000 100% €2,000,000 600,000 110,000 2,210,000 100%
Valuation Pre-money €5,000,000 Price per share €3.33
Investment round €2,000,000
Post-money €7,000,000
Harm de Vries - Twente Technology Fund
39. Series B Round
Pre financing Series B Post financing
Common Pref Total % Shares Issuance Total %
Shares Series A # shares Holding Amount issued ESOP # Shares Holding
Professor A 600,000 - 600,000 27% 600,000 17%
University 400,000 - 400,000 18% 400,000 11%
Angel 500,000 - 500,000 23% 500,000 14%
VC 1 600,000 600,000 27% €3,500,000 442,000 1,042,000 29%
VC 2 - - 0% €6,500,000 820,857 820,857 23%
ESOP 110,000 - 110,000 5% 65,000 175,000 5%
Total 1,610,000 600,000 2,210,000 100% €10,000,000 1,262,857 65,000 3,537,857 100%
Valuation Pre-money €17,500,000 Price per share €7.92
Investment round €10,000,000
Post-money €27,500,000
Harm de Vries - Twente Technology Fund
40. Series C Round
Pre financing Series C Post financing
Common Pref Total % Shares Issuance Total %
Shares Series A+B # shares Holding Amount issued ESOP # Shares Holding
Professor A 600,000 - 600,000 17% 600,000 9%
University 400,000 - 400,000 11% 400,000 6%
Angel 500,000 - 500,000 14% 500,000 7%
VC 1 1,042,000 1,042,000 29% €5,000,000 321,623 1,363,623 20%
VC 2 820,857 820,857 23% €5,000,000 321,623 1,142,481 16%
VC 3 - - 0% €15,000,000 964,870 964,870 14%
VC 4 - - 0% €15,000,000 964,870 964,870 14%
ESOP 175,000 - 175,000 5% 875,000 1,050,000 15%
Total 1,675,000 1,862,857 3,537,857 100% €40,000,000 2,572,987 875,000 6,985,844 100%
Valuation Pre-money €55,000,000 Price per share €15.55
Investment round €40,000,000
Post-money €95,000,000
Harm de Vries - Twente Technology Fund
41. IPO
Pre financing IPO Post IPO
Common Pref Pref Pref Total Conversion % Shares Total %
Shares Series A Series B Series C # shares Stock split Holding Amount issued # Shares Holding
Professor A 600,000 600,000 715,733 9% 715,733 6%
University 400,000 400,000 477,155 6% 477,155 4%
Angel 500,000 500,000 596,444 7% 596,444 5%
VC 1 600,000 442,000 321,623 1,363,623 1,626,651 20% 1,626,651 14%
VC 2 820,857 321,623 1,142,481 1,362,852 16% 1,362,852 12%
VC 3 964,870 964,870 1,150,983 14% 1,150,983 10%
VC 4 964,870 964,870 1,150,983 14% 1,150,983 10%
Flotation - €50,000,000 3,333,333 3,333,333 29%
ESOP 1,050,000 1,050,000 1,252,533 15% 1,252,533 11%
Total 2,550,000 600,000 1,262,857 2,572,987 6,985,844 8,333,333 100% €50,000,000 3,333,333 11,666,667 100%
Valuation IPO Pricing €125,000,000 Price per share (before split) €17.89
Investment round €50,000,000 Price per share (after split) €15.00
Postmoney €175,000,000
Harm de Vries - Twente Technology Fund
42. Titel:
Venture Capital Term Sheets “a guide to
structuring and negotiating venture
capital transactions”
Authors:
H.F. de Vries and M.J. van Loon
Publisher:
Reed Business Information
ISBN13:
9789059016323
!
Harm de Vries - Twente Technology Fund
