Constructing an Arizona Bioscience Dealmaker Network: A Proposal to Support BioAccel s Initiative to Build Out the Investment Ecosystem

Transcription

1 Constructing an Arizona Bioscience Dealmaker Network: A Proposal to Support BioAccel s Initiative to Build Out the Investment Ecosystem CommonWeal, LLC of Chapel Hill, North Carolina is pleased to submit this work statement to BioAccel to support its on going early stage funding and bio business mentoring mission as well as the specific objectives associated with its Regional Innovation Strategies program grant. The basis and driver for the overall approach is the Dealmaker proprietary analytical engine developed by CommonWeal to deliver detailed insight into the dynamics of entrepreneur, investor, and company networks that power new value creation within economies. The Dealmaker framework is based on the concept that networks of serial entrepreneurs, investors and their affiliated companies play a critical role in driving value creation and shaping the character of robust regional economies. Firm and company level information identifying the actors and their connective relationships can provide a new window into the innovation dynamics within a regional economy as a whole and just as importantly into the entrepreneurial behavior, investor focus and innovation hot spots within specific industry sectors and sectors. Within the CommonWeal approach Dealmakers are actors who have founded, managed or invested in multiple private entrepreneurial firms, and hold concurrent equity ties to multiple firms as a consequence of their serving on the boards as advisors, investors or managers of these firms. They are specifically defined as those individuals who have three or more concurrent equity positions in private entrepreneurial firms as a consequence of their entrepreneurial or investment activities. Generally, by virtue of their experience, the most facile and active entrepreneurs and investors are considered Dealmakers. Dealmaker analytical engine output is drawn primarily from the Capital IQ database, a private database maintained and licensed by Standard & Poor, that provides quantitative research data and analysis applications to over 4,200 investment management firms, private equity funds, investment banks, advisory firms, corporations, and universities. This unique private dataset maintains detailed records about private firms, their managements, and their boards of directors based on data submitted by the companies at incorporation and through the shelf registration process, and made available to licensees on a current snapshot basis. As a general rule, firms that have received some form of formal outside investment will be captured within this database. 1

2 As described below, this CommonWeal Dealmaker work plan for BioAccel is defined by three major tasks. 1. The Dealmaker Foundation Database : Constructing an Arizona wide bioscience industry entrepreneur, investor and company database 2. The Arizona Dealmaker Network : Identifying and analyzing the firm to firm (Dealmaker) network currently in play within Arizona s bioscience sector by pinpointing that subset of serial entrepreneurs, investors and their associated firms that drive value creation and then mapping the social capital relationships among these various actors 3. Customized Investment Ecosystem Support : Developing, in concert with BioAccel, a Dealmaker based Investment Ecosystem Toolkit to support both the BioAccel s on going early stage funding and bio business mentoring mission as well as the specific objectives associated with its Regional Innovation Strategies program grant. The Work Plan Task 1: The Network Foundation Database As a first step, the output for entrepreneur and investor records across all industry domains identified by the Dealmaker engine will be configured in a traditional Excel spreadsheet database organized by Dealmaker ties, with each actor identified by sector/industry for each of their affiliated companies, their role as key executive and/or board member, and by Dealmaker type (e.g., Serial Investor, Investor, Entrepreneur, Entrepreneur with Finance Tie). Then separate tabs will be created that organize the database information into the ten major Global Industry Classification Standard (GICS) sectors. The Standard and Poor s GICS system model is the global standard for categorizing companies into sectors, industries and sub industries. The GICS typology was developed for the worldwide financial community and has become the commonly accepted global industry analysis framework. Each company s classification category reflects its primary business model based on its financial performance. GICS is comprised of 10 sectors, 24 industry groups, 68 industries and 154 sub industries. After that organizational task is completed the research team will construct a bioscience sector definition distilled from the 154 sub industry classifications within the GICS typology and then populate a separate bioscience network foundation database. The database will function as the platform for the Dealmaker focused analytical tasks at the bioscience sector and sub industry level. Additionally, casting a wide net at the beginning of this task by creating an aggregated database encompassing all industries allows the research team the flexibility to perform the detective work needed to identify and include firms outside the formal bioscience sector definition that really function within the bioscience domain. For instance, a firm classified as an Information Technology establishment may be focused on genomics software, an advanced manufacturing 2

3 firm may be producing Nano or micro devices for therapeutic applications, a materials firm may be creating coatings for instruments or drug delivery systems, etc. Deliverable #1: Spreadsheet based Network Foundation Database Task 2: The Arizona Bioscience Sector Dealmaker Network Analysis and Map Task 2(a): The Bioscience Sector Dealmaker Network Database The first step in this task will be to construct the actual bioscience sector serial investor and entrepreneur (Dealmaker) database by identifying all actors with concurrent equity positions whose activity is predominately in the bioscience domain. Along with established with Dealmakers (entrepreneurs and/or investors with three or more concurrent equity positions) we propose expanding the scope of the network database to include those Arizona actors with 2 equity positions. For the purposes of this analysis, these folks are considered nascent Dealmakers in that they are exhibiting an inclination or the capacity to become serial entrepreneurs and investors and are viewed as a significant potential new asset within the region s innovation eco system. This group is typically large and as such, is strategically noteworthy especially for economies that do not have established dense Dealmaker networks. Deliverable #2: Spread based Bioscience Sector Dealmaker Network Database Task 2(b): The Arizona Bioscience Sector Dealmaker Maps Using the information in the Dealmaker sector database, the next step is to identify and map the actual Dealmaker network within the sector. Network maps will be plotted for those actors with at least three equity positions (established Dealmakers) and for actors with at least two equity positions (this factors in the Nascent Dealmakers). This social network maps will deliver a visual representations of the density and nature of the connections among various actors and firms within the network. The maps will be delivered in an interactive graphml (Graphic Markup Language) format. The graphml formatted maps provide quick and easy access to the useful information embedded in the maps by allowing the user to click on an individual to highlight that person s company, investment and entrepreneurial connections and relationships within the map. The map plots list individual to firm connections within the network and uses three icons to categorize the actors. Square icons indicate companies; circular icons indicate individuals that the DealMaker approach classifies as primarily investors; and triangular icons denote the individuals classified as primarily entrepreneurs. Deliverables #3: Arizona Bioscience Sector Dealmaker Maps at 3+ and 2+ Equity Positions Levels in GML and PDF formats (4 Maps) 3

4 Task 3: Customized Investment Ecosystem Support For this final task CommonWeal will develop a Dealmaker based Investment Ecosystem Toolkit to support both the BioAccel s on going early stage funding and bio business mentoring mission as well as the specific objectives associated with its Regional Innovation Strategies program grant. At the completion of Task 2, CommonWeal will work with BioAccel to identify highest and best use toolkit elements. It is anticipated the kit will contain from four to six investment ecosystem support tools depending on their complexity and development costs. We anticipate that the CommonWeal/BioAccel team may well conceive new toolkit elements based on the unique content of the Arizona Dealmakers network, the state of development of the Arizona investment ecosystem and innovation infrastructure and the BioAccel mission. By way of example, here is a representative listing of similar Dealmaker network actionable analytical tools from prior CommonWeal Dealmaker network initiatives. Network Linchpins Profiles: Linchpins are Dealmakers with at least six equity positions. This is one indicator of network character. By virtue of their very high activity level these Dealmakers represent in many respects the wisest assets in the network. Profiles contain detailed workups for each Linchpin including various connectivity measures within the network, home company business description, target company (Dealmaker equity) business descriptions, and business bios. Broker Positions: Within a Dealmaker network certain individuals and companies by virtue of their location within the maze of network connections have the capacity to influence information flows and outcomes for the entire network. These are folks that have a high number of connection paths among entrepreneurs, investors and companies going through them.. They occupy broker positions. It is a relative measure and indicates the individuals power position within the network. These broker positions can be identified within a network using a Betweenness Centrality arithmetic function. Regional Dealmaker Network Breakouts: To enable a more detailed understanding of the state and development status of local Dealmaker networks CommonWeal can generate Dealmaker network maps for key Arizona regional economies for instance, Phoenix and Tucson. Individual Dealmaker Summary Profiles: CommonWeal can build a spreadsheet based individual Dealmaker profile archive that contains valuable supplemental information including the individual s business bio, the Dealmaker s home company, and business descriptions, websites and addresses for the Dealmaker s target companies. Dealmaker Associated Company Profiles and Network Connectivity Sketches: This spreadsheet based tool will feature profiles on the companies connected to the serial entrepreneurs and investors in the 4

5 Dealmaker bio network. In addition it will include measures we use to calibrate the companies "connectedness" within the Dealmaker network/cluster including one to identify the one person in each company most connected into the network. Dealmaker Bioscience Sub Industry Presence Profile : This element will offer a bird s eye view of serial entrepreneur and investor activity levels across the various sub industries that define the bioscience sector. As such, it offers a quick glimpse into what kind applications and companies are receiving the most Dealmaker attention. Bioscience Sector Equity Flow Inventory: This tool will identify and profile equity transactions within the Arizona bioscience sector. It will include investor and investment target profiles, stage and type of deal, and transaction values. Business to Business (B2B) Dealmaker Bridgemakers: If BioAccel is interested in identifying conduits for investments or partnering between regions or places, this tool can identify Dealmakers with concurrent equity positions in two different regions; for instance those with positions in both Tucson and Phoenix or Phoenix and Los Angeles. These individuals and their companies as well as their associated networks can be identified through the application of the Dealmaker engine and positioned as the connective tissue between the two regional entrepreneurial economies. Deliverable #4: Four to Six Toolkit Elements as Described Above Project Cost, Timeline and Deliverables CommonWeal will perform the above described services and produce the associated deliverables for a fixed price of $25,000. The project will take ninety days to complete. The effort will adhere to the following deliverable and payment schedule. $6,000: upon execution of the contract $6,000: upon submission of deliverable #1 & deliverable #2 (day 30) Network Foundation Database and Bioscience Sector Dealmaker Network Database $6,000: upon submission of deliverable #3 (day 45) Arizona Bioscience Sector Dealmaker Maps at 3+ and 2+ Equity Positions Levels in GML and PDF formats (4 Maps) $7,000: upon submission of deliverable #4 (day 90) Dealmaker Based Investment Ecosystem Toolkit 5