Public-private investment instruments of NCRD. The BRIdge programs

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1 Public-private investment instruments of NCRD The BRIdge programs

2 NCRD OVERVIEW Overview Poland s National Centre for Research and Development ( NCRD ) is an executive agency of Poland s Minister of Science and Higher Education Responsibilities include: Financing of applied research projects and strategic programs Management of EU funding in the science sector Supporting the commercialisation of R&D results In 2011, the NCRD s remit was extended to new initiatives, significantly increasing its budget by c.usd 630m Under this new remit: >2,500 contracts have been signed with entrepreneurs >700 enterprises that carry out R&D projects have been cofinanced Today the NCRD comprises >350 employees and with annual budget of c. 1.6 billion USD Company snapshot Year of establishment 2007 Number of employees >350 Annual budget Beneficiaries of NCRD funds in 2013 (by type) Enterprises 12% Universities 29% Research Units 11% NGOs 1% Others 1% c.usd 1.6bn Consortia 46%

3 From the idea to expansion We fishing innovations in all industries

4 The BRIdge programs Investment Instruments with public-private financing formula. NCRD acts as the limited partner = no active operational involvement + limited involvement on the strategic level BRIdge programs have been launched in order to: increase the effectiveness of public spending devoted to support of R&D commercialization provide the financing for R&D projects in the death valley increase the exposure of Polish science sector to private capital financing create coherent ecosystem for development of R&D projects with significant commercial potential

5 Program implemented by 2 external partners aimed at optimizing the value of projects co-financed by NCRD under other financing schemes. Co-financing of R&D projects in the early stages of development - proof-ofprinciple and/or proof-of-concept - in order to increase the supply of R&D projects attractive to investors, venture capital and/or private equity funds in the medium-term perspective. Public-private support for commercialization of R&D results using Venture Capital Funds. As for now: 2 funds with a budget of around USD 40m each.

6 The BRIdge programs ecosystem DEMAND FOR CAPITAL PRE-SEED START UP EARLY STAGE TIME PREINCUBATION + PROOF OF PRINCIPLE INVESTMENT + PROOF OF CONCEPT EXPANSION (A i B ROUND)

7 Program aimed at optimizing the value of projects co-financed by NCRD (under other financing schemes) Designed for projects in pre-incubation phase and incubation phase Program implemented by 2 external partners PricewaterhouseCoopers (technical sciences) LSBC (life sciences) 3 stage process stage 1: identification investment grade projects in NCRD s portfolio stage 2: delivery of coaching and mentoring to the selected projects stage 3: searching for the potential investors + finalizing the transaction

8 The aim of the BRIdge Alfa project is to support the preseed funds, whose main role is to finance technological projects related to conducting research and development activities or commercial use of industrial property. BRIdge Alfa Funds are financing projects under the Proof of Principle and Proof of Concept phase. The main source of the projects is environment of research units. The primary objective is to build relationships between academia and business, and thus the elimination of the supply gap of technological projects. Creating the supply of early-stage projects suitable for VC investments

9 Proof of Principle (PoP) - It is conducted by Alfa at pre-incubation stage. The early stage of Project s verifiaction verification of an idea, initial assessment of Project s potential, competitive environment analyses, defining research plan and the milestones of Project s development, It may be conducted by research units (universities, research institutes, other scientific units) or physical persons as well as by dedicated research teams (e.g. inventors). Proof-of-Concept (PoC) The phase of proper verifiaction of an idea, covers industrial research and experimental development works whose results (if positive) usually make it possible to file a patent or to enter into international PCT phase or to use the result of a Project commercially. The activities are conducted in a separate structure (spin off) which is financed by the Alfa Fund. September 21, 2016

10 BRIdge Alfa NCB 80 % R 80 % Investor 20 % ALFA Preincubation management Proof Principle SPI N OF F SPI N OF F SPI N OF F of 20 % NCBR.gov.pl Budget of PLN mm Investment in R&D projects in the preseed stage Financing the operational activities 20/80 Investor brings 20% of private funds Min. 20% of budget for R&D NCBR s supervision through participation in the steerig commitee Support for Spin-off up to 3 M PLN 20% of the support given by the investor (capital entry) 80 % of the support given by the NCRD (grant)

11 Pilot project - Bridge Alfa Created 10 Bridge Alfa funds supported a total amount of 54 million zł. Funds conducted a professional market analysis of hundreds of R&D projects and have made 47 investments (total 45 million PLN) in technology start-ups On the initiative of part of the funds it has also developed accelerator for scientists (alfa.ac) Conducted training for scientists (alpha school).

12 Program aiming at creation of public-private VC funds, in order to: eliminate the market failure associated with Polish VC s relatively low appetite for risk bring to Poland leading, global management teams increase the exposure of Polish science sector to private capital financing increase the effectiveness of public spending (money invested by NCRD could be returnable + potential profits)

13 NCRD acting as a limited partner, provides approx. 50% of capital Preference for the private partners during exit exit priority for investors (to the amount of invested capital) NCRD exists after the investors (to the amount of invested capital) the remaining part of proceeds is divided between NCRD, private partners and management team (carried interest) September 21, 2016

14 Pilot undertaking launched in 4Q2014 agreement with Adiuvo & BRAN Investments (life sciences) Capitalization of the fund - EUR 40 M The Joint Polish Investment Fund operational in deals screened, 4 portfolio companies First revenues in investment companies Fund investment strategy Mobile/personalized health Diagnostics Medical technology Drug discovery and development Investments into R&D projects in 3 stages: pre-incubation (80% non-returnable capital from NCRD + 20% private capital) incubation (70% returnable capital from NCRD + 30% private capital) acceleration (50% returnable capital from NCRD + 50% private capital) September 21, 2016

15 NCRD does not take equity position in exchange for the capital it invests NCRD participates in taking strategic decisions: Investment Committee - observer with the right to opt-out from the investment (if the specific predefined situation occurs) Advisory Board - fully-fledged member NCRD does not participate in operational management - the responsibility of the management team Fund invests in companies with Polish Nexus companies based in Poland or companies with significant value added activity in Poland September 21, 2016

16 Up to 50% FUNDUSZ VENTURE CAPITAL Raises min. 50% of capital FUND OF FUNDS NCBR Up to 50% FUNDUSZ VENTURE CAPITAL Raises min. 50% of capital Up to 50% FUNDUSZ VENTURE CAPITAL Raises min. 50% of capital Fund capitalization of 450 m. EUR NCBR contribution at 50 % m EUR NCBR selects commercial operator for Fund of Funds Selection of 5-7 venture capital funds (VC) VC Fund capitalization: mm EUR NRDC as an observer in Investment Committee Funds invest in innovative companies with Polish Nexus, enhancing their growth and building value Portfolio of innovative companies Portfolio of innovative companies Portfolio of innovative companies Equity investments in companies at start-up and early stage (investment round A and B) The total investment in one company up to 30 m EUR Exit through IPO/sale

17 Thank you Przemysław Paczos National Center For Research and Development Tel.: przemyslaw.paczos@ncbr.gov.pl