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IIF3 Tranche 3 Info Sessions - P

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					Innovation Investment Fund
    Round 3 Tranche 3




         March 2010
        IIF3 tranche 3
• Graydon Smith
  – Manager, Venture Capital Funds
  02 6213 6209
• Ian Bell
  – Assistant Manager
  02 6213 7430
            Welcome
•   Overview of today’s session
•   Innovation Investment Fund
•   The IIF Assessment Process
•   The IIF Application Form
•   Conclusion
•   Questions
•   One-on-one Interviews
          Overview
• Purpose to assist potential
  applicants understand the
  IIF program and produce high
  quality applications
• 40 minute presentation followed
  by general questions
• One-on-one interviews for
  specific questions
         What is IIF?
• Create a sustainable Venture
  Capital market in Australia
  – Identify suitable managers to
    operate licensed innovation funds
  – Co-invest in the commercialisation
    of Australian developed research
          What is IIF?
• Three main parties:
  – The Commonwealth – regulator of the
    IIF Licence and Limited Partner investor
  – The Manager – the General Partner to
    manage all investment decisions
  – Private Sector Investors – Limited
    Partners are co-investors to provide
    private capital to the IIF Fund
      How established?
• Key IIF Program documents:
  – Ministerial Guidelines – outlines
     requirements and gives authority to
     Program Delegate to make decisions
   – Ministerial Directions – outlines role
     of the Board for assessment and to
     provide advice
   – Customer Guide – not a foundation
     document, but sets out the process for
     applicants
                Innovation Investment Fund IIF 3 Governance Model

                 Ministerial      Parliament        Ministerial
                 Guidelines       & Minister        Directions
                                                    Innovation
          Department
                                                    Australian
          of Innovation
                                                      Board
$200m for ten                                                Licence
fund managers                                                Assessment
          AusIndustry                                 Venture
           (Program                                   Capital
           Delegate)                                 Committee
                               A ten year
                               IIF Licence
      $20m Government
      IIF Investment             IIF Licensed
                                                   Minimum $20m private
                                Fund Manager
                                                   committed capital
           Investees                Fund
         commercialising         Supervisory           Private
            research               Board              Investors
       Fund Governing
         documents
• IIF Licence – governs
  Commonwealth and Manager
  relationship – regulatory document
• Partnership Deed – governs
  Commonwealth, Manager and
  Investor relationships – investor
  document
• Investors commit via a Partnership
  Subscription Deed Poll
         Key features
• Manager is responsible for
  investment decisions
• Investors may not influence
  investment decisions
• Commonwealth Capital and Private
  Capital – 1:1 ratio
• Maximum Commonwealth Capital
  $20 million
• 10 year term, 3 year extension
• No new investments after 5th year
         Key features
• Key Personnel are defined
• Only invest in Eligible Investee
  Companies – early-stage and
  commercialising Australian R&D
• Not invest in Ineligible
  Investments
• Manager paid management fee –
  limited ability to recover other fees
• All investors treated equally
         Key features
• Diversity – no more than $10m of
  fund in any one investment
• Diversity – no more 20% of Fund
  in any one investment
• Distributions – investors get back:
   – capital plus interest returned first
   – then any profit is split:
     10% to Commonwealth and
     90% to Private Limited Partners
     and the General Partner
          IIF Statistics
                                IIF Round     IIF Round     IIF Round
Data as at: 22 February 2010
                                     1             2             3
                                                                          Total
               Date Commenced     1998          2001        2006/07


               Commonwealth           130              91          60         281
    $m
               Private                   67            66          70         203
 Committed
               Total                  197           157          130          484


               Commonwealth              96            36             0       132

$m Returns     Private                258              28             0       286

               Total                  354              64             0       418
         IIF Round 3
• Senator Kim Carr announced this
  tranche on 26 February 2010
• Open for existing and new
  managers to apply for this tranche
• The demonstration of private sector
  investor commitment of matching
  private funding will be taken into
  consideration when recommending
  applications.
 The Assessment Process
• Eligibility check on applicants
• Identify potential conflicts of
  interest (Disclosure of Interest)
  – Innovation Australia
  – AusIndustry
  – Due diligence contractor
• Three stage assessment
  process
 The Assessment Process
• Stage 1 assessment
  – Examine the claims
  – Assess against the merit criteria
  – Select applicants for Stage 2
• Stage 2 assessment
  – Due Diligence referee and further
    checks
  – Interviews
• Stage 3 finalisation
 The Assessment Process
• Innovation Australia will recommend
  a priority list of applicants
• Invitation from Program Delegate
  expected in September 2010
• Six months to finalise capital and
  execute deed
  - No expectation of any extension
• Full debrief for all applicants
    The Application Form
•   Cover
•   Part A - Applicant details
•   Part B - IIF fund proposal
•   Part C - Supporting Documents
    – the separate DOI form
  The Application Form
• Cover
• Part A Applicant details
  – Applicant is the proposed general
    partner
  – Sign the Declaration
  The Application Form
• Part B - IIF fund proposal
• Core of the application
  - Address the 7 merit criteria
  - All criteria are equal
• Can be as an attachment but
  must address the criteria in the
  same order
  The Application Form
• Criterion A - training
• Contribute to training and
  developing of Australian based
  staff in all aspects of making
  venture capital investments in
  early stage companies
  The Application Form
• Criterion B – Proposed fund
• The proposed size of the fund and
  ratio of privately sourced capital to
  Commonwealth program capital
   – Source of capital
   – Ratio of fund
   – Fund structure
   – P&L, balance sheet, cash flow etc
  The Application Form
• Criterion B
  – Fund structure
    • Cannot be structured as a PDF
    • Maybe structured as a
       – Venture Capital Limited Partnership
         (VCLP)
       – Early Stage Venture Capital Limited
         Partnership (ESVCLP)
       (with the approval of the Venture
         Capital Committee)
ESVCLP & VCLP Fund Structures
• Incorporated Limited Partnerships
• Flow through tax treatment (not a
  taxing point)
• GP’s carried interest taxed as a
  capital gain
• LP benefits
   – ESVCLP – Domestic and foreign investors Income
     and Capital Gains Tax exempt
   – VCLP – Foreign investors Capital Gains Tax exempt,
     domestic investors gains taxed in their hands

  Contact: Venture Capital Hotline: 02 6213 6609
           venturecapital@innovation.gov.au
  The Application Form
• Criterion C – fees and charges
• The level and structure of
  management fees proposed
  – Competitive part of the process
• Management services
• Any recoverable expenses
• Carried interest
  The Application Form
• Criterion D
• Outline, expertise, capacity and
  experience in early stage equity
  investing
• Outcomes
  The Application Form
• Criterion E – the team
• A balanced management team
  including relevantly qualified and
  skilled personnel
• Key personnel
• Other personnel
  The Application Form
• Criterion F – Understanding
  fund management
• Features of the proposed fund
  – Investment strategy
  – Specialisation
  – Role in investees
  The Application Form
• Criterion G
• Demonstrated willingness to
  operate within the intent of the
  IIF Program, including an
  understanding of the policy
  objectives
  The Application Form
• Part C Supporting Documents
  – Referees
  – List all attachments
     •   Disclosure of interest
     •   Key personnel documents
     •   Evidence of investor support
     •   References
     •   Diagrams & tables etc
   The Application Form
• Applications close 7pm Monday 31 May
  2010 – No extensions
• $5,000 application fee for stage 1
• Electronic copy and 10 hard copies
• No alteration to the application
• AusIndustry may request clarification
• Additional $5,000 application fee for
  stage 2
           Conclusion
• Highly competitive
  - existing and new managers
  - private capital considerations
• Read the Ministerial Guidelines
• Read the Customer Guide
• Address questions to
  IIF3@innovation.gov.au
• Applications close 7pm
  31 May 2010
Questions?

				
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