Transcript Innovative Ventures Inc. Grand Rapids MI USA

New Directions in Deal Flow &
Venture Creation
World Bank & Government of Turkey
4th Knowledge Economy Forum
23 March 2005, Istanbul, Turkey
Innovative Ventures Inc.
Grand Rapids MI USA
Moscow Russia
Thomas Nastas
President
[email protected]
www.IVIpe.com
23 March 2005
www.IVIpe.com
[email protected]
New Directions in Deal Flow &
Venture Creation
Excellent Potential to:
1. Sell Technology from Domestic SMEs to
Western Buyers
2. Integrate Domestic Technology with Western
Talent for local/Global Customers
23 March 2005
www.IVIpe.com
[email protected]
New Directions in Deal Flow &
Venture Creation
Today’s Message
1. How Attract Investors/Capital to Your Country?
2. How Determine Interventions Needed? (What’s
Needed?)
Finance & Financial Engineering, VC, IP, Business Plan
Help, Centers of Excellence, Incubation, Capital
Markets, Tax Incentives, Grants, SBIR programs, etc?
3. How Help SMEs, Creation of Technology & SMEs?
How Do You Get Started? Solutions & Priorities
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Realities of VC (in Efficient Markets)
Equity is a Great Product, but:
1. It’s Expensive (% ownership)
2. Very Selective-1/100 SMEs seeking VC receive $$$High Risk/High Return
 (Actual/Potential Deal Flow Pursuing Large
Markets ($50-$100MM)
 People (Technical, Mkting, Mgt, Support staff,
etc.)
3. Requires Access to Liquidity (Capital Mkts &/or
Strategic Buyers (Domestic or Foreign)
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Probability
Individual Event
Company has enough $$
Mgt Capable & Focused
PD Successful
Mfging & Component Sourcing Successful
Competitors Behave as Expected
Customers Want Product
Pricing is Correct
Patents Issued & Enforceable
Combined Probability of Success
80%
80%
80%
80%
80%
80%
80%
80%
17%
Low Success Rate = Invest 1 of every 100 deals
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Emerging Markets Have Much $$ (e.g., E. Europe
& CIS)
EBRD, IFC & US Govt. Supported Funds ($1B+)
Intel Capital (Corporate VC, much $$$ & budget)
Russia Technologies (Alfa Group, $20MM)
Baltic Investment Fund & Scandinavian Funds
E. European Funds, Enterprise Investors (Poland),
Advent, Horizonte, etc.
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Why are More $$ Not Finding its Way to Early
Stage – Regional Tech Investment?
Capital Seeks the Highest Rate of Return
Strong Domestic Growth in Non-tech Sectors,
Retailing, Distribution, FMCC, etc.
Competition from Other Asset Classes with =
&/or > Liquidity, ex. Stock Mkt., Bonds, even
Real Estate
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Many Tech Opts Focused on Int’l Mkts
Where Demand Is
Gaining Access is Expensive
Penetration & Growth Takes Much Time
Emerging Market Quality & Quantity of
Deal Flow is Poor
Few Opportunities Meet Req'ts for Success
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Realities of Emerging Market VC
1/200 SMEs seeking VC in emerging markets receive
$$$ Reasons, high rejection rates:
Undeveloped Opportunity
Lack of Uniqueness/No or Poor Competitive Advantage
Too much $$$, too much time & too little reward
People (mgt/employees)
Lack of Transparency, No Clear Title/Ownership of the
IP
What to do with the SMEs that are rejected?
Ignore? Sympathize? Seek New Solutions?
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
The GoForward Plan™ For You
1.Document & Benchmark the Deal Flow
 Global Value or Domestic Use & Those % Not Interesting
2.Attract Corporations/Corporate VC to Confirm
Deal Quality & Potential as Supplier Technology
 Go After Corporations that Do Business in Your Country
3.Leverage Interest to Get Technologies Adopted to
Build Supply Chains- Creates More & Better Deals
4.Example: IVI, Shell Oil, Russia & Technologies for
the Petroleum Industry
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Background on IVI
US VC Funds (1986)
The Michigan Product Development Fund ($5MM-Gov/Private)
International VC & PE Funds (1992)
Canada ($100MM-Bus. Dev. Bank)  Europe ($10MM-EU, $-Financière
Saint Dominique, Paris)
E. Africa ($5MM), Sub-Saharan
Africa ($-IFC, $-World Bank)
($200MM), South Africa ($30MM)
 Kazakhstan ($-USAID, $30MM
EBRD)
23 March 2005
Russia ($30MM-EBRD & USAID)
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Mkt. Dev: IVI, Tech VC & Russian Technology
1997: Transact Russian VC Deals-General Economy
2000: Investigate IT Deals/Sector
2002: Evaluate (Russian) E&P Technologies
For Service Suppliers (Halliburton, Schlumberger, etc.)
2004: Seek VC Investments. Partner w/Shell
Technology Ventures/Internal Incubation Dept.
Objective: Id/finance Russian technology
Transfer of IP (License/Sale)
VC Investment in Existing Company or Create New Company to
execute technology into market-Build the Supply Chain
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Improving Access to More $$: IVI Strategy
Bring More Corporations to Russia & the CIS
Corporate Characteristics to Execute:
A Must: Do Business in Russia/CIS & Global Search for
Technology-Fund R&D with SMEs, Universities, Nat Labs
Better: Internal Incubation Group
Best: Internal VC Dept., & Invest in VC Partnerships
Objectives: Create Cross-Border Funding of
R&D/VC & Supply Chain Linkages
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
IVI/Shell Initiative
1. IVI Approached Shell. IVI & Shell Co-Fund Budget to
Execute. 100% Private Sector Financing
2. IVI Created a Database for Contact
 Generate Deal Flow-SMEs & Institutes
3. Evaluate Deal Flow (IVI & Shell staff)





Name of Technology/What it Does
Benefits/Value of the Technology
Performance Data/Benchmark to Competition
IP Status
What Does the Developer Want to Do
3. Conclusions & Next Steps Decisions (IVI & Shell)
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Results: 100 Technologies/4 Short-listed
Artificial Lift &
Advanced Drilling
Enhanced Oil
Recovery
Novel Well
Hydrocarbon
Construction, Smart Processing
Fields & Wells
Russian Specific
Renewables
Conditions
23 March 2005
www.IVIpe.com
[email protected]
Non-Seismic
Exploration
Earth Modeling
Off-Shore
Commercializing Innovation
w/o Venture Capital
Results & Examples: R&D & Equity Investment
Opportunities Exist
Sources of Deal Flow
SMEs
Individuals
3%
Institutes
38%
Institutes
SMEs
59%
© Innovative Ventures Inc, 2004
23 March 2005
www.IVIpe.com
[email protected]
Individuals
Commercializing Innovation
w/o Venture Capital
Results & Examples: Co-Dev. & Sales
Transactions Possible
Stage of Development (Technology)
Ready for
Mfging/Delivery to
customer
10%
Selling
1%
Prototype
N/A (not available)
3%
Testing
18%
© Innovative Ventures Inc, 2004
23 March 2005
R&D
R&D
52%
Prototype
16%
Testing
Ready for
Mfging/Delivery to
customer
Selling
N/A (not available)
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Results & Examples: Actions Needed for
Commercialization
Partner Needs of Russian Side
Commercialization
Assistance
25%
Production/Market
Financing
10%
© Innovative Ventures Inc, 2004
23 March 2005
Customer
1%
N/A (not available)
3%
R&D Financing
49%
R&D Financing
Prototype Financing
Production/Market
Financing
Commercialization
Assistance
Customer
Prototype Financing
12%
www.IVIpe.com
[email protected]
N/A (not available)
Commercializing Innovation
w/o Venture Capital
Results & Examples: Finding Technology
is Possible
Deals by Russia City
Yekaterinburg/Ufa/
Kazan
(Urals Region), 8%
Other, 20%
© Innovative Ventures Inc, 2004
23 March 2005
Tomsk/Novosibirsk
Region
Moscow/Moscow
Region, 52%
Nizhniy Novgorod, 9%
Tomsk/Novosibirsk
Region, 11%
www.IVIpe.com
[email protected]
Moscow/Moscow Region
Nizhniy Novgorod
Yekaterinburg/Ufa/Kazan
(Urals Region)
Other
Commercializing Innovation
w/o Venture Capital
Results & Examples: Tech Dev. Matches
Strategic Priorities of Int’l Partners & Buyers
Deals by Technology
Other
19%
Exploration
15%
© Innovative Ventures Inc, 2004
23 March 2005
Production
Refining
Alternative Energy
10%
Pipeline
4%
Exploration
Pipeline
Alternative Energy
Refining
8%
www.IVIpe.com
[email protected]
Production
44%
Other
Commercializing Innovation
w/o Venture Capital
Results & Examples: Enabling & Platform
Technologies of Strategic Priority Exist
Deals by Specific Technology
Devices
31%
Sensors
15%
Software
Software
15%
© Innovative Ventures Inc, 2004
23 March 2005
MWD Drilling
9%
Refining/Oil Processing
13%
www.IVIpe.com
[email protected]
Sensors
EOR
17%
EOR
Refining/Oil
Processing
MWD Drilling
Devices
Commercializing Innovation
w/o Venture Capital
Results & Examples: The Majority of IP is
Protected
IP Status
International patent
issued (e.g., USA, Europe,
etc) 10%
In process for
International (e.g., USA,
Europe, etc) 3%
Information not provided
3%
Information not provided
None
In process for Russia/CIS
None 27%
Russia/CIS patent issued
Russia/CIS patent issued
45%
In process for Russia/CIS
12%
International patent issued
(e.g., USA, Europe, etc)
© Innovative Ventures Inc, 2004
23 March 2005
In process for International
(e.g., USA, Europe, etc)
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Reasons: Technologies Interesting or Rejected
Interesting & w/Follow-up for R&D & VC Investment:
1. Opportunity Unique – Test Data, although not to Int’l Standards
2. Global Application. Domestic Use & Potential to Upgrade
3. Developers Responsive-Want to do business
Rejected:
1. No Uniqueness nor Competitive Adv/Tech for a Service Supplier
2. No test/performance data-no projected performance, no targets
3. Developers Not Responsive
Note: Rejection not due to lack of IP, Bus. Plans, VC,
Mgt., Capital Mkts, Financial Structures, Tax
Incentives, etc. Rejections are Fixable
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Conclusions with Shell Oil (Corporate VC)
1. Create Business Models to Increase Sales
Opts. to Mix & Match Russian & Western technology
Match Russian platform technologies w/Western
strengths in systems, mgt, planning & execution
Mix others w/Western technologies & skills as
enabling & complementing technologies to create
the total solution
2. Localize Product Content-Create New Supply
Chains & Reduce Mkt. Barriers
3. Develop the Market-Increase Revenues
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Results: GameChanging Solutions w/Global
Value
Distributed Temperature/Pressure System
(Sensors/Software) SME Technology
Disc Crystallizer (Refining) SME Technology
EOR 2 Stage Combustion Technology (Institute Tech)
Low Frequency Seismo-Acoustics-3 km/20km (Inst)
Novel Well Testing (Software) (Institute Tech)
Ceramic Vitrification of the Borehole (Institute Tech)
(Case-less Lining)
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Results: Solutions for Russia Specific Needs
(E&P, Transport, Processing, etc.)
Ex: Cold Weather, Large Geography, Off-Shore
Applications where performance 1 step below
world class, but significantly lower cost/$$
Developed in environment of cheap oil &
different (Russian) E&P policy vs. international
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
Opportunities to Capitalize
Expand commercialization in Russia w/Western
bus dev know-how, mgt., enabling &
complementary technologies
Upgrade to world standards for value pricing &
price sensitive segments
Example: Russian Gas Separation & Sphere
Plastics (cold weather) Technologies
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
The GoForward Plan™
1. Characterize the Deal Flow, Performance & Quality
2. Establish Industry Consortiums. Go After Corporate
Investors vs. Financial Investors
3. Fund the Consortium. There are very few private
sector investors that fund the budget
4. Capitalize on what you have 1st. Define where
technology exists/needed and exploit those
5. Then Spend Time &$$ to Create New Technologies
6. Later IP Funds, Quasi-Equity, SBIR, Grants, Yozma
23 March 2005
www.IVIpe.com
[email protected]
Ex: How Much Value (Added)?
Where’s the Technology?
23 March 2005
www.IVIpe.com
[email protected]
Technology In Many Places!
Just Look & Define
Slaughter
Raising
Genetic Engineering
& Breeding
Butcher
Processing into Ham, Kielbasa
23 March 2005
Distribution, Storage &
Delivery
www.IVIpe.com
[email protected]
Retail Locations
GameChanging Opportunities
with Russian E&P Technology
The IVI GoForward Plan™
CIS High Technology Oil & Gas Consortium
Several Oil Multinationals & Service Suppliers (Oil & IT)
Objective: Finance & Commercialize Russian
Technologies (IP, R&D & VC Equity Investment)
• Upstream & Downstream
• Renewables
• Related Technologies used in the business, IT, sensors,
comm., etc.
23 March 2005
www.IVIpe.com
[email protected]
Commercializing Innovation
w/o Venture Capital
World Bank & Government of Turkey
4th Knowledge Economy Forum
23 March 2005, Istanbul, Turkey
Innovative Ventures Inc.
Grand Rapids MI USA
Moscow Russia
Thomas Nastas
President
[email protected]
www.IVIpe.com
23 March 2005
www.IVIpe.com
[email protected]