Financing and Supporting Innovation Sidney Chameh [email protected] 2007.

Financing and Supporting Financing and Supporting InnovationInnovation

Sidney ChamehSidney Chameh

[email protected]@dgf.com.br May May 20072007

AgendaAgenda

I. Innovation and Economic Development

II. Innovation Stages and Financing

Sources

III. ABVCAP

IV. DGF – Decisão Gestão de Fundos

AgendaAgenda

I. Innovation and Economic Development

II. Innovation Stages and Financing

Sources

III. ABVCAP

IV. DGF – Decisão Gestão de Fundos

What is innovation?What is innovation?

New products and services

New methods of production,

supply and distribution

Changes in management and work

organization

Creation of new patterns of use or

consumption

What is the importance What is the importance innovation to economic innovation to economic

development?development?

Improve knowledge and

competitiveness

Innovation can produce new

technologies that increase the

productivity;

Higher productivity, higher

economic growth;

AgendaAgenda

I. Innovation and Economic Development

II. Innovation Stages and Financing

Sources

III. ABVCAP

IV. DGF – Decisão Gestão de Fundos

Innovation StagesInnovation Stages

Research Stage•At this stage, the R&D activities are the major

concerns of the project in order to complete the prototype/application/service.

•Finance is used to research, assess and develop an initial concept before a business has reached the start-up phase.

•Funding will come, usually in the form of non-reimbursable grants, basically from the Public Sector.

Source: European Commission

Innovation StagesInnovation Stages

Development Stage• As the project reaches the stage where a

prototype or pilot plant can be built to demonstrate its feasibility, the situation begins to change.

•Relevant Sources of Finance:•Public Sector•Corporate: industrial/commercial companies.•Seed Capital: venture funds prepared to make

pre-start-up investments in the technology, followed by further investment if/when the project results in a company formation.

•Venture Capital: provides financial support to a company in the form of a participation in its equity or an option to convert a loan to equity. The relatively high risks are compensated by the possibility of high returns. It has a strong risk-bearing character, focusing on industries with high growth potential.Source: European

Commission

Innovation StagesInnovation Stages

Start up Stage• At this stage, a new company is created or

exists a pre start-up commercial project. •In some respects this remains the most difficult

stage to finance, though much depends on the size and type of project involved.

•Relevant Sources of Finance:•Founders and Entrepreneurs: normally put all

the finance that they are able to afford, as well as non-financial contributions, e.g., little or no salary, working from home (no rent);

•Friends and Family: a "helping hand" rather than a serious investment;

•Business Angels: may be able to provide the start-up equity and "hands on" advice and help to the new company.

•Venture and Seed Capital Source: European Commission

Innovation StagesInnovation Stages

Exploitation Stage•At this stage company is in full commercial

operation.•Banks and all kinds of venture funds can be

interested. •It is also a stage at which the management

might wish to consider a stock market flotation as a mean of raising additional capital.

•The capital may be used to finance increased production capacity, market or product development and/or to provide additional working capital.

•Relevant Sources of Finance:•Venture Capital•Private Equity•Banks•Stock market: companies can gain access to a

broad international base of institutional and retail investors.

Source: European Commission

Very High High Moderate LowRisk/Return

Fin

an

cin

g S

ou

rces

(Deb

t an

d E

qu

ity)

Micro Small Medium Big Size of

Company

Promotion Agencies

Commercial Banks

Developing Banks

Venture Capital e Private Equity

Capital Markets

Financing Sources by Financing Sources by Company SizeCompany Size

M

ark

ets

/

Investm

en

t V

eh

icle

sLong Term; < liquidity Short Term; > liquidity

Long Term Investment Vehicles and Corporate Stage of Developing

PIPE

Mezzanine

Private EquityStocks,

Bonds,

Derivatives

Seed Capital

VentureCapital

Corporate Stage Start-up Developing Consolid.

Liquid and Competitive Markets

Investment StagesInvestment Stages

AgendaAgenda

I. Innovation and Economic Development

II. Innovation Stages and Financing

Sources

III. ABVCAP

IV. DGF – Decisão Gestão de Fundos

ABVCAPABVCAP

ABVCAP is a non-profit institution working for the

development, stimulation and promotion of long-term

investments in the Brazilian economy, through

investment vehicles which invest in companies,

company projects and the infra-structure in Brazil.

ABVCAP acts a representative institution in Brazil for

the private equity and venture capital sector. ABVCAP

consists of over 100 different “Members”, participants

in the investment community with institutional or

individual interest, in either business or services, in the

development of market activity in long-term

investments in the country – through the model of

venture capital and its variations.

Associação Brasileira de Private Associação Brasileira de Private Equity &Equity &

Venture CapitalVenture Capital

ABVCAPAvenida Rio Branco, 123, sl. 806

20040-005 Rio de Janeiro RJ Brasil+55 21 3970 2432

[email protected]

Contact informationContact information

ABVCAPABVCAP

AgendaAgenda

I. Innovation and Economic Development

II. Innovation Stages and Financing

Sources

III. ABVCAP

IV. DGF – Decisão Gestão de Fundos

May 2007May 2007

Institutional PresentationInstitutional Presentation

DGF DGF Decisão Gestão de Gestão de FundosFundosDGF - Decisão Gestão de Fundos – founded in 2001 with the purpose of

managing Venture Capital and Private Equity funds, generating returns to

investors over the average of the comparable market.

DGF is authorized by Comissão de Valores Mobiliários (CVM) to manage

investments funds in Brazil and is a leading&founding member of ABVCAP

(Brazilian Association of Private Equity and Venture Capital). and CEPE (Private

Equity and Venture Capital Studies Center) from Fundação Getulio Vargas.

www.dgf.com.br Fone/Fax: (55) (11) 3884.5827

Ethics

Satisfaction

LoyaltyDiscipline

Professionalism

Determination

ValuesValues

DGF focus its action on managing Investment Funds:

Origination, research and selection of projects Projects that fits into the

investment policy of their funds;

Market studies and companies analysis Development of studies which are

going to be analyzed by the Investment Committee;

Constant Monitoring Studies and analysis update of the investments by the

fund;

Corporate Governance Continuous action in the Corporate Governance of

the invested companies;

Divestiture - Continuous research of divestiture opportunities.

FocusFocus

PartnersSidney Chameh

Eduardo PamplonaFrederico Greve

Financial dep’t.Paulo FerreiraCristiane Fiori

Administrative dep't. Rosana Buoso

CEO/ Funds´ChampionSidney Chameh

REIF FIPAC

Analysis teamDaniel Busquets, Luiz Henrique Spinardi, Thiago Pongelli and others (to be hired)

Investment Officers Frederico Greve

Investment Officers Frederico Greve,and Celso Nunes

Organizational StructureOrganizational Structure

Sidney Chameh Sidney is founding partner of DGF, and manages Private Equity funds since 1998. The first fund managed totaled $40mm. Graduated in Business Administration with an MBA in Finance from McGill University (Montreal - Canada) and FGV/SP, Mr. Chameh has more than 22 years of practice in capital markets as investment analyst and prtfolio manager. Has worked for Banco Sudameris, Emerging Markets Company; Banco Multiplic, Banco Crefisul and FAR.

Eduardo PamplonaEduardo, partner of DGF since 2003, is graduated in Economics from UFRJ and hold an MBA from University of Michigan. With more than 15 years of professional experience. Eduardo was a vice-president of GE Capital, being responsible for represent GE as board member in a fund with some relevant investments such as TeleNova, LatinTech, Fotoptica, DASA and Atrium. Pamplona has previously worked for Mckinsey&Co and Calyon.

Frederico GreveFrederico has been working in private equity for close to 10 years. He started his career working in tech start-ups and soon went on to to work as a private equity analyst at Banco Fator, a leader in equity fund management in Brazil. Later he joined local private equity group BPE Investimentos, which managed local and international funds in excess o $100 million. Frederico has been a partner at DGF since late 2003.Celso NunesGraduated in Computer Engineering from ITA (Aeronautic Institute of Technology) with an MBA from UCLA. Prior to his MBA he worked as manager at Oracle for more than 5 years. As finishing his MBA Mr. Nunes was invited to be an associate at Angel Led Capital a Venture Capital firm from California. Returning to Brazil he worked as a consultant for Pyxis Management Consulting and MGM Partners, prior to join DGF in 2006.

Key PersonnelKey Personnel

Funds ManagementFunds Management

Funds under Funds under ManagementManagement

Corporate Governance / Corporate Governance / Strategic consultant to Strategic consultant to

invested companiesinvested companies

Partnerships Partnerships and and

AssociationsAssociations

REIF FundREIF Fund

50,0%

18,2%

6,8%

25,0%

REIF Limited REIF Limited Partners:Partners:

The Fund started

operations in 2002

with committed

capital of USD 10

million. The

investment period

ended in late 2005

with 12 investments

Portfolio CompaniesPortfolio Companies

All current portfolio companies of REIF Investment Fund.

New Venture - FIPACNew Venture - FIPAC

Description:

Investment in equity and convertibles of companies that are able to consolidate a niche sectors, or able to be consolidated by larger players (roll-up strategy). Fill a gap in Brazilin private equity offering; Multi-sector but 100,0% of the portfolio in IT, Pharmaceuticals and Services.

Fund StructureFund Structure

Institutional Investors

IDB/MIF, BNDES, FINEP and Petros

FIPAC

USD 50 MM

Multi-Sector

IT, Pharmaceutical, Services

$ Convertible Debentures

$ Equity EXIT IPO;

Sell to a strategic buyer

“equity to debt”

Investments Committee:

7 votes, one vote with at least 20,0% of committed capital + 2 representatives of general partners and 1 independent