UKTI Innovation Gateway

UKTI Innovation Gateway

UKTI can help innovative, £20M+ projects pitch to

Sovereign Wealth and Pension Funds

UKTI is the UK Government Department responsible for international trade and investment. We work with:• UK based businesses to ensure their

success in international markets through exports.

• Overseas companies to look at the UK as the best place to invest, set up or expand their business.

UKTI

The UK Strategic Opportunity

The opportunity cost of the ‘gap’ between international perceptions and reality is estimated to be worth up to £3.6bn p/a in unrealised trade and investment.

WeaknessesStrengths

Opportunity

• UK is No 2 in the 2014 Global Innovation Index (WIPO 2014)

• 2nd internationally for business-university collaboration (WEF, 2013)

• Sustains the most ‘impactful research base in the world’ (Elsevier 2013)

• Protected the £4.6bn research budget• Created £1.5bn network of ‘catapult‘

collaboration centres

UKTI-commissioned research (2013) shows that UK innovation is still seen internationally as world leading but is: • Seen as weak in commercialisation.• Comparatively cash poor with even a protected

science budget reducing in real terms due to inflation by up to 20% and a VC market skewed towards early stage finance, presenting a strategic investment opportunity.

• Composed of strong individual bodies it can appear complex

UKTI Innovation Gateway

1Institutional InvestorsAttract investment from institutional investors through tailored ‘pitchbooks’ of UK investment ready Science and Innovation projects

2 Venture CapitalTo attract larger Venture FDI to UK and investment into funds

3Target Large Corporates with Innovation offerSecure increased R+D presence from large corporates by more effectively selling the breadth of UK tech / innovation SMEs / research base

4FDI / Trade Strategy and Campaign workFor four of the 8 GREAT technologies: Space, Robotics and Autonomous Systems, Advanced Materials and Synthetic Biology support definition and delivery of their international trade and FDI strategy.

The work of the Innovation Gateway falls into four core work-streams:

The international ‘front door’ to commercial opportunities in the UK’s innovation system

Investor Classes

• UKTI has relationships with Sovereign Wealth Funds, Institutional Finance providers, / High Net Worth's / Family Offices through our global network of colleagues in overseas Posts and HQ based relationship management teams.

• The Innovation Gateway Team holds relationships with UK based Venture Capital funds and senior relationship with 80 of the largest global Corporate VC’s.

Investor Class Breakdown

Investor Type

Risk Appetite Indicative Bite-size

Investment preferences and expected returns

Venture Capital

High risk £0-10m • Early stage technologies• Investment can be driven by strategic reasons or purely financial returns• Will not expect return on investment on every deal. Average return is 1

success in 10 investments.

High Net Worth Individual / Family Offices

Low-High Risk £0-500m • Early or late stage technologies• Potential interest in package deals• Will move into philanthropic territory for opportunity that meets their

personal interest (which may have potential socio-economic benefits globally or to home country/region)

• Known interests in clean-tech and agri-tech for example.

Sovereign Wealth Fund

Low Risk preference: potential for High: Low risk blends

£10-500m • Later stage technologies and package deals• Will look for commercial return on investment (see slide at end of deck

for illustrative returns)• However, some SWFs may accept lower return on investment for

potential socio-economic returns.

Pension Fund

Low Risk £50-500m • Later stage technologies/companies.• Will only take commercial return on investment• Traditionally low risk investors e.g. real estate, infrastructure and bonds.

*These are a rough approximation of investor preferences, boundaries may change for a deal meeting niche investor interests.

Owned by government of sovereign states

For the benefit of current and future generations.

Often created from surplus foreign exchange and reserve assets accrued from the export of natural resources or large current account/budgetary surpluses.

72 SWFs actively investing today. (IMF)

Aggregate amount of assets under management $5.4 trillion (Preqin SWF Report 2014)

80% ($4.3 trillion) of these funds held only 6 countries.

Introduction to Sovereign Wealth Funds (SWF)

Our SWF Engagement Approach

UAE ADIA, Mubadala, ADICQatar QIA, QHCanada CPPIB, Caisse, OTTPB, OMERSChina CICSingapore Tamasek, GICNetherlands National Civil Pension FundSouth Korea KICKuwait KIA/KIOAustralia Australian Govt Future FundUSA Calpers & Teachers…. + constantly expanding and exploring

Sovereign Wealth and Pension Funds invest for the longer term and seek to make investments of at least £50-100m typically.

Our initial understanding of criteria for investment are that a project must:

• Be commercially viable and stand up to due diligence. (ROI could be offered through Joint Venture, Bonds, Equity or Debt)

• Build on existing globally recognised academic or commercial strengths, by association or location.

• Address the global marketplace or an investor’s domestic needs.

• Existing government support or co-investment/location with global businesses or brands will be looked upon favourably from a commercial perspective.

SWF Investment Behaviour

Balancing Innovation and Risk

Bonds/Real Estate Development

Breakthrough Technology

Requiring High Capital

A stronger investment risk profile might be achieved through a balanced package proposition

Business Growth

What might an investable project look like?

There is no ‘right answer or model’ as each investor has individual

preferences and these are not always clear in specific detail. A project

could contain one of more of the following elements:

A business with an innovative product

A research + commercialisation activity

Seeking financing of debt/equity for capital and growth

Plus student or Hotel Accommodation adjoining (or within) for

visitors or local commercially linked needs.

• Require £20M+ debt/equity financing

• Compelling and convincing – a clearly communicable market requirement or opportunity

• Progressed to a suitable stage

• Strong team involved to deliver the project through to success

• Financial plus other returns to the investor

Threshold Criteria, from experience to date

Typical information we need

• Details of the Innovation – the existing or resulting science or technology and

benefits arising

• Organisation track record to date, revenues, investment, IP, business model

• How sales will be generated/intermediaries/partners/sales team

• Activities with key markets, orders, geographies, pipeline

• Sales, Costs, EBITDA, projections.

• Finance/investment sought, already secured, use of funds: e.g. people (who &

why), equipment, international expansion.

• Returns to an investor, what form, timing, %ROI

1. UKTI explores ideas and reviews potential companies and projects

2. Organisations provide their pitch material. UKTI can offer comments that might help

3. Pitch materials are to suitable investors by UKTI team in the UK and overseas

4. 121 introductions and meetings are arranged between projects/companies and investors that wish to know more.

What UKTI does

Next Steps

• Shape projects and plans• See if we can help• Develop proposals in line with the UKTI template document.• Develop pitch material

Key contactsJames Dancy [email protected]

Roy Williamson [email protected]