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New Directions in Deal Flow & Venture Creation World Bank & Government of Turkey New Directions in Deal Flow & Venture Creation World Bank & Government of Turkey 4 th Knowledge Economy Forum 23 March 2005, Istanbul, Turkey Innovative Ventures Inc. Grand Rapids MI USA Moscow Russia Thomas Nastas President [email protected] com www. IVIpe. com 23 March 2005 www. IVIpe. com [email protected] com

New Directions in Deal Flow & Venture Creation Excellent Potential to: 1. Sell Technology 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] com

New Directions in Deal Flow & Venture Creation Today’s Message 1. How Attract Investors/Capital 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? ) ØFinance & 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] com

Commercializing Innovation w/o Venture Capital Realities of VC (in Efficient Markets) Equity is a 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 Ø (Actual/Potential Deal Flow Pursuing Large Markets ($50 -$100 MM) Ø 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] com

Commercializing Innovation w/o Venture Capital Probability Individual Event Company has enough $$ Mgt Capable Commercializing Innovation w/o Venture Capital Probability Individual Event Company has enough $$ 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% 17% Low Success Rate = Invest 1 of every 100 deals 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital 23 March 2005 www. IVIpe. com Info@IVIpe. com Commercializing Innovation w/o Venture Capital 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Emerging Markets Have Much $$ (e. g. , E. Commercializing Innovation w/o Venture Capital Emerging Markets Have Much $$ (e. g. , E. Europe & CIS) EBRD, IFC & US Govt. Supported Funds ($1 B+) Intel Capital (Corporate VC, much $$$ & budget) Russia Technologies (Alfa Group, $20 MM) Baltic Investment Fund & Scandinavian Funds E. European Funds, Enterprise Investors (Poland), Advent, Horizonte, etc. 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Why are More $$ Not Finding its Way to Commercializing Innovation w/o Venture Capital Why are More $$ 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] com

Commercializing Innovation w/o Venture Capital Many Tech Opts Focused on Int’l Mkts Where Demand 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] com

Commercializing Innovation w/o Venture Capital Realities of Emerging Market VC 1/200 SMEs seeking VC Commercializing Innovation w/o Venture Capital Realities of Emerging Market VC 1/200 SMEs seeking VC in emerging markets receive $$$ Reasons, high rejection rates: ØUndeveloped Opportunity ØLack of Uniqueness/No or Poor Competitive Advantage ØToo much $$$, too much time & too little reward ØPeople (mgt/employees) ØLack 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] com

Commercializing Innovation w/o Venture Capital The Go. Forward Plan™ For You 1. Document & Commercializing Innovation w/o Venture Capital The Go. Forward Plan™ For You 1. Document & Benchmark the Deal Flow Ø Global Value or Domestic Use & Those % Not Interesting 2. Attract Corporations/Corporate VC to Confirm Deal Quality & Potential as Supplier Technology Ø 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] com

Commercializing Innovation w/o Venture Capital Background on IVI US VC Funds (1986) The Michigan Commercializing Innovation w/o Venture Capital Background on IVI US VC Funds (1986) The Michigan Product Development Fund ($5 MM-Gov/Private) International VC & PE Funds (1992) ØCanada ($100 MM-Bus. Dev. Bank) Ø Europe ($10 MM-EU, $-Financière Saint Dominique, Paris) ØAfrica ($-IFC, $-World Bank) ØE. Africa ($5 MM), Sub-Saharan ($200 MM), South Africa ($30 MM) Ø Kazakhstan ($-USAID, $30 MM EBRD) 23 March 2005 ØRussia ($30 MM-EBRD & USAID) www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Mkt. Dev: IVI, Tech VC & Russian Technology 1997: 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] com

Commercializing Innovation w/o Venture Capital Improving Access to More $$: IVI Strategy Bring More Commercializing Innovation w/o Venture Capital Improving Access to More $$: IVI Strategy Bring More Corporations to Russia & the CIS Corporate Characteristics to Execute: ØA Must: Do Business in Russia/CIS & Global Search for Technology-Fund R&D with SMEs, Universities, Nat Labs ØBetter: Internal Incubation Group ØBest: 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] com

Commercializing Innovation w/o Venture Capital IVI/Shell Initiative 1. IVI Approached Shell. IVI & Shell 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 Ø Generate Deal Flow-SMEs & Institutes 3. Evaluate Deal Flow (IVI & Shell staff) Ø Ø Ø 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] com

Commercializing Innovation w/o Venture Capital Results: 100 Technologies/4 Short-listed Artificial Lift & Advanced Drilling 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] com Non-Seismic Exploration Earth Modeling Off-Shore

Commercializing Innovation w/o Venture Capital Results & Examples: R&D & Equity Investment Opportunities Exist Commercializing Innovation w/o Venture Capital Results & Examples: R&D & Equity Investment Opportunities Exist 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: Co-Dev. & Sales Transactions Possible 23 Commercializing Innovation w/o Venture Capital Results & Examples: Co-Dev. & Sales Transactions Possible 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: Actions Needed for Commercialization 23 March Commercializing Innovation w/o Venture Capital Results & Examples: Actions Needed for Commercialization 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: Finding Technology is Possible 23 March Commercializing Innovation w/o Venture Capital Results & Examples: Finding Technology is Possible 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: Tech Dev. Matches Strategic Priorities of Commercializing Innovation w/o Venture Capital Results & Examples: Tech Dev. Matches Strategic Priorities of Int’l Partners & Buyers 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: Enabling & Platform Technologies of Strategic Commercializing Innovation w/o Venture Capital Results & Examples: Enabling & Platform Technologies of Strategic Priority Exist 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Results & Examples: The Majority of IP is Protected Commercializing Innovation w/o Venture Capital Results & Examples: The Majority of IP is Protected 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital Reasons: Technologies Interesting or Rejected Interesting & w/Follow-up for 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] com

Commercializing Innovation w/o Venture Capital Conclusions with Shell Oil (Corporate VC) 1. Create Business 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 ØMatch Russian platform technologies w/Western strengths in systems, mgt, planning & execution ØMix 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] com

Commercializing Innovation w/o Venture Capital Results: Game. Changing Solutions w/Global Value Distributed Temperature/Pressure System Commercializing Innovation w/o Venture Capital Results: Game. Changing 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/20 km (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] com

Commercializing Innovation w/o Venture Capital Results: Solutions for Russia Specific Needs (E&P, Transport, Processing, 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] com

Commercializing Innovation w/o Venture Capital Opportunities to Capitalize Expand commercialization in Russia w/Western bus 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 ØExample: Russian Gas Separation & Sphere Plastics (cold weather) Technologies 23 March 2005 www. IVIpe. com [email protected] com

Commercializing Innovation w/o Venture Capital The Go. Forward Plan™ 1. Characterize the Deal Flow, Commercializing Innovation w/o Venture Capital The Go. Forward 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 1 st. 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] com

Ex: How Much Value (Added)? Where’s the Technology? 23 March 2005 www. IVIpe. com Ex: How Much Value (Added)? Where’s the Technology? 23 March 2005 www. IVIpe. com [email protected] com

Technology In Many Places! Just Look & Define Slaughter Raising Genetic Engineering & Breeding 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] com Retail Locations

Game. Changing Opportunities with Russian E&P Technology The IVI Go. Forward Plan™ CIS High Game. Changing Opportunities with Russian E&P Technology The IVI Go. Forward Plan™ CIS High Technology Oil & Gas Consortium ØSeveral 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] com

Commercializing Innovation w/o Venture Capital World Bank & Government of Turkey 4 th Knowledge Commercializing Innovation w/o Venture Capital World Bank & Government of Turkey 4 th Knowledge Economy Forum 23 March 2005, Istanbul, Turkey Innovative Ventures Inc. Grand Rapids MI USA Moscow Russia Thomas Nastas President [email protected] com www. IVIpe. com 23 March 2005 www. IVIpe. com [email protected] com