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OTAF’s III’s goal is to enable promising early stage technology companies to complete the steps necessary to achieve key performance milestones which will result in self-sustainability (cash flow positive) and/or significant traction (demonstrating proof of concept / significant market adoption).
Parameters
This third fund will focus on commercialization phase Ohio-based technology startups that have the reasonable expectation of reaching an enterprise value of $20-50 million in three to five years, targeting a market segment with at least $500 million in total revenue potential. OTAF III and its SideCars will make convertible participating preferred equity investments in companies that are scalable, led by a solid management team, and can articulate a well designed capital access plan and liquidity event.
Ideal OTAF opportunities have these characteristics:
- High potential technology company in IT, Software, Bio-Sciences, Medical Devices, or Advanced Materials.
- Clearly identified & unique differentiating factor(s) that position the product/solution as a potential high margin market leader.
- Defensible intellectual property with clear ownership or licensing arrangement, or other high barriers to entry.
- Strong entrepreneurial team with specific industry expertise.
- $500+ million addressable target market with high likelihood of $30 million revenue within 3 to 5 years.
- Clear path to a $30-$50 million exit via sale to a targeted strategic bidder within 5 years
Process
Investment opportunities seeking OTAF funding will be considered on a real-time basis as they are identified.
There are 4 phases of the OTAF investment process:
- Investment Screening
- Due Diligence
- Investment Decision
- Funding
Investment Screening
The process begins when a member of the OTAF management team works with the Company to understand the opportunity, its development and growth opportunities, and its potential for attracting multiple targeted strategic bidders. If OTAF’s management feels the Company merits consideration, the Company will present to the Fund’s Investment Screening Committee (ISC). The Company will be coached in the preparation of the 2-3 page executive summary and PowerPoint presentation for this meeting, which requires a $300 presentation fee. OTAF ISC meetings occur once per month, and typically two to four companies present.
Due Diligence
If the Company receives a positive response from the ISC, the entrepreneur will make the same pitch to the full OTAF membership the next week. If the OTAF III members vote positively, then OTAF will assemble a team of Due Diligence (DD) volunteers to join OTAF management and launch the formal DD Team. DD Teams are typically comprised of members who are seasoned Sidecars, and subject matter experts. They are expected to complete their work in 6 – 8 weeks.
Investment Decision
If the DD Team believes the Company is a suitable OTAF investment, it will work with the Company to complete a signed Term Sheet and help it prepare for the final presentation to the full OTAF membership. At this meeting the DD Team will also provide its assessment and investment recommendation to the OTAF members plus solicit potential interest from Sidecars who will then attend an informal meeting with management within two weeks (if the investment vote is positive).
Funding
OTAF III invests $200,000 in Convertible Participating Preferred Equity in the form of stock (C Corporations) or membership units (LLC’s). The Fund reserves $100,000 for potential follow-on investments in each venture if they perform well. OTAF members (“Sidecars”) typically invest alongside the Funds in individual amounts ranging from $10,000 to more than $250,000 per venture. OTAF Funds have consistently led and participated in syndications of $500,000 to >$3,000,000 by co-investing with other leading Angel Investment Funds and regional Venture Capital Funds. OTAF also works closely with management to secure non-dilutive funding opportunities provided by local, state, and national, public and private economic development institutions.
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