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The purpose of the TechColumbus Pre-Seed Fund is to enable promising technology startups to complete the steps necessary to attract follow-on funding from venture capital firms, angel investors and other sources.
Parameters
This fund will focus on incubating phase technology startups in the central Ohio region that have the reasonable expectation of reaching $30 million in revenue in three to seven years, and address a market of at least $100 million. The fund will make primarily convertible debt investments in companies that are scalable, led by a solid management team (or have plans to complete one), and can articulate a defendable next round capital attraction strategy.
The ideal pre-seed opportunity will include most or all of the following criteria:
- High potential technology-based startup with clear path to follow on funding.
- Defendable intellectual property with clear ownership or licensing arrangement.
- Team led by an experienced entrepreneur or the company is willing to acquire the needed management talent. Management is coachable.
- Recognizable $100 million addressable market with high likelihood of $30 million revenue in three to seven years.
Process
Investment opportunities seeking TechColumbus Pre-Seed funding will be considered on a real-time basis as they are identified.
There are five phases of the Pre-Seed investment process:
- Investment Screening
- Preparation
- Deal Flow Assessment
- Investment Decision
- Funding
Investment Screening
Prior to beginning the process, a member of the TechColumbus team will work with the Company to understand the opportunity, its future prospects and its potential for attracting additional capital. If the TechColumbus team believes that the Company merits consideration for the Pre-Seed Fund, an internal review of the opportunity to determine the appropriateness for this funding will occur.
Preparation
If selected to move forward, the entrepreneur will work with the TechColumbus team to prepare the Company for the Pre-Seed “pitch”, including a thorough review of the business plan and the presentation.
Deal Flow Assessment
Once ready, the Company will submit a detailed business plan and present its opportunity to the Deal Flow Assessment Committee, which will determine if the opportunity should pass to the next stage. If selected, the Company will then be assigned an Entrepreneur-in-Residence (EIR) who will perform detailed due diligence and structure a proposed deal, if warranted.
Investment Decision
Following due diligence, the Company will present to the Investment Committee. The EIR will also present his or her findings and the proposed deal to the Investment Committee. The Committee, which is comprised of investment professionals, subject matter experts and other development specialists, will then select those most promising investments for funding.
Funding
The Pre-Seed Fund typically utilizes a standard five year senior secured convertible promissory note. There is also a standard ten year warrant agreement associated with the transaction. The investments are typically made via tranches based on the achievement of agreed upon milestones. In addition to the funding itself, the EIR transitions to a part-time operating role on the management team, all at no cost to the Company. He or she stays actively engaged with the company through the funding period, helping to propel the company through its fundraising and commercialization efforts.
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