Vencon Management, Inc.1From Lab Dreams to Business Reality:An Entrepreneurship Tutorial for ScientistsVENTURE CAPITAL AND THE CHEMICAL INDUSTRY ENTREPRENEURAMERICAN CHEMICAL SOCIETY NATIONAL MEETING Washington, DCAugust 29, 2005Irvin Barash, President, Vencon Management, Inc., New York, NY 10019Vencon Management, Inc.2Setting the Stage for Chemical Ventures: Commercialization MilestonesINVENTION OR DISCOVERYBCDMINOR MARKET NEEDSMAJOR TECHNOLOGY CHANGESMAJOR MARKET NEEDSTechnologyMilestonesAVencon Management, Inc.3Photovoltaics Growth0204060801001201900192519501975198519952000YEARSECONOMIC INTENSITYABCDVencon Management, Inc.4Nano-Technology Growth0102030405060708019851995200020052010YEARSECONOMIC INTENSITYABCDVencon Management, Inc.5TECHNOLOGY TYPESELECTRONICCHEMICALSE INKSPHOTOVOLTAICSADVANCEDMATERIALSCONDUCTIVEPOLYMERSBIO DEFENSEENVIRONMENTALBIOENERGYVencon Management, Inc.6TYPES OF INVESTMENTSNEW VENTURESSPIN-OFFSINVESTMENT IN AN EXISTING BUSINESSJOINT VENTURESPURCHASE OF AN EXISTING COMPANYVencon Management, Inc.7STAGES OF VENTURE GROWTH20052006200720082009201020111234567BeginPartial Stage CompleteEndCompleteTECHNOLOGY VENTURES GROWTH STAGESVENTURE STAGE DESCRIPTION STAGE 0:IDEA/CONCEPTSTAGE 1:R&DSTAGE 2: INITIAL MARKETING PLANSTAGE 3: FORMATION OF COMPANYSTAGE 4:BUSINESS TEAM AND PLANSTAGE 5:MARKETING DEVELOPMENT/PARTNERINGSTAGE 6:COMMERCIALIZA-TIONPRE-SEED STAGE.Patents Bench ScaleVencon Management, Inc. Business PlanSEEDSTAGE DEVELOPENT STAGE:PRE-COMMERCIALVencon Management, Inc.8STAGES OF VENTURE GROWTHSTAGE 0: IDEA/CONCEPTSTAGE 1: R&DTHIS STAGE IS ALSO REFERRED TO AS PRE-SEED STAGESTAGE 2: INITIAL MARKETING PLANSTAGE 3: FORMATION OF COMPANYSTAGE 4: BUSINESS TEAM AND PLANTHIS STAGE IS ALSO REFERRED TO AS THE SEED STAGESTAGE 5: MARKETING DEVELOPMENT/PARTNERINGTHIS STAGE IS ALSO REFERRED TO AS THE DEVELOPMENT STAGE.STAGE 6: COMMERCIALIZATIONAFTER COMMERCIALIZATION, THERE IS SALES AND THE STAGE IS REFERRED TO AS EXPANSIONVencon Management, Inc.9VENTURE CAPITAL INVESTMENTSU.S. VENTURE CAPITAL INVESTMENTS$0$20$40$60$80$100$120$140$1601996199719981999200020012002200320042005YEARBILLIONSVencon Management, Inc.10KEY INVESTMENT FACTORSEXTERNALITY #1: INVESTMENT FUNGIBILITYCapitalisinvestedtogenerateanattractivereturncommensuratewithrisk.Manyopportunitiesabound.Particularlytoday,therearenumerousdifferentinvestmentcategoriesas:1) Public Markets2) Private Equity --Institutional Venture Capital and Individuals3) Mergers & Acquisitions (Buy outs)4) Real Estate5) Distresses Securities6) Oil & Gas7) Emerging Markets8) CommoditiesVencon Management, Inc.11KEY INVESTMENT FACTORSEXTERNALITY #2: RISK FACTORSEach type of investment has a different type of associated risk.Investors strive to diversify their risk amongst the investment categories. Risk also relates to the liquidity of the investment.Risk regards many factors as:Stage of the investmentProprietary nature of the product/technologyHistory of the companyIndustry growthTotal capital needsManagementVencon Management, Inc.12KEY INVESTMENT FACTORSEXTERNALITY #3–CAPITAL APPRECIATIONThe general range of appreciation of capital for the different categories relates to between 15% to 50% per year. Of course, such levels need to be contrasted with risk.EXTERNALITY #4–ACTIVE vs. PASSIVE INVESTMENTIntheactivemode,investorssitontheBoardofCompaniesoreventakearoleinmanagement.Inventurecapital,investorsaregenerallyactive.EXTERNALITY #5–ECONOMIC ENVIRONMENTVencon Management, Inc.13FINANCING EVALUATION PROCEDURESReview of Initial InformationDetailed InformationLetter of IntentContractsVencon Management, Inc.14The Successful Venture•.•Focus on 1-2 end use products to account for commercial sales.•Research for out years commercialization.•Team with strategic partners.•Active Board Management