Sourcing Innovation From the Migration of Companies To, From and Between Emerging Markets

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2 Sourcing Innovation From the Migration of Companies To, From and Between Emerging Markets Tom Sweeney CEO & Managing Director STEM 7 Capital Partners Ltd

3 Big Trend: The Globalization of the Commercialization & Financing Continuums Government Education + Research Centres Private Sector University Post Grad Research Early Stage Later Stage Growth Stage Mezzanine Fundamental/Theoretical Research Applied Research Invention Innovation Commercialization Pre Seed (IP Rights with Institution) Spinouts (Seed) Startups Technology Transfer Offices Bench Prototype /Pilot Cashflow Positive Strong Balance Sheet Accelerators Angels VC and CVC Private Equity, Banks 3

4 There is a large and timely opportunity for GPCA companies to benefit from the globalization of the financing and commercialization continuums at all stages of growth Education + Research Centres University Governments Post Grad Research Early Stage Private Sector Later Stage Growth Stage Mezzanine Fundamental/Theoretical Research Applied Research Invention Innovation Commercialization Pre Seed (IP Rights with Institution) Spinouts (Seed) Startups Technology Transfer Offices Bench Prototype /Pilot Cashflow Positive Strong Balance Sheet Accelerators Angels VC and CVC Private Equity, Banks 4

5 KEY TRENDS Innovation Ecosystems Aspirational Economies Emerging Markets 5

6 Innovation Ecosystems An economic term used to describe regions where each of the following attributes is present: Pervasive invention and innovation An entrenched entrepreneurial culture Contiguous access to multiple sources of investment capital at all stages of growth Fluid interaction between all of the participants shown below Examples: California (Silicon Valley, San Diego, etc.), New York, Boston, Cambridge (UK) Mezzanine/IPO Later Stage Series B Series A Seed Sectors Source: Global Connect Capital Resources 6

7 Key Trends: Innovation Ecosystems 1. Inbound Entrepreneurship From More Countries Foreign entrepreneurs are coming to the US west coast from a wider range of emerging markets and aspirational economies Increasing accelerator support from their home governments and bridge funds to further fund the best deals More Foreign Entrepreneurs Arriving From More Countries More Emerging Market Graduates Are Going Home 2. More Emerging Market Graduates Are Going Back Home (Hai Gui) Graduate students from emerging markets and aspirational economies are going back home to start, continue or join new companies 74% of Indian, 57% of European, and 71% of Chinese indicated that they wished to start a business back home within the next decade * 3. Ultra high Growth Companies Are Emerging in Emerging Markets Combination of western education, highly educated local talent, local capital and massive regional markets are creating winners Implicit catalyst for financing innovation into and from emerging markets and aspirational economies Year on Year Increases of Returnee Chinese Students Year * Source: Kauffman Foundation, UC Berkeley School of Information Students 134, , ,900 % increase 25% 38% 47% 7

8 Aspirational Economies A sovereign economy where its government, for various reasons, has articulated and funded an explicit strategy to diversify from a resource based or factor based economy towards a more knowledge based economy Mezzanine/IPO Later Stage Series B Series A Seed Sectors Capital Resources Source: Booz & Company 8

9 Key Trends: Aspirational Markets Large Investment Funds Are Sourcing Internationally Explicitly focused on sourcing and investing in specific sectors that will result in local job creation SOEs are establishing corporate VC funds (e.g. SABIC, Saudi Aramco, STC) These funds represents growth markets and new financing opportunities for STEM companies Massive Investments in Free Zones & Infrastructure Designated regions focused on specific STEM strategies Enables effective workarounds to certain cultural, legal and taxation issues Massive infrastructure spending on enabling assets (buildings, universities, roads, rail, etc.) Pervasive Increase in Entrepreneurship Programs Catalyst for emergence of entrepreneurship organizations, local incubators, accelerators, angel financing and pooled capital funds 9

10 Emerging Markets Anation state whose infrastructure, technology education levels, approach to entrepreneurship and capital markets are concurrently evolving such that a knowledge based economy is emerging and growing in specific regions of that country in one or more sectors. 10

11 Key Trends: Emerging Markets 1. Chinese, Indian and ASEAN start up environments are evolving rapidly. They are widely and grossly misunderstood by the west Hai Gui + local capital & massive markets 2. Eastern innovation is increasingly pervasive and competitive globally = strong companies that can and will expand 3. Emerging market growth companies will increasingly seek investment from and expansion into other economies 11

12 STEM 7 is an investment bank that originates, advises and manages investments in proven, high growth potential, technology driven companies that are expanding into, from and between emerging markets, including GCC countries seeking to enhance their knowledge based economies* INVESTORS Family offices, private equity funds, venture capital funds, CVCs, angel investors, sovereign funds, corporations OPPORTUNITIES Direct investment (equity and debt), joint ventures, franchises, subsidiaries, licensing royalties SECTORS Science, technology, engineering, mathematics (STEM), agriculture, food, water, resources * See Appendix A 12

13 Mission: provide strategic advisory & selective investments explicitly focused on high growth technology companies expanding into, between and from emerging markets Unique capacity to source high quality deals: Unparalleled relationships with a global network of early and later stage investment funds Excellent local presence and expertise in the leading emerging market technology hubs Strong advisory work, including research institutes, foreign, high net worth leaders Primary function includes providing management and investor advisory to facilitate and invest in the parent operating company and/or the legal entities expanding into the acquiring market Current Deal Flow Map Silicon Valley Dubai Shanghai Singapore 13

14 Investing in the Flow of Global Innovation March 2014 Tom Sweeney CEO & Managing Director STEM 7 Capital Partners Ltd.