Elevate Ventures 2016 Annual Report by Elevate Ventures

2016 ANNUAL REPORT

HIGHGROWTH INDIANA

WELCOME ELEVATING INDIANA THROUGH INNOVATION AND ENTREPRENEURSHIP SUCCESSFUL COMMUNITIES SHARE QUALITIES that make them desirable places in which to live, work, raise families and call home. At Elevate Ventures, we believe deeply that one fundamental quality of such places is the existence of a thriving, sustainable entrepreneurial culture. When we step back from our day-to-day work at Elevate and take the long view, we envision Indiana’s future as a state rich in “best places to live and work,” where people swap stories about how their cities were transformed through entrepreneurism, and where children grow up believing they can be innovators because they learned about entrepreneurship in school. We foresee universities as engines of entrepreneurial growth and engagement with the communities around them, supporting the development and commercialization of intellectual property. Our vision is for innovation centers, business incubators and coworking spaces to be working together to create a bigger pond of innovation and investment activity in Indiana.

In 2016, Elevate Ventures experienced a record year of capital investment, despite an overall national decline in private equity activity.

Guided by this vision, we are making demonstrable headway by helping regions and communities create entrepreneurial cultures, and encouraging and developing the business leaders of tomorrow. This has been our goal since Elevate’s inception, and we are the only organization in the state executing a strategy that advances entrepreneurs from within Indiana to create a thriving, robust pipeline of growthoriented companies backed not only by critical capital but also by a network of people interested in helping others accomplish their goals. Ours is a long-term strategy, with many built-in sprints, to accomplish the vision. Elevate’s developing partnerships with the North Central, Northeast, Southwest and Southern regions of Indiana, as well as a close partnership with Purdue University, are designed to grow innovation and entrepreneurism as a means to grow successful communities. The model is just beginning to expand and accelerate, but constituents across the state are experiencing the value of our approach (hear from them starting on page 8). In 2016, Elevate Ventures experienced a record year of capital investment, despite an overall national decline in private equity activity. Now is the time to accelerate this momentum with a long-term strategy, one that creates opportunities for people to come together in dynamic ways to create and grow successful companies and, just as important, successful communities in our state.

Chris Lamothe, CEO

Elevate Ventures 2016 Annual Report

CONTENTS

INTRODUCTION Find out what itâ&#x20AC;&#x2122;s going to take to hit a tipping point for entrepreneurship in Indiana.

16 FUNDS

See sources and uses of Elevate funds in 2016.

20 FAQS

MILESTONES Follow the Elevate Ventures story from the inception of the 21 Fund to today. Glimpse into an aspirational future.

17 SUPPORT

Introducing the forward-thinking people and organizations that support Elevate and its mission.

8 ACTION

Hear what stakeholders and partners have to say about how Elevate is impacting individuals, communities and businesses in Indiana.

18 TEAM

Meet the people behind Elevate, including our Board of Directors, statewide staff, Entrepreneurs-inResidence and Elevate Advisors.

23 REFERENCES

Get answers to top frequently asked questions.

How to build a high-growth Indiana

INTRODUCTION BUILDING CRITICAL MASS MISSION Elevate Ventures’ mission is to create sustainable entrepreneurial development cultures and infrastructure and to drive financial and economic returns for our stakeholders.

OUR EVERY EFFORT AT ELEVATE VENTURES is guided by the desire to build critical mass, one that will mark a tipping point in Indiana when entrepreneurial momentum becomes sustainable, and communities and regions across the state benefit from having many high-growth companies in their own backyards. Contrary to popular belief, high-potential high-growth businesses, not just startups, make the biggest impact on the economy. Research from the Journal of Economic Perspectives indicates that business startups account for about 20 percent of U.S. gross (total) job creation, while high-growth firms account for up to 50 percent of new jobs created.1 According to the Ewing Marion Kauffman Foundation, which helps individuals attain economic independence, “Entrepreneurs flourish in a connected, dense and diverse ecosystem where they can move quickly to take advantage of opportunities.” These are the kinds of collaborative, engaged environments we are working to create at Elevate Ventures.2

To build this critical mass, it will take more than just entrepreneurs. It will also require advisors, community leaders, mentors, investors and a robust desire to collaborate and share. At Elevate Ventures, we are working to create this multifaceted network of stakeholders. Our team has formal partnerships with Purdue University and four Indiana regions actively working to build entrepreneurial energy in their communities. The portfolio companies in which Elevate is invested are spread across 21 Indiana counties. From 2011 to 2016, funds under Elevate’s management have deployed $57 million in capital, with an additional $369 million generated by co-investments and followon investments. In fact, for every dollar Elevate invests, other capital partners invest $6.50, with 1,100 co-investors participating with our organization to access and help fund top-quality deal flow in Indiana. Explore our 2016 Annual Report to see and hear more about our impact. We all have a role to play in driving forward toward exciting milestones in Indiana’s future. Thank you for being a part of the critical mass.

Elevate Ventures 2016 Annual Report

MILESTONES Foundation for the future

OVERNIGHT SUCCESS IS A MYTH ANYONE WHO HAS ACCOMPLISHED SOMETHING GREAT knows that success is actually a combination of hard work, good timing, trial and error, and opportunities. The “overnight” part happens when all of these things come together and people start to notice. The milestones Elevate Ventures has been a part of since 1999 demonstrate a strategic, aspirational approach to success, both for our organization and our stakeholders.

PAST

21 Fund Launches

Partnerships Emerge

The Indiana General Assembly establishes the 21 Fund to bring about innovation with the goal of transforming our state’s economy.

The 21 Fund provides infrastructure and encourages industry academic partnerships to transfer new technologies and talent from the academic sector to the Indiana commercial sector.

1999

1999–2005

1999-2015

Moves to Market

Elevate Ventures Launches

Entrepreneurship Support Expands

Under the Indiana Economic Development Corp., the 21 Fund focuses on the development of technologies within the commercial sector. In the context of the IEDC’s partnership with Elevate Ventures, the 21 Fund shifts to moving validated technologies into the market and company-building.

Elevate Ventures establishes operations to offer expert advisory services to entrepreneurs, and help the 21 Fund become self-sustainable, offering investment opportunities on par with private sector investors.

Elevate establishes presence in North Central, Northeast and Northwest Indiana. Hires full-time Entrepreneurs-in-Residence dedicated to supporting entrepreneurship in each region.

2005–2010

2011

How to build a high-growth Indiana

MILESTONES Broadens Footprint Elevate continues expansion, establishing presence in Southern Indiana. Hires full-time EIR to serve region.

2013

Elevate Advisors Launch

Expansion Continues

Ranks at the Top

Elevate establishes presence at Purdue University through the Purdue Foundry.

Elevate Ventures ranks top four among most active venture capital firms in the Great Lakes Region by Pitchbook.

2015

November 2015

Indiana Commits

Elevate Advisors network launches, bringing together some of the brightest minds in business from across the state for entrepreneurs. This growing group of 14 women and men include current and former company founders, corporate executives and board members, and investors.

During Innovation Showcase, Gov. Mike Pence announces a push for $1 billion in resources to be allocated toward efforts focusing on entrepreneurship and “next generation” jobs and discoveries. Co-sponsored by Elevate Ventures, the event breaks records with nearly 1,000 entrepreneurs, investors and others participating. All three Innovation Showcase winners are Elevate portfolio companies.

Launch of resource-rich online Knowledge Portal, Investor Portal and Talent Portal for entrepreneurs, investors, job seekers and other stakeholders.

July 2016

July 13 –14, 2016

October 1, 2016

National Reputation Rises

Entrepreneurship Stats Prove Success

The Wall Street Journal, Harvard Business Review and The Atlantic cover a two-county region in Indiana, reporting on how a dramatic increase in scale-up businesses is benefiting rural communities.

Indiana cracks the Kauffman Index of Growth Entrepreneurship top 10, rising from the 19th spot in 2016. The milestone represents rate of startup growth, share of scaleups and high-growth company density.

2022

2025

FUTURE

Digital Assets Grow

2017+

Elevate Ventures 2016 Annual Report

Companies Gain Recognition Salaries Rise Average salary of employees working at Elevate’s portfolio companies under active management reaches $67,047. Total payroll for 2015 hits $53,268,879.

PRESENT

Portfolio companies win 25 local, regional and national awards from organizations including SXSW, Frost & Sullivan, Gartner Research, Deloitte, Entrepreneur Magazine, Inc. Magazine, IBM, Indiana Chamber of Commerce, Red Herring, Forbes and the International Consumer Electronics Show.

2016

December 31, 2015

January–December 2016

ELEVATE VENTURES 2016 INVESTMENT TOTALS

Breaks Investment Record Elevate Ventures has a record-breaking year of capital investment, breaking its previous record set in 2010.

December 2016

Impact of Entrepreneurship Felt Statewide Indiana rises five spots on CNBC’s list of America’s Top States for Business, from No. 16 just four years ago to No. 11. Among the key improvements leading to the overall ranking are access to capital (from No. 18 to No. 6) and technology/innovation (from No. 26 to No. 14).

$8.3M

$1.3M

21 Fund

SBIR/STTR Grant Matching

$2.0M

$173K

Indiana Seed Fund

High Potential Startup Grant

$2.0M Indiana Angel Network Fund

$500K Elevate Ventures Purdue Foundry Fund

2027

How to build a high-growth Indiana

ACTION

Elevate Ventures has secured the following Regional Partnerships to help these areas nurture their entrepreneurial cultures and innovation through advisory services, education, networking and more. At least one dedicated Elevate staff member will serve each Regional Partnership.

NORTH CENTRAL St. Joseph, Elkhart and Marshall counties, and the University of Notre Dame

NORTHEAST Adam, Allen, DeKalb, Huntington, Kosciusko, LaGrange, Noble, Steuben, Wabash, Wells and Whitley counties

SOUTHWEST Dubois, Vanderburgh and Warrick counties

SOUTHERN Clark and Floyd counties

PURDUE FOUNDRY Purdue University and Tippecanoe County

Elevate Ventures 2016 Annual Report

Entrepreneurial venture communities

STATEWIDE PARTNERSHIPS CAN LEAD TO SWEEPING IMPACT CITIES AND TOWNS outside of the top metro areas in the U.S. can become significant entrepreneurial players if all the right pieces are in place. Buy-in and participation of key partners actively engaging to make it easier for entrepreneurs to succeed is elemental to growing a fertile entrepreneurial environment. Consider how an unlikely Western city has excelled. Salt Lake City came in at No.13 in 2016 for Venture-Capital Investment Per Capita, just ahead of Madison, Wisc., and Raleigh, N.C., and two spots behind New York and Los Angeles. Speaking about how his state’s entrepreneurial environment has improved over the years, Scott Petty, co-founder of Signal Peak Ventures, says of being in Utah, “If I’m an entrepreneur and I want to get a company up and running quickly, I can do that. I can find the people. I can find the support, service providers, a lot of investors that I can go to not necessarily to get money from but advice, help and so forth, whereas it certainly wasn’t quite that way several years ago.” 3 Continuing to broaden and deepen our growing network of statewide partners and resources—peers, investors, advisors and community leaders—can help Indiana capitalize on its top-ranked business environment in cities and towns throughout the state. With the right support and people in place, we can fulfill Indiana’s promise as a great place to start and grow a high-performing, high-growth business.

ECONOMIC DEVELOPMENT COALITION OF SOUTHWEST INDIANA, EVANSVILLE Greg Wathen, President & CEO Our goal is to be a catalyst for change to foster a thriving regional economy. As a result of our recent partnership with Elevate Ventures, we are beginning to see its model at work for us. In particular, Elevate is helping the Southwest Indiana region become more strategic in achieving goals to stimulate an entrepreneurial environment. They are bringing structure and process to an initiative that has lacked guidance in the past.

PURDUE FOUNDRY • John Hanak, Managing Director In order for Indiana to continue to establish its reputation as a “go-to” state for new economy entrepreneurship, parts of the entrepreneurial ecosystem that typically operate in silos must collaborate. Elevate plays a leading role in knitting together so many of those elements to enable that environment to prosper. At Purdue we seriously endeavor to be the premier driver of that entrepreneurial growth, and our relationship with Elevate Ventures is a key component of that effort. We value our already-deep and yet still growing partnership with Elevate Ventures. Through the work we have jointly done with their team through our Elevate Purdue Foundry Fund, we’ve been able to gain leverage from their expertise and network in the venture world, while at the same time deploying 21st century investment dollars into a large number of the start-ups emanating from the Purdue Foundry.

CURVO LABS • Andy Perry, Co-Founder Elevate has been a partner to Curvo dating back to our “idea” phase. New entrepreneurs and their ideas may be fragile in their embryonic state. A culture and community supportive of entrepreneurship encourages and equips founding teams with the education, the confidence and the funding to hone their ideas, solve real problems in the marketplace and make significant economic impact as well. Elevate’s work is helping to create this dynamic in Indiana communities.

RUSHER MEDICAL • Michael Rusher, Founder I’m proud of Indiana. We have a large percentage of U.S. entrepreneurial activity, with many medical companies having developed here in the state. Many of those, like Cook Medical in Bloomington, are making contributions to make Indiana a more attractive place to work and live. Fort Wayne, the city where I am based, has great entrepreneurial support through multiple organizations that share and encourage diverse ideas, and the development process. This in turn has boosted and will continue to promote positive social, cultural and environmental changes.

SPRINGBUK • Rod Reasen, Founder & CEO Innovation and entrepreneurship are at the heart of any great community. Many of the name brand companies of today didn’t exist even 20 years ago. Now, these very organizations employ thousands of people, making up the culture of Indiana. Our community has an unprecedented opportunity to be the epicenter of innovation, and I’m proud to be part of this movement.

How to build a high-growth Indiana

ACTION

2,000 COMPANIES assisted (total)

7 FUNDS under Elevate’s management to help companies move fast

2016 PORTFOLIO COMPANIES 2,409 total jobs $143,682,821 total payroll $59,644 average salary

Empowering entrepreneurs

STARTUPS THAT CAN MOVE FAST, MOVE FORWARD RECENT RESEARCH by Harvard University’s Shikhar Ghosh indicates that three out of every four venture-backed firms fail.4 Startups that make it have a few things in common, including fast growth, says Neil Patel, a Forbes contributor, entrepreneur and consultant to Amazon, General Motors and Viacom.5 When a company can grow fast, they are in a position to raise funds and continue to grow. When a company can’t grow rapidly, it flounders, funding sources lose interest, and it likely fails. “If your startup can grow fast, you can effectively bypass some of the biggest startup killers—losing to the competition, losing customers, losing personnel, and losing passion,” Patel says. Elevate helps position Indiana entrepreneurs to pursue critical rapid growth.

ALLOS VENTURES • Don Aquilano, Managing Director There is a significant capital gap here in Indiana. Without Elevate’s early-stage investment focus and support, many of today’s growing Indiana ventures would either be out of business or out of state.

SOMNI • Matt Berg, Founder Our relationship with Elevate has benefited us by allowing us to take the next step towards growth in our company. We wouldn’t have been able to make critical moves towards our future without their support.

ANIDYN • David D. Nolte, Chief Scientific Officer and Co-Founder Elevate has always moved rapidly to support our activities at AniDyn, whether through matching funds to grants or for direct investment. This is direct monetary support that enhances our ability to operate and cultivate our products as well as customers. The Purdue Foundry, being close to home, has had a substantial positive impact on the company, chiefly through its statewide connections, teaming us up with experienced business management as well as investors and business advisors.

Elevate Ventures 2016 Annual Report

37,500 HOURS of assistance provided to entrepreneurs (estimated total)

6 ENTREPRENEURSIN-RESIDENCE providing face-to-face advisory services across the state

13 FULL-TIME TEAM MEMBERS to carry out the Elevate Ventures mission

Advisory services

SHARING EXPERTISE PAYS OFF BIG IN AN IN-DEPTH ANALYSIS culling data from more than 650 internet startups, Startup Compass concludes that one of the clearest results uncovered was that founders who learn are more successful. “Startups that have helpful mentors… and learn from startup thought leaders raise 7 times more money and have 3.5 times better user growth,” the report says, illuminating the need for advisory services and the growth of robust networks to support innovation and entrepreneurship in Indiana.6

STEADYSERV • Steve Hershberger, Co-Founder, Chairman & CEO In working with a number of Elevate resources, we feel that the greatest value we have received from our board observers, as well as EIR involvement, is the truth. They will speak plainly and in informed ways about the positives and negatives of approaches and decisions. There are no games or agendas. Rather, a simple desire to solve problems and do it with the greatest efficiency as possible. It is a relatively rare commodity in the marketplace.

INSCOPE MEDICAL • Maggie Galloway, CEO If the kinds of rich entrepreneurial cultures Elevate is working to develop were prevalent across Indiana, it would enable more companies to move through the “valley of death” and onto a path to success. So many companies struggle after the initial excitement of starting a company but before they are profitable. We have learned that having the right people to guide you is invaluable.

BOLSTRA • Haresh Gangwani, CEO Elevate Ventures serves as a guide and mentor to our company, and in 2016 Bolstra became a member of Elevate’s portfolio. It has been a fantastic experience! The team members—executive staff, EIRs, marketing strategy consultants, etc.— at Elevate Ventures have been extremely kind in responding to our needs with guidance, and connecting us with the right set of people.

POLICYSTAT • Steve Ehrlich, President PolicyStat has been a partner with Elevate since the organization launched in 2011. Elevate has been represented on our board since we first received our 21 Fund notes, and we have benefited greatly from their guidance. We received an investment from the 21 Fund at a critical juncture, and it helped position us to get to cash-flow positive. We are now at a point where we are self-funded, which opens up a whole set of options that were not previously available to us.

How to build a high-growth Indiana

ACTION

For every dollar Elevate Ventures invests, it pulls in $6.50 from outside investors as co-investors. Following is capital invested (by fund type) to date:

21 FUND $32,977,497 invested $246,267,622 leveraged

INDIANA SEED FUND $4,041,497 invested $16,199,881 leveraged

INDIANA ANGEL NETWORK FUND $10,408,843 invested $57,029,184 leveraged

SBIR/STTR GRANT MATCHING $3,531,399 invested $13,222,674 leveraged

HIGH POTENTIAL STARTUP GRANT $561,000 invested $245,000 leveraged

ELEVATE VENTURES PURDUE FOUNDRY FUND $860,000 invested $3,424,086 leveraged

INDIANA HIGH GROWTH FUND $4,698,161 invested $29,537,427 leveraged

Elevate Ventures 2016 Annual Report

Investments/Funding

ELEVATING ACCESS TO FUNDS FOR INDIANA ENTREPRENEURS ELEVATE VENTURES’ SOLE FOCUS is on entrepreneurs in our own backyards, from Evansville to Mishawaka and all points in between. “People start businesses where they live,” according to a study of high-growth companies in Indianapolis published by the Ewing Marion Kauffman Foundation. This finding is in contrast to the currently dominant theories of the creative class, the study notes, highlighting the need to focus efforts locally.7 “The U.S. is the world’s dominant center for venture capital, accounting for nearly 70 percent of total global venture capital,” reports Richard Florida in The Atlantic. San Francisco, San Jose, Boston and New York lead the world’s cities in venture capital investment, illustrating the East and West coasts’ dominance and the need to develop more investment opportunities here at home.8 Elevate Ventures is among the largest venture capital firms in Indiana and a top provider of funding to entrepreneurs launching and building high-potential, high-growth businesses in the state. As we continue to cultivate entrepreneurial cultures, we are giving innovators at home the tools and resources to launch, grow and succeed.

ANIDYN • David D. Nolte, Chief Scientific Officer and Co-Founder Indiana has a healthy and welcoming environment for entrepreneurship. If I could snap my fingers and change it, it would be to enhance interactions with targeted investors. Investors are out there, but finding the right kind with a good match of interests is a bit like finding a needle in a haystack (an appropriate metaphor for Indiana).

SOMNI • Matt Berg, Founder Startups benefit everyone. When a person works to solve a problem, and he or she has and creates a new or better solution that otherwise never would have existed, everyone stands to benefit. More Indiana-based startups would improve the quality of life for all.

IEDC • Jim Schellinger, Indiana Secretary of Commerce Hoosiers are innovation leaders, developing ideas that are changing the way the world operates. In order for those ideas to evolve into startups and high-growth companies, they need a world-class entrepreneurial environment that supports growth and helps attract venture capital from around the world to our state. Through Elevate Ventures’ management of Indiana’s 21 Fund programs and its focused, collaborative partnerships, it is connecting entrepreneurial ideas with the expertise and capital needed to develop while helping advance an economy primed for job creation.

DEVELOPERTOWN • Ken Miller, Partner Indiana must do more to compete with other thriving early-stage capital communities around the U.S. The investments and education that Elevate Ventures provides to Indiana’s early and growing entrepreneurial businesses make a clear difference in accelerating growth in high-wage jobs and attracting out-of-state venture capital. Our belief is that Elevate Ventures is primarily constrained by the number of investments it can make annually, which leaves many Indiana companies struggling to compete. These viable companies are forced to pursue the expensive, difficult process of raising capital from outside of Indiana. The second constraint Elevate Ventures faces is the amount of entrepreneurial education and support its team is able to provide to Indiana companies. Elevate Ventures’ focus on seed-stage capital for Indiana companies has made a great impact on the Indiana economy. Removing these barriers could greatly increase Elevate Ventures’ impact on the Indiana economy.

ADRANOS ENERGETICS • Chris Stoker, CEO Elevate, through the Elevate Ventures Purdue Foundry Fund, provided the initial funds to launch our company by awarding us a $20,000 Black Award in January 2016. Elevate has provided additional funding for Adranos beyond the Black Award through managing the approval of our $50,000 State of Indiana STTR match and by awarding us an $80,000 Gold Award in early 2017. Managing these two programs requires a great deal of time and effort, but doing so is crucial to help companies like mine grow beyond the idea stage towards the commercialization stage.

PONDURANCE • Ken Gramley, Executive Director of Strategy and Finance, and an Elevate Advisor Entrepreneurs are great at seeing problems and finding unique ways to solve them. Ultimately, this requires innovative people, which Indiana has plenty of, and access to capital, which despite some recent inroads, we are still far behind where we need to be.

BLUE PILLAR • Tom Willie, CEO Elevate Ventures joined the Blue Pillar team as a new investor in our Series D Preferred Equity financing in December 2016 and will serve as an observer to our board of directors. The most important step in creating a startup is to ensure that your idea or product solves a critical need. There is no better place to validate, refine and initially succeed at this mission than in your own backyard.

How to build a high-growth Indiana

ACTION

Heading into 2017

INDIANA RANKS NO. 1 in the nation for cost of doing business (CNBC)

INDIANA RETAINS ITS AAA BOND RATING outperforming all surrounding states (Standard & Poor’s)

INDIANA RANKS 1ST among Best States for Regulatory Environment (Pacific Research Institute)

INDIANA RANKS 8TH among Best States for Tax Climate (Regional Business Cost Comparison and Ranking for Midwest)

Elevate Ventures 2016 Annual Report

A vision in action

WE SEE A BRIGHT FUTURE AHEAD IN INDIANA ELEVATE VENTURES HAD A RECORD-BREAKING YEAR of capital investment in 2016, topping our previous record by $4.7 million for a 46 percent gain and a total of $14.8 million invested in 2016. If this is an indicator of things to come, Indiana is at a tipping point, on the cusp of accelerating innovation and entrepreneurship at an exciting rate and impacting the state for decades into the future. We are buoyed in part by 2016’s 16-year high for deal activity in Indiana, Elevate’s robust and growing community partnerships, the level of talent we are seeing from Hoosier entrepreneurs and the escalation in deal flow that is attracting more and more investors to our doorstep. The state’s commitment to make innovation and entrepreneurship a top priority is also a weighty development that should motivate anyone with a stake in Indiana’s future to see how they might play a role. We at Elevate Ventures look forward to serving all of our stakeholders in the coming years and capitalizing on Indiana’s assets and promise for the benefit of entrepreneurs, investors and all Hoosiers.

VISIONTECH PARTNERS & VISIONTECH ANGELS • Ben Pidgeon, Executive Director, and past President of Venture Club of Indiana My dream is to raise awareness of the exceptional investment opportunities in Indiana’s startup ventures. The dollar has more purchasing power in the Midwest compared to the East and West coasts. Also, Indiana entrepreneurs possess an innate perseverance, practicality and directness—qualities critical to startup success. My dream is for this approach to building companies, coupled with the ability to stretch a dollar, to become better known to investors across the nation, and for Indiana to see increasing capital inflow to seed-stage companies as a result. For this dream to become a reality, Indiana needs more successes like Salesforce and Appirio, more sharing of diligence when appropriate and a belief that yes, we can do this!

DEVELOPERTOWN • Ken Miller, Partner Our view is that the 10-year plan for Hoosier innovation and entrepreneurship should significantly increase Indiana’s investments in proven programs such as Elevate Ventures, while expanding cross-sector initiatives like the Internet of Things or TechPoint’s XTern program. The Indiana economy, like business, is evolving rapidly, and Indiana’s investments should move quickly with programs that support and grow our existing businesses and provide a significant boost to the entrepreneurs who understand the next generation of our economy.

ECONOMIC DEVELOPMENT COALITION OF SOUTHWEST INDIANA, EVANSVILLE Greg Wathen, President & CEO Elevate Ventures should lead the effort to grow and leverage innovation while embedding entrepreneurship into Indiana’s DNA.

ELEVATE VENTURES • Robert Myer, Board Chair, and former Fortune 500 Executive If the state wants to turn $1 billion into $7 billion, it should try everything possible to convince Elevate Ventures to take stewardship over the entire 10-year investment. Elevate is the only entity in Indiana that has proven it can effectively invest those funds. Look at its track record. By drawing seven times more investment to Indiana companies for every dollar it implements, more companies are succeeding, great new jobs have been created, and we expect a full return of invested funds to the state.

4G VENTURES • Bill Godfrey, Managing Director Elevate Ventures understands how entrepreneurship and innovation can ignite Indiana’s growth economy. They have been a strong catalyst and partner in funding the most promising technology businesses across Indiana.

How to build a high-growth Indiana

FUNDS for Operations

SOURCE

OF FUNDS

84.7%

IEDC SSBCI

3.4% 11.6%

DONORS OTHER

0.3%

USE

OF FUNDS

33.8%

EIR LABOR & CONSULTING

15.9%

INVESTING LABOR & CONSULTING

27.0%

ADMIN LABOR & CONSULTING

10.6%

ADMIN & OVERHEAD MARKETING

5.0% 5.7%

DIRECT SERVICES PROFESSIONAL FEES

2.0%

Elevate Ventures 2016 Annual Report

SUPPORT

2016 Contributors

ORGANIZATIONAL SUPPORT WE ARE GRATEFUL to the people and organizations that financially support Elevate Ventures and its mission. Ambassador Enterprises

Kem Krest

Community Foundation of St. Joseph County

Koch Enterprises Inc. Micropulse Inc.

Elkhart Community Foundation Fort Wayne Metals

Northeast Indiana Regional Opportunities Council

Garatoni-Smith Family Foundation

Old National Bank

German American Bank

Olive B. Cole Foundation

Graham Allen Partners

Parkview Health

Indiana Economic Development Corporation

The Judd Leighton Foundation University of Notre Dame

Individual donor Vectren Corp. Interlogic Outsourcing Inc.

How to build a high-growth Indiana

TEAM BOARD OF DIRECTORS

STATEWIDE STAFF

ROBERT MYER

LEADERS, INNOVATORS AND EXPERTS across Indiana make up the Elevate Ventures team. Together, we are working to unleash value for public-private entrepreneurial initiatives in communities across Indiana, and the statewide and regional entrepreneurial network.

Chair DON DENSBORN Director LARRY GARATONI Director STEVE MARTIN

CHRIS LAMOTHE Chief Executive Officer

Director JOHN SAMPSON Director

TING GOOTEE Chief Investment Officer

KIP TOM Director CHRIS LAMOTHE Director

PHIL LODATO General Counsel & Chief Compliance Officer

PHIL LODATO Secretary

BARBARA UGGEN-DAVIS Chief Financial Officer

ROSANNE BURGE Senior Partner

ALEXANDRA BOWERS Office Manager

ERICA SCHWEYER Senior Analyst

Elevate Ventures 2016 Annual Report

ENTREPRENEURS-IN-RESIDENCE

ELEVATE ADVISORS

ELEVATE VENTURES OFFERS LEADERS of early-stage and high-growth companies a major competitive advantage: our team of Entrepreneurs-in-Residence. EIRs provide first-time entrepreneurs with business advisory services to help them navigate the uncharted waters of starting a business, from launch to exit and every decision in between. Our teamâ&#x20AC;&#x2122;s industry experience includes semiconductors, agriculture, IT, pharmaceuticals, medical device, NASA, big data and more. What they have in common is the desire to see their clients succeed.

THE SELECTION PROCESS to become an Elevate Advisor is rigorous. Among the criteria are in-depth industry experience, a strong professional reputation and sponsorship by at least two Elevate Ventures full-time employees. Industry targets for Advisors include B2B software, B2C products or solutions, life sciences/health care, manufacturing/energy/defense, agriculture and others.

ROBERT CLARK Northeast Indiana

GAVIN FERLIC

ANIL BANSAL

DAVE CORCORAN

Advisor

MICHAEL EARLEY

KEN GRAMLEY

Advisor

IRENA GOLOSCHOKIN

JEFFREY T. HODGSON

Advisor

RYAN HOU

BARBARA KEW

Advisor

KARL KOEHLER

JANE NIEDERBERGER

Advisor

MONTY RIFFER

ERIC STINE

Advisor

TOM STONE

ARI VIDALI

Advisor

Northern Indiana

MARK GRAMELSPACHER Central Indiana

DAN OWEN Southern Indiana

KELLY SCHWEDLAND Northwest Indiana

MICHAEL SHEPARD Purdue Foundry

How to build a high-growth Indiana

FAQS

COMMUNITY STAKEHOLDERS ASK Q. What type of ROI has Elevate generated for the state of Indiana? A. Elevate’s investments, totaling roughly $60 million, have generated nearly $330 million in co-investment into Indiana companies to date. The annual payroll from our portfolio alone exceeds $60 million. Those dollars represent real, direct impact on our entrepreneurial economy. We are also at the early stage of generating financial returns on our funds, putting us on a long-term path to self-sustainability. Q. How are my funds/donations being spent and what type of ROI can I expect? A. Fifty percent of community donations are directly provided back to communities in support of their entrepreneurial activities. The other half is used to build statewide networks in the form of educational events, knowledge and talent tools, and capital referrals. The ROI is captured in the amount of entrepreneurial activities (e.g., number of companies receiving assistance and investment, and coinvestment) and connectivity through capital, customer and talent referrals, and related outcomes. Q. How can I get Elevate to make a difference in my city/county/region? A. Our regional engagement lead is the key connector between our statewide activities and each community. Having a strong engagement lead with community support and trust is an important first step. Elevate’s leadership and community support staff are also available and ready to help when needed. Contact us to learn more. Q. How does Elevate measure success?

? 20

A. We quantify wins in a number of ways, including dollars invested in Indiana companies, amount of co-investment capital, ROI, number of employees of portfolio companies and number of startups receiving funding/assistance. We also measure the number of connections we’ve made to facilitate activity and outcomes related to capital, customers and talent.

ENTREPRENEURS ASK Q. What is your process for a company seeking funding? A. Initially, you get into our system by formally applying for funding via the Elevate website. Once we receive your application, you will be asked to provide an executive summary and pitch deck so an Elevate representative can present your deal to the team. During this meeting, the team decides if you should be invited in for a company presentation. This presentation takes place in person in Indianapolis. After your presentation, the investment committee gathers the opinions of the staff and makes a decision whether to move forward on due diligence. If you get approved, you will receive a checklist of due diligence items to submit. Once those are received and we conduct our internal review, the investment committee votes whether we should commit funding or not. If we commit funding, we work with you to negotiate the terms and finalize the deal.

Elevate Ventures 2016 Annual Report

Q. How does Elevate help entrepreneurs raise money? A. Elevate provides capital to qualified Indiana businesses with a unique emphasis on the entrepreneur. We help and sometimes fund pre-revenue, pre-profit, emerging and existing businesses seeking to scale quickly. Q. What is the timeline for receiving investment? A. It depends how ready you are. From initial vetting to investment approval, we target 6-10 weeks, depending on how fast we receive diligence documents. Most companies go through an advisory process with one of our Entrepreneurs-in-Residence prior to initial investment consideration by Elevate, which adds to the overall engagement timeline for a total of 3-4 months. Q. How much do you typically invest? A. It depends on the funds. We invest from pre-product to early-revenue stage companies, and have the capability of investing from $20,000 up to $2 million as initial investment. Q. Do you match investments? A. With our direct investment funds, we do not match. We have our own investment and diligence process. If we decide to move forward with a company, Elevate takes on the role of lead investor or co-investment partner in a financing round. With that said, we do operate a matching grant program for SBIR/STTR Phase I awardees who are selected by the federal review panels to develop nationally competitive technologies for commercialization. For our fund-of-funds, we rely on those fund managers/organized angel groups who have organized diligence and portfolio management infrastructure. In that scenario, entrepreneurs would interact with those groups directly, not Elevate. Q. What investment instruments, such as SAFE, do you use? A. We use preferred equity or convertible notes in bridge round financing. We currently do not use SAFE. Q. What are your investment mandates? A. We have three: 1) We are return-driven funds, 2) we have a co-investment mandate, meaning we can’t go into a deal alone, and 3) we invest in only Indiana-based companies. Q. What is Elevate doing to support entrepreneurs statewide beyond providing capital? A. Great question. A network of 14 (and counting) Elevate Advisors augment our in-house EIRs and statewide staff. This talented group is equipped to engage with our portfolio companies on a project basis. Leveraging our close relationships with Elevate portfolio companies, we are also able to provide knowledge and lessons learned to entrepreneurs, and organize sessions to enable thought-leadership sharing and peer learning. Q. What are EIRs and how can they help me? A. An EIR is an Elevate “Entrepreneur-in-Residence.” EIRs help entrepreneurs with issues regarding talent, capital, product, customers and operations—at no cost to the entrepreneur—all across Indiana. All EIRs have an entrepreneurial background, so they have succeeded (and failed) in organizing a business around ideas, raising and leveraging people and capital, and ultimately building a business to various degrees of success. They also know that time is of the essence when someone is raising capital, and that the expertise entrepreneurs need is attached to a timeline, and so they respond accordingly.

How to build a high-growth Indiana

FAQS

Q. How do I get co-investment capital? A. One way to make yourself available to potential co-investors is through Elevateâ&#x20AC;&#x2122;s online Investor Portal, which connects investors to companies seeking funding. Many entrepreneurs also reach out to family, friends and angel investors as a first effort to fund their visions. Q. Will Elevate invest in my company?

A. The best way to figure that out is to go to our website and apply. From there our team will work together to determine if your company meets our investment criteria and has developed to the point of Elevate engagement.

INVESTORS ASK Q. Can Elevate help me find high-quality deal flow in Indiana? A. Yes. Accredited investors can access our online Investor Portal to view a vetted collection of Indiana companies seeking funding, including those companies in which Elevate Ventures has invested. We also host events around Indiana to get deal flow in front of investors. Although you will have access to all deals, EIRs may specifically reach out to you if the investment fits with your subject matter expertise. Q. How do your direct funds and fund-of-funds work together? A. Those two donâ&#x20AC;&#x2122;t invest in the same round. We maintain frequent communications with our fund-offunds participants, and try to coordinate on investment as early as possible in our respective investment processes. Additionally, we try to manage risk and evaluate potential investment overexposure to any single portfolio company across different funds. Q. How can I become a participant in your fund-of-funds? A. We have one open RFP for the Seed Fund with total capital allocation of $5.5 million. That fund is near the end of its capital runway. If you are interested in future fund-of-funds RFP opportunities, please contact us via our website to be registered in our system. Q. Are you able to share diligence? A. Yes, we can do that with the permission of companies under consideration and under a customary confidentiality and hold-harmless agreement.

Elevate Ventures 2016 Annual Report

REFERENCES

PAGE 4 Ryan Decker, John Haltiwanger, Ron Jarmin and Javier Miranda. “The Role of Entrepreneurship in US Job Creation and Economic Dynamism.” Journal of Economic Perspectives, Vol. 28, No. 3, Summer 2014. www.kauffman.org/ what-we-do/resources/entrepreneurship-policy-digest/the-economic-impact-of-high-growth-startups 1

Emily Fetsch. “The Economic Impact of High-Growth Startups.” Ewing Marion Kauffman Foundation,

Oct. 10, 2016. www.kauffman.org/what-we-do/resources/entrepreneurship-policy-digest/the-economic-impactof-high-growth-startups PAGE 8 Josh Steimle. “The State Of Venture Capital In Utah.” Forbes.com, Dec. 1, 2015. www.forbes.com/sites/ joshsteimle/2015/12/01/the-state-of-venture-capital-in-utah/#63cbb83e4506 3

PAGE 10 Glenn Kessler. “Do nine out of 10 new businesses fail, as Rand Paul claims?” Washington Post, Jan. 27, 2014. https://www.washingtonpost.com/news/fact-checker/wp/2014/01/27/do-9-out-of-10-new-businesses-fail-as-randpaul-claims/?utm_term=.59b300c1e37d 4

Neil Patel. “90% Of Startups Fail: Here’s What You Need To Know About The 10%.” Forbes.com, Jan. 16, 2015. http://www.forbes.com/sites/neilpatel/2015/01/16/90-of-startups-will-fail-heres-what-you-need-to-know-about-the10/#56fdcd4855e1 5

PAGE 11 “Discover The Patterns Of Successful Internet Startups In The Startup Genome Report.” Startup Compass Inc., May 28, 2011. blog.startupcompass.co/discover-the-patterns-of-successful-internet 6

PAGE 12 Yasuyuki Motoyama. “The Regional Environment in Indianapolis: Insights From High Growth Companies.” Ewing Marion Kauffman Foundation, Sept. 10, 2015. www.kauffman.org/what-we-do/research/city-metro-andregional-entrepreneurship/the-regional-environment-in-indianapolis-insights-from-high-growth-companies 7

Richard Florida. “The Global Cities Where Tech Venture Capital Is Concentrated: The Bay Area and large U.S. East Coast metros dominate.” The Atlantic, Jan. 26, 2016. www.theatlantic.com/technology/archive/2016/01/globalstartup-cities-venture-capital/429255/ 8

PAGE 14 Heading into 2017: [Indiana Ranks No. 1] CNBC, www.cnbc.com/2016/07/12/americas-top-states-for-business-2016-the-list-andranking.html [AAA Rating] Alex Brown. “S&P Reaffirms State’s Credit Rating.” Inside Indiana Business, April 1, 2016. http://www.insideindianabusiness.com/story/31621461/sp-reaffirms-states-credit-rating [Indiana ranks 8th] Jared Walczak, Scott Drenkard, Joseph Henchman. “State Business Tax Climate,” Tax Foundation, Sept. 28, 2016. https://taxfoundation.org/2017-state-business-tax-climate-index/

How to build a high-growth Indiana