SC Launch Annual Report 2008

Helping Build South Carolina’s Knowledge Economy

SC Launch! was created to facilitate applied research, product development and commercialization programs, and to strengthen South Carolina’s Knowledge Economy by creating high wage-earning jobs.

SC Launch! provides entrepreneurs with key tools for success to help build technology startups, jobs and equity in the future for South Carolina.

SC Launch! also provides access to business, academic and economic development entities through the SC Launch! Resource Network.

SC Launch! is a collaboration among SCRA and South Carolina’s university research foundations: Clemson University, the University of South Carolina and the Medical University of South Carolina.

The SC Launch! Mission Fulfill the 2005 Innovation Centers Act to: n Help create startups which leverage intellectual property from the research universities and encourage partnerships among the public and private sectors; n Provide support to generate professional-grade applied research and commercialization;

n Promote the development of Knowledge Economy industries and applied research facilities in South Carolina;

n Establish a continuing forum to foster greater dialogue between the state’s research universities and industry;

n Focus SC Launch! client efforts on the development, testing and

n Assist university research foundations in South Carolina to increase their research capabilities.

implementation of new advances in knowledge-based industries;

INNOVATION PIPELINE Incentive $ Pre-Company / University Startup Initiatives Proof-of-Concept Prototyping Clinical Trials IP Support Business Plan Services Licensing

‘New Ideas’ Innovation Prizes

IDEA

Assessment

Incentive $

Investment $

Startup Company Seed-Stage Investments Grants

Convertible Notes Promissory Notes Equity Investments Royalties

SBIR/STTR Phase 1 Matches

Risk Reduction Services SC Launch!

Resource Network Mentoring Seminars Training Networking

Landing Party Support

Demonstration Projects

Development

Deployment

INNOVATION

Support

Programs that Support Discovery, Development and Commercialization

SC Launch! is involved in each step of the innovation pipeline, from discovery assessment through development and deployment, and continuing with support during later commercialization activities. Programs include university precompany initiative support, an SBIR/STTR Matching grant program, and both funding and support to help startup companies grow.

Additional programs include support of innovation prizes, landing parties and demonstration projects. Innovation prizes are awarded through the New Ideas for a New Carolina contest, which encourages and supports innovators and inventors in commercializing their ideas. Landing parties are R&D stage companies that relocate to South Carolina and make a commitment to grow the Knowledge Economy. Demonstration projects conceptualize, attract and execute technology in focused program areas.

University Startup Assistance Program

This program supports research university-based, early-stage companies, and pre-company initiatives by providing grant funding for proof-of-concept studies, prototype development, clinical trials, protection of intellectual property and other similar uses. These initiatives are recommended by the respective university research foundation Executive Director or designee and meet the SC Launch! criteria. This program funding encourages the commercialization of university research and technology.

SBIR/STTR Phase I Matching Grant Program

The SC Launch! SBIR/STTR Phase I Matching Grant Program awards matching funds to South Carolina-based companies that have been granted a Federal Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) Phase I award. The Program is designed to foster job creation and the Knowledge Economy in South Carolina by increasing the competitive position of South Carolina small businesses in attracting SBIR/STTR grant funding. The Program also provides an incentive for Federal Phase I award-winning companies to participate in the more substantial Federal Phase II program.

For SBIR/STTR Phase I Matching Grant Program eligibility requirements please visit www.sclaunch.org.

HELPING COMPANIES GROW SC Launch! identifies, nurtures and supports the growth of high impact knowledge-based companies by providing:

Funding

SC Launch! support and funding positions companies for follow-on capital.

SC Launch! offers funding to qualified applicants in the form of grants, loans and equity investments. Grants may be awarded to help defray the cost of business services such as legal, ďŹ nancial, marketing and intellectual property protection.

Grants are also intended to further the applied research and development efforts and better position the Client Company for future growth and fund-raising.

Once a company has met certain milestones, they may go before the SC Launch!

Inc. Board for approval of a loan or equity investment of up to $200,000. The SC Launch! funding process prepares its clients for the rigors involved in acquiring follow-on funding from angel investors and venture capital firms.

Mentoring and Support SC Launch! Zone Managers are the frontline of the SC Launch! program. Their duties include mentoring and guiding SC Launch! Client Companies and conducting due diligence with program applicants and companies presenting to the SC Launch! Inc. Board. Zone Managers collaborate with corporations and with colleges and universities statewide. They also work closely with SC Launch! Resource Partners and economic development organizations to help strengthen the Knowledge Economy.

Access to Resource Network SC Launch!’s connections with the business, academic and economic development sectors of the state provide an ecosystem of support to maximize client opportunities for success. The SC Launch! Resource Partners are seasoned professionals who provide basic business services such as banking, accounting, legal, insurance, advertising and marketing. Through this network, SC Launch! companies receive counseling, mentoring and training.

Program Acceptance Guidelines The following criteria are used to qualify companies for entry into the SC Launch! program. n South Carolina entity – based in SC or committed to locate to the State, with entity established and registered with SC Secretary of State and at least 51% of payroll located in SC; n High-impact potential in terms of knowledge-based jobs and increase in per capita income in the surrounding area or county; n Intellectual property position that is protected or capable of being protected thus creating a distinct competitive advantage; n Linkage to South Carolina research universities is beneficial.

Companies interested in SC Launch! that meet the above criteria should go to www.sclaunch.org for an application.

Technology Sectors These technology sectors are currently identified as having the greatest statewide interest and alignment with the research focus areas of the university research foundations. n n

n n

n n

Advanced Materials and Fibers Alternative Energy, including, but not limited to, Hydrogen a nd Fuel Cells Automotive Life Sciences, Biotechnology and Biomedical Engineering/Chemicals Related Information Technology and Software

Measuring Success

Investments made under the SC Launch! program are predominately high-risk, and are designed to stimulate company growth, technology transfer and new economic development. There are different measures of success, and SC Launch! tracks a variety of performance indicators, including: n High-performance Knowledge Economy firm creation n Job creation (professional and research & development jobs above the prevailing wage rate) n Linkages between universities and private industry (e.g. spin-outs, spin-offs, tie-backs, etc.) n Client companies funded n Follow-on financing of SC Launch! companies n Financial return on equity and loan investments in SC Launch! companies

FOSTERING HIGH-IMPACT TECHNOLOGY In addition to grants, loans and equity investments, SC Launch! assists in preparing its clients for further growth and success through collaboration, advice and mentoring.

Bolstering the Growth of Medical Technologies in South Carolina In addition to receiving a financial investment from SC Launch!, Sabal Medical relocated their business to take full advantage of the partnerships and M E D I C A L medication safety, one patient at a time collaboration offered by SC Launch!. Their move bolstered the growth of medical technologies in South Carolina, and enabled them to form relationships with local hospitals and provide continued system support to Greenville Hospital System.

SABAL

SC Launch! supports companies that are in the vanguard of the shift to a Knowledge Economy.

With this move, Sabal is poised for future growth and continued product development. Sabal recently received several million dollars in investment capital. The financing was led by Nexus Medical Partners of Quincy, MA, and its German affiliate, Medicis Nexus Partners GmbH of Munich. Sabal Medical develops and produces an automated nursing medication cart and bar code verification software that ensures five critical patient rights: the right patient, right medication, right dose, right route and right time. The product, known as MedCenter™, offers a comprehensive solution, certain to bring nurses, patients and pharmacists together to save lives one patient at a time.

Positioned for Further Growth CreatiVasc Medical was founded in 2004 to deliver a stream of innovative, easy-to-use and intuitive vascular technologies that address the universal problems of kidney dialysis connectivity. The CreatiVasc devices are designed to provide innovative solutions that dramatically improve dialysis patients’ quality of life.

CreatiVasc Medical, located in Greenville, South Carolina, has found greater growth and success through their SC Launch! collaboration. In addition to a financial investment, the partnership further positioned the company to secure private funding. The SC Launch! Resource Network assisted CreatiVasc in finding a manufacturer for their product.

“The financial infusion from SC Launch! has enabled us to accelerate our product development, patent protection and FDA testing activity while we raised $3.5 million from our private equity funding for continued growth. We could not have achieved what we have without this innovative new program. Being funded

by SC Launch! allowed us to prepare for commercialization of our first device, while we successfully completed the private equity investment drive. The entire SC Launch! staff has been a tremendous asset in giving us support and advice.

We even found an in-state manufacturer for our first commercialized product, the Fistula Finder®, through SCMEP, an SC Launch! Resource Partner.”

Steve Johnson, CreatiVasc Medical, CEO

“The expertise of the SC Launch! staff has really given us access to important tools we could not get otherwise. SC Launch! has legitimized us through their due diligence process and has better positioned us to angel investor groups, venture capital firms and to people throughout the region.”

Marty Lefkowitz, DigitalDerm, CEO

“By working with the SC Launch! program, Sabal is able to take this technology to a broader marketplace.

The relocation to South Carolina was a strategic move.

SC Launch! strategic seed money has positioned us for growth, and the high-quality relationships we’re developing with hospitals like Greenville Hospital System are providing excellent input to our product development process.”

Bill Park, Sabal Medical, CEO and President

Startups Propel the South Carolina Technology Base SC Launch! provides seed capital of up to $200,000 to high potential startups to bridge the funding gap between “friends and family” investments and follow-on, venture capital funding, which is critical to a company’s success. An ideal example is Zipit Wireless, a Greenville, SC-based developer and distributor of the Zipit Wireless Messenger.

SC Launch! invested in Zipit Wireless with seed funding when the company was at a crossroads. Within one year, Zipit received $4.5M in addon series A funding, and continues to expand toward new opportunities in its market space.

COLLABORATING TO TAKE IDEAS TO MARKET University research and technology is a priority, and SC Launch! assists with making it a commercial reality.

Argolyn Bioscience, Inc. Argolyn Bioscience, Inc. is a privately held biopharmaceutical company dedicated to discovering and developing novel peptide drug candidates to treat pain, psychosis, and other serious diseases and disorders. The company was founded in 2002 on the basis of inventions created at the Medical University of South Carolina by Dr. Thomas Dix in the Department of Pharmaceutical Sciences.

University connections are critical to the mission of SC Launch!. This is where the ideas that become knowledge-based companies begin.

The company has two compounds in development. ABS212 an analgesic drug candidate that works by a novel mechanism. ABS201 is in development as a first-in-class treatment alternative for schizophrenia. These, and other product candidates in their portfolio, were developed using their proprietary amino acid analog substitution technology which enables the rapid and efficient discovery of novel, peptide-based drug candidates.

Argolyn was awarded the 2007 Deal of the Year for first-time financings by Southeast BIO in November, 2007. The company received a $15.8 million financing round in June, 2007, co-led by investors Intersouth Partners and Quaker BioVentures, with Amgen Ventures also participating. The financing is being used to advance the company’s drug candidates into human clinical trials and to validate its patent-protected technology platform.

“SC Launch! came to us at a critical time in our company’s development. They have been more than a source of capital. They’ve made important introductions for us and helped make us more visible.”

Pearce Gilbert, Argolyn Bioscience, Co-Founder and COO

SensorTech SensorTech offers a new, patent-pending contact sensing technology that accurately measures force, pressure, torque, or impact. This exciting technology has the ability to be formed into any shape and size.

Andrew Clark co-invented this new bioengineering technology as part of his doctoral program in Bioengineering at Clemson University. The University applied for a patent of the technology and the Spiro Institute for Entrepreneurial Leadership arranged for MBA students to work with SensorTech to explore its market opportunity. Clark also completed the Technology Entrepreneurship Certificate program at the Spiro Institute. SensorTech now holds an exclusive option to negotiate a license with Clemson to commercialize the technology.

“We’re excited to be working to commercialize this technology with nearterm opportunities in prosthetics and load-cell sensors. SC Launch! has been particularly valuable through the University Grant they awarded us. This provided working capital for equipment, raw materials and other operating costs so vital to a start-up. We’re now finalizing our business plan and will apply for the additional SC Launch! funding!”

Chuck Pringle, SensorTech Inc., CEO

Resource Partners BB&T

Bauknight Pietras & Stormer, PA Byrum Innovation Group Carolina First Bank Carolina Software As A Service CarterTodd & Associates Chernoff Newman Dority & Manning, P.A Dynamic Exhibits ECI – Find New Markets Elliott Davis, LLC HR On-Call McNair Law Firm McPherson, Berry & Associates, Inc Michael D. Layman, Attorney at Law, P.A Nelson Mullins Riley Scarborough LLP

CarboNix

Ogletree Deakins

Formed in 2006 by local entrepreneur Al Quick and Dr. Michael Matthews at USC, CarboNix, LLC uses a novel method of lowtemperature sterilization to eliminate microbial spores and allergens from various materials. It develops, markets, sells and distributes products based on licensed, compressed CO2 technology.

ProActive Technology

“The formation of CarboNix provides a great example of how a new focus on commercializing the technologies developed in our South Carolina research universities can play a significant role in economic development for the State. Companies like CarboNix will spring up all over the state with help of partners like SC Launch! and others.”

Post No Bills, Inc PST Computer Training, Inc Strategic Marketing International (SMI) South Carolina Chamber of Commerce South Carolina Manufacturing Extension Partnership (SCMEP) Trevelino/Keller Communications VC3 VantagePoint Wachovia Corporation Willcox Buyck & Williams, PA Wyche Burgess Freeman & Parham, PA

Al Quick, CarboNix, Co-founder and COO

Selah Technologies - Innovation in Nanomaterials Selah Technologies, LLC is an advanced materials manufacturing company focused on the development of nanotechnology enabled products for the biomedical and consumer electronics industries. Its mission is to consistently deliver high quality products to the global marketplace in an ethically sound manner. The company started with research that came from Clemson University and is currently located in Pendleton, South Carolina.

Selah DotsTM are carbon based quantum dots that have a broad range of potential applications that include tumor guided surgery and use in biosensors.

“South Carolina’s transition to a knowledge economy is dependent on many factors.

Chief among these is the support that high tech startups find here in comparison to other states. Many parties in the state now recognize this reality and are actively working to improve the soil conditions for new companies like Selah Technologies. SC Launch! is the embodiment of SCRA’s efforts in this regard. Selah has been blessed to find an outstanding partner in SC Launch! during this critical time in our startup.”

Michael Bolick, Selah Technologies, CEO and President

JOIN THE CIRCLE OF INNOVATION When you give you join others in the Circle of Innovation. Your support enables SC Launch! to provide: n

Financial support to help potentially successful companies bridge the funding gap;

n

Matching funds to Phase 1 SBIR/STTR award winners which will bolster the economic assistance these programs offer for small businesses and encourage greater access and leverage of federal research dollars;

n

Assistance to universities to help turn promising research technologies into commercial realities;

n

Resources to encourage R&D landing parties to relocate to South Carolina.

n

Mentoring, training and networking opportunities to the continually increasing number of companies in the program in order to help their businesses succeed.

You can have an Impact on the Knowledge Economy The Industry Partnership Fund is an easy way for individuals or businesses to make an impact on the growth of a Knowledge Economy in South Carolina.

A South Carolina taxpayer (individual or corporate) can receive a 100% credit against state income taxes, insurance premium taxes and/or certain license fees. The individual limit is $2,000,000 and the aggregate limit is $6,000,000. Contributions are accepted on a first come, first served basis.

By contributing to the Industry Partnership Fund, you become a member of the Circle of Innovation.

Industry Partnership Fund Fuels SC Launch!

Using $12 million from SCRA’s strategic cash reserves, the SC Launch! program was created in 2006 to fulfill the mandates of the Innovation Centers Act. In order to sustain Knowledge Economy development beyond 2008, the Industry Partnership Fund was established in 2006 under the Industry Partners Act. Contributed funds are used by SC Launch! to support commercialization of intellectual property out of university research foundations, as well as assist entrepreneurs across the state. Funds are also utilized to finance start-up and spin-out companies, provide incubation and business services to companies and other activities to execute the mandates in the Innovation Centers Act and the Industry Partners Act. SC Launch! is currently accepting contributions to support entrepreneurs in South Carolina. If you are interested in learning more about becoming a participant in this exciting initiative please visit:

www.sclaunch.org

Results to date...

Since inception in April 2006, the SC Launch! program has had a significant impact on South Carolina’s Knowledge Economy. Through collaborations with the research universities, the support of our Resource Partners and the members of the Circle of Innovation we have all come together to make a difference. The metrics are diverse and poised to grow in the coming years.

38,000,000

dollars in follow-on funding secured by SC Launch! companies

41

companies receiving direct investment

25

77,000

average salary (in dollars) of jobs created

innovation prizes awarded to inventors

12

116

members of the Circle of Innovation

59

companies that have received some form of funding

52

companies currently receiving support

demonstration projects funded

8

SBIR/STTR matching grants awarded

5

research and development landing parties

“This is a very special investment for us and the state. Progress Energy is proud to support the Industry Partnership Fund. It is an investment in the future of our state’s Knowledge Economy” Emerson Gower, Progress Energy, Vice President

“We believe that SCRA and the SC Launch! program are having a major impact in helping encourage and foster high impact, knowledge-based enterprises. We have a vital interest in this and want to do all we can to help in the process.”

Irv Welling, Shareholder, Elliott Davis

Where to go from here...

Are you: n an entrepreneur interested in help taking your idea to market; n a person writing for an SBIR/STTR Grant; n an individual or member of an organization interested in contributing funds to support the SC Launch! mission while receiving dollar-for-dollar tax credits; n someone wanting to learn more about what we do?

If so, please contact us at 803-343-5311 or www.sclaunch.org.

www.sclaunch.org