CONVERTIBLE LOANS & ROYALTIES

Naim Rassool (GM: Technology Innovation WC)

Craig Landsberg (GM: Business Advisory & Support Services)
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Presentation Outline

TIA&Fundingproducts(10min)
TIA & Funding products (10min)
ConvertibleLoans(10min)
Royalties(10min)

TIA Act No. 26 of 2008

stimulating
stim lating and intensifying
intensif ing technological innovation
inno ation in
order to improve economic growth and the quality of life of all
South Africans by developing and exploiting technological
innovations.

Technology
Ideas

Technology
Innovation

Strategic Intent

Vision
To be a world class innovation agency that supports and enables
technological innovation to achieve socio-economic
socio economic benefits for South
Africa through leveraging strategic partnerships

Mission
To enhance
T
h
South
S th Af
Africas
i global
l b l competitiveness
titi
and
d tto d
deliver
li
socioi
economic value through mobilising financial and non-financial interventions
across different sectors of the economy.

DST Funding Entities Merged into TIA

SA high
g tech,, high
g risk funders in innovation value chain

TIA Technology Sectors

BiotechnologySectors

IndustrialSectors

Agro

Advanced
Manufacturing

Health

Industrial Biotech

Energy

ICT

Mining
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Summary of Funds

Equity

Debt

Convertible
Loan

Royalty

Convertible Loans
Concept & Rationale for Loan being convertible into equity
IRR on convertible loan
Repayment terms scenario:
Immediate interest accrues at prime x%
Repayment at break-even
Repayment sometime after break-even
No interest for fixed period
Repayment after profitable for 12 consecutive months
Security for Loan IP
Ranking of loan repayment
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Royalties
Rationale for Royalties

Share of future success of technology/product

Arms-length
Type of entity
Common practice
Concept of Royalty
Direct Commercialisation Model
o Percentage off turnover (very rare cases off gross
profit)
o Typically
yp ca y fixed
ed pe
period
od
o Common best practice
Indirect Commercialisation
o Percentage off receipts
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Royalties
Determining Royalty Rates

25% IP rule
Industry norms
Eroding net margins
TIAs return (minimum real return)
Structuring Royalties
Holidays (royalty 0%)
Deferment (in case of cashflow problems, accrues interest
monthly at prime)
Dilution
Dil ti (only
( l in
i exceptional
ti
l cases to
t incentivise
i
ti i other
th investors)
i
t
)
Converting Royalties (must try to indicate ratio at which converts)11

Thank You!

Download Funding Guidelines & Application Forms from

www.tia.org.za

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TIAs successful Information Communication

Technology
gy ((ICT)) investments.

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BlueCubeMQiinlinemineralquantifiersallowprocessoperatorsinmineral
separationplantstoaccessminutebyminutemineralcompositioninformation
Outputdataischannelleddirectlytoaclientsdatabaseforimmediateuseby
operators.Thetechnologyprovidesconsistentandaccurateinformationon
actualmineralcomposition information,notonlytheelementalcomponents.
Thedataprovidedbytheinlinemineralscannersassistoperatorsinoptimising
therecoveryofvaluablemineralsbyprovidingimmediatefeedback.
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