Guidelines for Venture Financing Program Implementation

October 13, 2009

DOST MEMORANDUM CIRCULAR NO. 003-09

SUBJECT : Guidelines for Venture Financing Program Implementation

The Program aims to provide the impetus to push and accelerate the commercialization of new and emerging technologies/inventions by providing the necessary funding support to start-up and technology-based expansion projects. It shall determine and package the type of assistance needed for a particular technology to cover the wide spectrum of technology commercialization activities.

Projects must clearly indicate the participation of private sector in terms of equity investment.

I. Background

This guideline is being re-issued to provide supplemental information and update of the previously issued guidelines on the program.

II. Objective(s)

1. To improve the viability of start-up projects;

2. To enhance competitiveness of start-up projects through infusion of financial assistance.

III. Assistance Coverage

1. The financial assistance shall cover mainly the cost of acquisition/fabrication of critical production equipment and limited working capital. However, provision for additional financial assistance for working capital may be considered on a case by case basis to cover the cost of one (1) initial trial production. Technical assistance and expertise may also be provided when needed. ATHCDa

2. TAPI shall recover the financial assistance extended commensurate to the full value of the amount provided.

IV. Eligibility

Filipino juridical entities (preferably corporations/cooperatives) who will put-up and/or expand a business enterprise using commercially-viable technologies/inventions and new products developed by DOST agencies and the S & T community. Highly meritorious technologies developed outside the National Research System (NRS) may be considered upon recommendation of concerned councils/institutes. The proponent should provide as counterpart funding at least 30% of the project cost. The project should feature:

1. Substantial technological advantages

2. Socio-economic benefits

3. Application/use of technology/new products increased efficiency/productivity

4. Market acceptability and reasonable return on investment

5. Compliance with environmental clearance requirements

6. DOST priority areas such as but not limited to:

Processed Foods

GTH

Biotechnology

IT/Electronics

Metals and Engineering

Herbal/Organics in Agriculture

Environmental/Energy

Other cutting edge technologies

V. Project Evaluation Procedures

1. A Technical Evaluation Committee (TEC) shall assess the technology submitted for financial assistance in terms of commerciability.

2. Composition of the TEC depends on the expertise needed for evaluating the project but should include representatives from TAPI, RDIs/Councils, academe and private sector i.e., professional organizations, etc. aAcHCT

3. Expert from the industry may be invited for consultation, review, or evaluation.

4. Terms of Reference for evaluating the viability of the technology shall include status of technology development, technology and market forecasts, technology valuation, business potential (business/investment partners), etc.

VI. List of Requirements for Innovative Venture Financing Program

(see attached checklist) Annex A

VII. Criteria for Evaluation of Project Proposals for Venture Financing Program

Technical Aspect

Production/Process /Performance Efficiency

Novelty of Design/Process

Comparative Advantage vis-à-vis existing Products/Industries

Durability

Utility

Appearance/Acceptability

Adequacy of Supply of Raw Materials

Efficient Utilization of Resources

Market Aspect

Acceptability of the Product/Service/Process

Supply and Demand Ratio

Competitive Position (Market Share)

Target Market

Product Line

Financial Aspect

Profitability

Payback Period

Cost

Administrative Aspect

Educational Attainment of project manager

Work Experience of project manager

Credit Worthiness of Management

Management Experience

Structure & systems

Socio-Economic Aspect

Environmental Impact

Employment Generated

Increase in Income ITECSH

Improvement in Phil. Comparative Advantage

VIII. Operating Procedures for Innovation Venture Financing Program (IVFP)

1. Proponent submits proposal to the Office of the Director (OD) which forwards it to the Program Manager (PM) through the Division Manager (DM).

2. Program Manager (PM) acknowledges receipt of proposal indicating initial action taken.

3. PM checks completeness of the proposal.

4. If the proposal has not been endorsed by the Regional Director (RD) concerned, the Regional Office (RO) through its Regional Technical Evaluation Committee (RTEC) is requested to conduct an evaluation of the proposal.

5. If the proposal is not complete, the proponent is requested to submit a complete project proposal including other documentary requirements within forty five (45) calendar days. If no written response/conforme letter is received within the period, the proposal is deemed withdrawn/dropped. TAPI notifies proponent of decision to drop project.

6. If the complete project proposal/feasibility study/business plan is submitted, TAPI determines if the proposal needs to be evaluated by other agencies particularly on the technical aspect.

7. When the documentary requirements (Annex A) are complete, TAPI forms Technical Evaluation Committee (TEC) composed of selected TAPI staff with the PM as chair to evaluate the proposal. TEC shall conduct project visit together with the Regional Office staff/PSTO and/or representative from private sector, if necessary to check, verify and validate the information as indicated in the project proposal. TEC shall prepare the executive summary to include the line-item budget. For project cost of less than P1.5M TAPI Execom shall decide on the project.

8. For project cost of P1.5M or more TAPI shall create an Inter-Agency Committee (IAC) to help evaluate the merits of the proposal.

9. DM presents the project proposal to TAPI Execom.

10. If the proposal is disapproved TAPI informs the proponent and RO concerned accordingly.

11. If proposal is approved, TAPI prepares necessary documents and clears with Legal office. SCEDaT

11.1 The MOA shall stipulate among others, the following terms and conditions:

a. Refund of Financial Assistance:

 For government institutions:

 The proponent shall issue checks on the due date as indicated in the Schedule of Refund

 For non-government institutions:

 The proponent shall submit Post Dated Checks (PDCs) for scheduled amortization; the number of which is equivalent to the agreed refund schedule of the project

b. Submission of Reports

 The proponent shall submit Progress Report, Financial Statements and Audited Financial Report (AFR) with audit certificate and duly signed by a Certified Public Accountant (CPA).

c. RO shall install Project Monitoring Committee headed by RO staff, PM and proponent.

d. The proponent shall submit quarterly status report to TAPI duly signed by RD.

e. The proponent shall submit to RO the inventory of equipment (duly signed by the RD) purchased out of projects funds 30 days after the purchase including Xerox copies of original receipts issued thereof.

12. If cleared by Legal Office TAPI sends approval letter to the proponent together with the Memorandum of Agreement (MOA) with parallel advice to the DOST Regional Director (RD). Statement of undertaking by all parties is executed.

13. TAPI submits MOA for notarization.

14. After notarization of MOA TAPI shall release the funds to the proponent through the DOST Regional Office and requires proponent to send back to TAPI, acknowledgement of and official receipt for fund release.

15. Upon receipt of PDCs, PM acknowledges receipt and forwards all PDCs to the cashier through FAD Division Manager. PM retains Xerox copies of PDCs for reference. EaSCAH

16. TAPI cashier deposits due PDCs unless PM requests otherwise based on revision of refund schedule approved by TAPI Execom.

17. PM together with TAPI Cashier shall be responsible for monitoring PDCs and replacement of dishonoured cheques. However, at all times Cashier will strictly follow refund schedule unless otherwise formally advised by PM of changes duly approved by TAPI Execom.

18. Any request for restructuring/rescheduling of financial assistance/refund may be considered by TAPI Execom based on the recommendation of DOST Regional Office.

19. Project Liquidation — PM shall be responsible for liquidation of financial assistance to the project.

20. The PM shall pursue the completion of the project as stipulated in the MOA. Project is considered completed upon full refund of value of investment including remittance of agreed upon earnings of TAPI duly certified by TAPI-FAD and DOST Legal and full liquidation of project funds.

IX. Project Funding

Funding assistance to the commercialization project will be in the form of the following:

1. Seed money for the technology adoptor/partner — the program shall cover 70% of the project cost while the proponent shall put up at least 30% of the cost. This is subject to refund/recovery of TAPI's investment.

 For highly meritorious projects and upon recommendation of IAC/TEC, the proponent's counterpart can go down to as low as 20%.

2. Funding assistance for projects requiring collaboration with venture capitalists and/or other financial institutions/angel investors.

X. Investment Recovery and Income Sharing

Recovery of financial assistance to project will require full recovery of total amount of investment of TAPI and a Return to Investment scheme that will be computed based on a net income until TAPI's investment is fully refunded/recovered and an exit mechanism is executed.

The fund recovery scheme will be done on a case-by-case basis depending on the nature of the business, cash flow, TAPI's equity to the project and technology transfer arrangement applied subject to agreement between TAPI and proponent. DcICEa

XI. Project Cost

Due to limited funds of the program, TAPI's exposure should not exceed P1.5M per project until such time that sufficient funds are generated for the purpose. This limit may be adjusted upon recommendation of the TAPI Execom. The program shall cover up to seventy percent (70%) of the project cost while the proponent shall put up at least thirty percent (30%) of the total project cost. This is subject to refund/recovery of TAPI's investment.

 

XII. Asset Management

All equipment and investments of TAPI under the Innovation VFP will be recorded separately by TAPI and will be monitored appropriately.

Equipment inventory shall be maintained as subsidiary to the investment side.

XIII. Monitoring and Review

1. A Project Management Committee (PMC) composed of TAPI Program Manager, concerned PSTO and the Proponent shall meet regularly on a quarterly basis to discuss project implementation and thresh out problems (if any). The PMC exists until TAPI fully recovers its investment.

2. If the number of projects or the amount invested warrants the need to closely monitor the activities in the area, a staff will be assigned. The cost of project monitoring especially transportation and accommodation of DOST personnel will be charged against the expenses of the project until the partnership has ceased and the exit mechanism is fully executed.

3. Regular monitoring of project status shall be conducted by the Program Manager and concerned provincial S & T officer (PSTO).

4. Monitoring and review shall be undertaken based on output and time-bound performance milestones established for each project or when need arises.

XIV. Effectivity

This circular shall supersede the previously issued guidelines and shall take effect immediately.

Taguig City, Philippines, October 13, 2009. aSIAHC

(SGD.) ESTRELLA F. ALABASTROSecretaryDepartment of Science and Technology

ATTACHMENT

TAPI VF FORM NO. 4

Checklist of Requirements:

 

[  ]	A.	Complete Project Proposal/Feasibility Study
		[  ]	a.1	Technical Aspect (include copy of test results, if applicable)
		[  ]	a.2	Marketing Aspect
		[  ]	a.3	Management/Administrative Aspect
		[  ]	a.4	Financial Aspect
				[  ]	a.4.1	Financial assumptions
				[  ]	a.4.2	Details of project cost/specific purpose of loan
				[  ]	a.4.3	Counterpart funding offered
				[  ]	a.4.4	Projected income statement for five (5) years
				[  ]	a.4.5	Details of income and expenses
				[  ]	a.4.6	Projected case flow statement for five (5) years
				[  ]	a.4.7	Amortization/repayment scheme of financial assistance
		[  ]	a.5	Waste Disposal
[  ]	B.	Picture of Working Model (if applicable)
[  ]	C.	Letters Patent (if applicable)
[  ]	D.	Copy of business permits and licenses
[  ]	E.	MOA between technology generator and technology adoptors
		(if applicable)
[  ]	F.	Certified list of stockholders and officers (if a corporation/cooperative)
[  ]	G.	Brief bio-data of applicant/major stockholders/officers
[  ]	H.	Board resolution authorizing the borrowing and designating authorized
		signatories for the financial assistance (if a corporation/cooperative)    THIECD
[  ]	I.	Certificate of Registration of Business Name/Articles of Partnership or
		Incorporation/By-Laws/Certificate of Registration with the Cooperative
		Development Authority (CDA)/Securities and Exchange Commission
		(SEC)
[  ]	J.	Certificate of good standing from CDA (if a cooperative)
[  ]	K.	Proof of past performance/track record on related activity of the
		proponent/cooperator
[  ]	L.	Endorsement of DOST Regional Director
[  ]	M.	Three (3) quotations from suppliers/fabricators of equipment
[  ]	N.	Financial statements for at least the past three (3) years (if applicable) or
[  ]	O.	Certificate from LGU concerned attesting to the credibility and capability
		of the officers and staff of the proponent
[  ]	P.	Bank/credit references