Indiana Angel Network Fund III

INDIANA ANGEL NETWORK FUND III, LLC (“IANF III”)

EXECUTIVE SUMMARY OF INVESTMENT POLICY

Focused on seed-stage investments starting at $100,000. This fund is similar to Indiana Angel Network Fund II but with more stringent co-investment requirements. 

PURPOSE                     

This executive summary of investment policy specifically applies to IANF III, which has been established to invest, hold, and account for funds received by the State of Indiana through the State Small Business Credit Initiative administered by the United States Treasury managed by Elevate Ventures, Inc. (“Elevate Ventures”) through its subsidiary Elevate Advisors LLC (“Elevate Advisors”) to foster and promote the development of entrepreneurs and emerging companies within the State of Indiana.

DEFINITIONS

Headquarters – means having the North American Principal Office Address located in Indiana per the Indiana Secretary of State Business Registration Filing and at least one C-Suite position residing in Indiana.

Significant Presence – means at least one (1) physical office and one (1) full-time employee within the geographic borders of the State of Indiana and conducting a significant portion of its operations within the State of Indiana as determined by Elevate Advisors; or at the time of initial investment, have a clear plan to use the IANF III investment to create a significant presence in the State of Indiana as a result of the investment.

INVESTMENT CRITERIA

1. Total investments by IANF III in any one Investee shall not exceed One Million Dollars ($1,000,000.00). Each IANF III investment shall be on substantially similar terms as those offered to other private investors in the round.

1. Round size cannot exceed $20,000,000.

3.     The Investee shall be required to provide quarterly business updates.

4.     Each IANF III investment shall be made into a business that:

(a)   has 500 employees or less

(b)   is determined by Elevate Advisors to have its Headquarters in the State of Indiana; or committed to, or be in the process of, initiating, or expanding its operations to have a Significant Presence in the State of Indiana;

(c)    is primarily focused on:

(i)     a high-growth business model where venture funding is likely to benefit that growth

(ii)   the commercialization, transfer, and/or application of research and technology into marketable products; or

(iii)  a business plan that is determined by Elevate Advisors to have significant potential to: bring substantial capital into Indiana, create jobs, or diversify the business base of Indiana.

• is an innovation-driven enterprise with a total addressable market of at least Five Hundred Million Dollars ($500,000,000);
• has had average annual revenues of less than Fifteen Million Dollars ($15,000,000.00) in its two (2) most recent fiscal years; and
• is not primarily engaged in a business involving: real estate; real estate development; insurance; professional services provided by an accountant, a lawyer, or a physician; or oil and gas exploration.

1. The Investee’s investment criteria may not prohibit investments in Indiana’s distressed regions, as defined by the United States Economic Development Administration guidelines.
2. The investment has been evaluated by Elevate Advisors to meet or exceed its investment merit  criteria.
3. Elevate Advisors may take a lead investor role in structuring investment terms, including financial, corporate governance, and other applicable operational requirements, through IANF III investment.
4. Each IANF III investment is required to be syndicated with other capital sources on a minimum 1:1 basis.
5. The lead investors are professionally managed venture funds with a strong investment and portfolio management track record;
6. Elevate Advisors preferably has a positive co-investing history with the lead investors;
7. The investment syndication is based on a market-driven set of terms set by the lead investors, as determined reasonable by Elevate Advisors;
8. Elevate Advisors can access or assess the due diligence work conducted by the lead investors.

PROHIBITED USE OF FUNDS

In accordance with federal regulations, IANF III is prohibited from making investments to:

• Finance a non-business purpose;
• Refinance existing debt where the lender is in a position to sustain a loss and the investment would take over that loss through financing;
• Effect a partial change of business ownership or a change that will not benefit the business;
• Permit the reimbursement of funds owed to any owner, including any equity injection or injection of capital for the business’ continuance; and
• Repay delinquent state or federal withholding taxes or other funds that should be held in trust or escrow;
• Fund employee stock options (ESOPs).

INELIGIBLE RECIPIENTS

IANF III is prohibited from investing in or lending to the following ineligible businesses:

• Real estate investment firms, when the real property will be held for investment purposes
• Firms involved in speculative activities that develop profits from fluctuations in price rather than through normal course of trade.
• Firms involved in lending activities, such as banks, finance companies, factors, leasing companies, insurance companies (but excluding agents of insurance companies), and any other firm whose stock in trade is money.
• Pyramid sales plans, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants.
• Firms engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted.
• Gambling activities, including any business whose principal activity is gambling.
• Charitable, religious, or other non-profit or eleemosynary institutions, government-owned corporations, consumer and marketing cooperatives, and churches and organizations promoting religious objectives.