C2023312_CommercializationGapFund_Addendum3.pdf

C2023312_CommercializationGapFund_Addendum3

Addendum #3 to Oregon Business Development Department

RFP No. C2023312/ S-12300-00007920

“Commercialization Gap Fund Manager”

The Oregon Business Development Department (“Agency” or “Business Oregon”) has received additional questions regarding the requested services, and while the deadline for proposals remains October 4, 2023, we wish to provide responses to the questions received to date. None of these answers modify or add to the directions in the RFP document but provide useful information for drafting a proposal. Thanks for your continued efforts and interest.

Q1. We asked Agency to provide the Fund I and Fund II deal terms to the manager that was selected for both of those Funds and Agency indicated that they would see if this is permissible. Given that this information is certainly subject to a public information request (or the like) with the State of Oregon, why not provide this to all the interested parties in the RFP as part of the Oregon Business Q&A disclosures?

A1. Please refer to A10 in Addendum #2.

Q2. We asked Agency to provide the Fund I and Fund II Gap Fund metrics that the current manager was contractually required to provide if different in any way from those stated in Section 4.1.2.3 of the RFP. We believe that she was looking into this and would get back with us or in the RFP Oregon Business Q&A disclosures update that is expected to release this week with time for RFP responders to review before the RFP submittal deadline next week.

A2. Please refer to A4 in Addendum #2.

Q3. We asked Agency to explain why the current RFP (and the previous RFPs for the Gap Fund, per our recollection) requires that the Gap Fund only invest in companies that are less than 5 years old and with less than $1.0 million in (cumulative, presumably) (net?)

revenues. Given the length of time it takes companies that are spin outs of universities and the like to gain traction and become fundable from traditional investors, particularly the age of the business requirement seems too low a bar. Please explain.

A3. Please refer to A12 in Addendum #2.

Q4. We heard Agency say that “follow-on investments are allowed” by the Gap Fund manager into companies they have already invested into (presumably) by the current fund (it was not clear that a later fund could invest into the same company that an earlier fund invested into or not). Please opine on this. Also, we have in our notes that Agency stated that one of the funds (I or II) had $1.0 million allocated by the manager to first investments and $500,000 allocated for follow-on investments. Please confirm if we heard this correctly and correct if not correct. Please opine further on the

C2023312_CommercializationGapFund_Addendum3.docx allocations previous for both Fund I and II by contract or policy of the Fund manager to first investments and follow-on investments.

A4. The proposer’s approach to follow-on funding is a component of their investment strategy that is part of the review and selection process. Existing Gap Fund portfolio companies may be considered for follow-on funding from Gap Fund III on a case-by-case basis, as covered in Addendum #2, Q14.

For the $2.5M Gap Fund I, $1.65M was made in initial investments, with $475,000 for follow-on funding. For the $4.5M Gap Fund II, $2.25 was made in initial investments, with $1.395 for follow-on funding. The split between initial investment and follow-on funding can be adjusted from initial contract depending on the needs and success of the portfolio, as long as the number of companies initially invested in does not decrease and with prior approval from Business Oregon.

Q5. There was information in the Oregon VC and angel investor investment community that the Fund I manager was not actually allocated capital from the State of Oregon for an extended period of time in 2020, as late as fall 2020. Given that the RFP seems to indicate that timelines may be better than this is 2023 – 2024, please explain what happened (timing wise) in 2020 and 2022 for the Gap Fund I and II timing for the state to actually fund the manager so they can start deploying capital within the RFP mandated period post funding.

A5. The Gap Fund I Agreement was planned to be signed in March 2020 but was delayed and contract amount reduced due to significant state budget changes related to the COVID pandemic. Typically, it can take several months between funding award notification and agreement execution due to legal and administrative review of the many documents involved in the fiscal and legal agreements. The timeline provided in the RFP is provided considering the multiple entities involved, from both the State of Oregon and the Fund Manager, in getting to agreement execution. Business Oregon’s goal is to get the capital to the Fund Manager as soon as practicable.

Q6. The Gap Fund II actual portfolio companies has not been posted on the Business Oregon website yet (we have to go to the Elevate Capital website to see Fund II portfolio companies). It is difficult to tell without a deeper dive into each company listed by Elevate, how well the current fund manager allocated capital following the recommendations of the Oregon 10-Year Innovation Plan (or any predecessor plan or indications of Oregon InC goals prior to its release in 2021) for the Gap fund deployment into certain vertical business sectors in the state. Please opine on how well Business Oregon believes its current Gap Fund manager has done in supporting companies in ALL the sectors and geographic regions that the Oregon 10-Year Innovation Plan (or any predecessor plan or indications of Oregon InC goals) for the Gap Fund in the past and

C2023312_CommercializationGapFund_Addendum3 how deficiencies in sector/geography deployment in the past color decision making by the selection committee for current RFP proposals.

A6. The relevant companies have been posted to Business Oregon’s Commercialization Gap Fund website. Business Oregon will comply with the procedures and evaluation criteria outlined in the RFP in reviewing proposals.

Q7. Please explain the role that Business Oregon plays in making decisions and/or approving the ground level investments prior to being made by the Gap Fund manager in Funds I and II and if that is expected to be any different for Fund III and also please explain why (if there is such an approval of each investment) such an approval is required (such as to comply with Federal sources of dollars for the Fund, etc.).

A7. Business Oregon staff is not involved in the investment decisions or approval of any of the Gap Funds. The intent of this procurement process is to select a Fund Manager that we entrust to guide the Gap Fund based on our investment parameters. That said, there is regular communication between the Gap Fund Manager and Business Oregon staff to discuss investments and review where exceptions to the investment parameters may be made.

Q8. There is a rumor circulating in the local investment community that the Gap Fund selection committee has a selection bias for managers that focus first on minority entrepreneurs over non-minority entrepreneurs and that fund managers with members of a minority group have a similar advantage to potentially be selected by the committee. If this is true, should this have been made clear in the RFP so that responders could take this bias into account? If not true, please opine on this matter for the benefit of the local investment community that you are asking to respond to this RFP and others that work with Business Oregon and other state agencies on matters related to early-stage entrepreneurial support and creating jobs in startup companies in Oregon.

A8. Business Oregon and all members of the evaluation committee will comply with the procedures and evaluation criteria outlined in the RFP to ensure proposers are given fair and equal treatment.

https://www.oregon.gov/biz/programs/CGF/Pages/default.aspx