STA23101-SSBCI_ACCE-qa.pdf

1. What licenses are they referring to? No licenses required to run a VC firm - Provide Delaware license(s) and/or certification(s) necessary to perform services as identified in the scope of work.

A: Please see Section V, G, 5 of the RFP at Page 18. To the extent this question seeks legal advice about whether or not a license is required, please consult the legal counsel of your choice prior to submitting a proposal.

2. Do I have to be incorporated to apply for RFP? Or can I incorporate later, if accepted?

A: Please see Section II of the RFP at Page 3: At a minimum, proposing parties will be required to meet the following conditions:

• Be incorporated or qualified to do business in Delaware as a higher education institution, non-profit organization, or private venture fund (as defined by the Securities and Exchange Commission). Individuals primarily responsible for providing management services to the Fund on behalf of the applicant must have an established business presence in Delaware and perform such services primarily from within Delaware.

Please also see Appendix B, 3 of the RFP at page 43.

3. Seed program says target companies have 10 or less employees. Does that mean the VC program is to target companies with 10+ employees?

A: While there is no specific limitation in the RFP as described by the question, proposing parties are strongly advised to carefully review all federal guidance and requirements tied to the programs identified in the RFP. Strict compliance with those sources of legal authority will be material terms and conditions of any contract resulting from this procurement process.

4. For the "Delaware Accelerator And Seed Capital Program" does it have to be an Accelerator or can it be a seed fund?

A: Please see Appendix A, 2 of the RFP at page 41: Selected PFMs will support accelerator models providing structured services and concept stage capital to entrepreneurs in the early stages of product and business development. Incubator-like services may be provided by any entity qualified to perform such services as defined in this proposal. Programs can be a traditional accelerator model or one consistent with SSBCI definition under the or Early-Stage Investment Model as defined by SSBCI Guidelines.

5. Are you guys selecting only 2 accelerators/seed capital programs?

A: Please see Section IV,B, 17 of the RFP at page 11. There is a possibility that more than one vendor will be selected for contract depending on the needs of the State and the qualities of the proposing parties.

6. What are the actual deliverable items you want to receive to apply? I know of the attachments that have to be completed but for the scope when describing the fund is that a Word document split into sections?

A: Please see Appendix A for the stated deliverables in the RFP. Additionally, part of the value of the services beings sought by the State in this procurement process are the proposing party’s skill in coming up with the best specific plan to achieve the results, services, and goals of the program. To that end, it is expected that proposing parties will apply their specific knowledge, training, and experience to offer innovative solutions and recommendations which best achieve the goals of the State as described in the RFP within the legal and regulatory parameters established by the federal government. With respect to how a proposing party chooses to submit information, the RFP does not specify any particular electronic format or program. Any commercially reasonable method to transmit electronic data which is capable of review and storage by the State will be acceptable for review and scoring.

7. The primary target investment sectors include biotech, life sciences, advanced materials, IT/enterprise tech, fintech, and agtech but can the funding be used outside of these categories? For example, consumer focus tech or consumer product goods?

A: The targeted investments for this program are Delaware-based companies in concept stage seeking to validate a new product or service with high-growth potential, including those with proprietary or protectable intellectual property in a large addressable market. There is a preference for programs that support startups in one or more of the state’s key industry sectors including biotech and life sciences, advanced materials, IT/enterprise tech, fintech, and agtech.

The use of the word “preference” in the referenced RFP section is intended to convey that other investment sectors may be considered in the sole discretion of the State of Delaware, but are not the focus of this program. Decisions about how such matters will be managed may be more fully explored during any potential contract negotiations. Proposals which do not focus on the specific sectors identified in the RFP may be considered non-responsive or receive lower scores.

8. If a Fund Manager receives SSBCI for their VC fund but then later also builds a tech startup. Could that same person raise capital for their tech startup from another VC fund manager that also received SSBCI funding but in this case used that funding for fund their tech startup?

A: The services being sought by the State in this RFP are focused on the industry sectors identified therein and require conflict of interest protocols that are compliant with State and Federal law. Selected fund managers shall not be permitted to leverage specific knowledge of the program for personal financial gain. Proposing parties that already have an intention to raise capital through this program should consult legal counsel for advice regarding compliance with these sources of legal authority. The State reserves the right to refuse to fund any project that fails to comply with the law or the terms of a contract.

9. Is their [sic] a scenario where a fund is asking for $1M but maybe funds are not or whatever reason - would you guys fund less or a complete decline?

A: Please see the answer to question # 6 above.

10. Attachment 7 which is referenced is not included in the document. It seems to be on reporting requirements, can you confirm this is not needed or is needed as part of the application or RFP response?

A: The reference to Attachment 7 was a scrivener’s error; there is no Attachment 7.

11. Why 90% of investments in Delaware based companies for this program vs. 60% in the Early- Stage VC program? Is there a typo in one of these program specifications?

A: The figures referenced in this question are correct and free of typographical errors in the RFP.

12. Match requirement – at the “program level” can the match include the costs to run the program?

A: The program level match is related to dollars available to support the operations and investments of the program. As a direct investment program under SSBCI with an allowance for 4% of the SSBCI capital to be used to support the program, 96% of SSBCI capital must be used for investments in companies. Each company investment must be matched 1:1 with private capital investment, whether from private capital support of the program or 3rd party private capital committed at the time of each investment.

13. Match requirement – is funding from a non-profit organization considered part of “private sector match”.

A: Non-profit funds can be considered part of the private sector match as long as those funds are being used for investments in companies.

14. In treasury documents, a jurisdiction sponsored non-profit entity can provide SSBCI funds as follow-on to prior investments. Is this not allowed under the Delaware Accelerator and Seed Capital Program?

A: Delaware does not have a jurisdiction-sponsored non-profit entity in the program. Please also review the answer to Question # 2 above.

15. Legal structure – how will the money be awarded under this program. As a contract for services or grant or as a LP arrangement? If this is run as a program by a non-profit, how would the funding work under the program? If there are exits, can the money be re-invested during the course of the program? At the end of 4-6 years, does any remaining funding need to be returned even if generated from returns/exits and is not part of the original investment/grant?

A: It is the intention of the State of Delaware that the conclusion of this selection process will result in a contract between the State of Delaware and the selected party. Any funds that are received as a result of exits should be returned to the State of Delaware. Investments of SSBCI funds can only be made with the approval of the State. Please also review the answer to Question # 6 above. To the extent this question seeks legal advice, please consult the legal counsel of your choice prior to submitting a proposal.

16. In reference to Section II, Bullet 7 - Reporting (Page 3): What “other measures of economic impact and well-being” shall be included in quarterly and annual reports?

A: In the event a proposing party is selected for contract negotiations, establishing greater precision with respect to this phrase is a permissive subject of negotiation. Please also refer to the answer to question # 6 above and the U.S. Treasury Reporting Guidance for more detail:

https://home.treasury.gov/system/files/136/SSBCI-Reporting-Guidance.pdf.

17. In reference to Appendix A.2) Program Model (Page 41): “Overall, the program goal is to leverage early-stage investments in companies with high growth potential that can then raise at least an average of a 10:1 ratio of private capital over a 10-year period (for the portfolio of companies).” Will the value of a liquidity event during the 10-year period be considered in calculating the 10:1 ratio?

A: The 10:1 ratio is related to new capital invested into companies, alongside SSBCI funds.

18. In reference to Appendix B. Administration, Compliance and Reporting A) Legal structure (Page 45): “Please describe your legal structure with the Delaware Division of Small Business serving as a Limited Partner.” How should a state-supported institution of higher education incorporate the Delaware Division of Small Business into an evergreen fund structure involving the reinvestment of all returns?

A: The accelerator program should not run as an evergreen model. All returns should be provided to the State of Delaware on a pari passu basis. Investments of SSBCI funds can only be made with the approval of the State. Please also see the answer to question # 6 above.

19. The RFP indicates that the 1:1 match may be secured at the “program level.” Programs in other states have met this match via a program requirement that at least 1:1 cash match be secured on each deal. This improves the company’s ability to raise funding as it leverages the SSBCI preliminary commitment, demonstrating a contingent, independent, institutional commitment of funding. This would be consistent with the definition under “private financing” that enables the private financing to occur “…at or subsequent to…closing….” It is also consistent with the guideline requirement that “…the design of the program will meet the 1:1 financing ratio." Can you confirm that this approach is acceptable.

A: The program level match is related to dollars available to support the operations and investments of the program. As a direct investment program under SSBCI with an allowance for 4% of the SSBCI capital to be used to support the program, 96% of SSBCI capital must be used for investments in companies. Each company investment must be matched 1:1 with private

20. “Private financing” as defined in the SSBCI regulations does not exclude private not-for-profit entities. Please confirm that non-federal match from private, not for profit entities qualifies under DE’s match requirement.

A: Non-profit funds can be considered part of the private sector match as long as those funds are being used for investments in companies.

21. The RFP indicates that up to 4% of SSBCI funds may be used for management fees. The SSBCI regulations acknowledge that the provision of services to portfolio companies are “…a type of https://home.treasury.gov/system/files/136/SSBCI-Reporting-Guidance.pdf equity support..” Please confirm that the provision of at least an equal level of support provided by the accelerator/seed fund manager may be counted as part of the overall program match.

A: The program level match is related to dollars available to support the operations and investments of the program. As a direct investment program under SSBCI with an allowance for 4% of the SSBCI capital to be used to support the program, 96% of SSBCI capital must be used for investments in companies. Each company investment must be matched 1:1 with private

Note that the Delaware Accelerator and Seed Capital Program is a direct investment program under SSBCI. The 1.71 average annual allowance for services to portfolio companies is only available for SSBCI funds investment programs, which is the Delaware Early-Stage VC program.

The Delaware Accelerator and Seed Capital Program requires the 1:1 private capital match at the time capital is invested in portfolio companies.

22. The RFP requirement that “SSBCI funds be pari passu with private investment in cash flow rights differs from federal regulations that limit this condition to “…up to the repayment of the SSBCI investment.” Please confirm that the intent is to follow the federal guidelines.

A: As stated throughout the RFP, all manager performance must comply with federal guidelines and those obligations will become material terms of any contract that results from this selection process. SSBCI funds should be pari passu with private investment in cash flow rights. Please also see the answer to question # 6 above.

23. SSBCI guidelines enable a jurisdiction-sponsored non-profit entity to use SSBCI funds for follow-on investments in companies if the entity has an existing ownership or voting interest resulting from a prior investment of SSBCI funds or non-SSBCI funds. The RFP does not include this exception. We urge this exception, published in the December 15th regulations, be recognized as eligible under the RFP.

A: Delaware does not have a jurisdiction-sponsored non-profit entity in the program.

24. There is flexibility in the federal guidelines to enable qualifying, early-stage investment entities to invest SSBCI funds via legal models other than venture capital limited partnerships. For example, qualified, jurisdiction-sponsored non- profits have invested SSBCI funds via a direct contract with their state’s treasury. Is some form of this approach an option in DE? The RFP refers to the Delaware Division of Small Business as “…serving as a Limited Partner” but also asks for information about a Board of Directors, not typical in Limited Partnerships. Does this imply that DDSB’s role need not be as a legally constructed Limited Partner in a separately formed limited partnership, but can be construed as a “limited partner” as a result of its capital commitment, via a contract for services with the qualified jurisdiction sponsored non-profit?

25. Jurisdiction non-profits are established expressly for the purpose of achieving a public policy objective. The ability to re-invest returns from these pre-seed/seed investments, in accordance with program guidelines, fosters the growth of a stronger innovation ecosystem. Is the creation of an ever-green model an acceptable approach?

26. Is it possible for two fund managers of either of the SSBCI fund programs to invest/support the same enterprise.

A: Yes, but as a reminder in this scenario the SSBCI funds could not count for leverage and the private capital cannot be double counted. Both SSBCI investments would also need to meet all other SSBCI requirements, including the $20 million restriction and conflict-of-interest standards for venture capital programs.