For this purpose, strategic corporate investors are world-leading, publicly traded, technology companies with revenues of at least several billion dollars. Two strategic investors should be diverse enough to not have conflicting interests. More strategic investors could make discussions too cumbersome. Three financial investors will control the majority of the shares. Again, the small number of total investors guarantees reaching consensus more easily. The amount invested in Reality Ventures by each of these investors is likely to be sufficient to attract their interest and sufficient for Mine/Reality to be successful.
There are no conflicts expected. If both strategic investors want to make use of their Right of First Offer, the party which made the original proposal may exercise its right first. If neither of the parties has made the project proposal, they are each entitled to acquire 50% of the start-up company, but subject to the approval of the financial terms by the other shareholders.
It decides on all matters related to investments by Reality Ventures made into MINE and the start-up companies.
They are all valued based on a fixed initial valuation which is based on the project cost multiplied by an initial valuation increase factor.
Reality Ventures has priority rights for the first three rounds. There can be additional investors, but during the first three rounds such external investors can only participate with the consent of Reality Ventures.
Based on reviews of the projects at milestones, the management of MINE decides to continue or terminate the projects which were initially approved by the “Mining Committee”. After at most two years, they are presented to the “Mining Board” which then decides to launch the start-up. The five person Mining Board is constituted by the founder, the general manager of MINE, one representative each of the strategic investors, and one representative of the financial investors. The five person “Investment Committee” consisting of representatives of the shareholders of Reality Ventures decides on all matters related to the investing in and the continuation of the start-up companies once they are launched.
Each project within MINE is initially funded with a fixed maximum amount. The financial model assumes the initiation of 20 projects at the cost of 40% of the initial amount of funding. Obviously, with additional funding or with reinvestment of proceeds, the number of projects will increase.
Yes, largely because the targeted innovation engineering process implemented at MINE ensures a highly effective use of the investment.
This is assumed and expected in our financial models. Of course, the shareholders can agree to pay out the proceeds earlier, in part or in their entirety, but possibly at the risk of choking the project pipeline too early to sustain such a financial model. However, with a sufficiently large pipeline of newly initiated and ongoing projects and with a certain number of highly profitable ones among the newly created companies whose shares are partially held by Reality Ventures, Reality Ventures can well be operated in perpetuity with a steady pay out of realized profits while maintaining a significant ownership share in these companies.
These are incentive rights given to key members of the core team of MINE. They entitle these members to a participation in the proceeds of developed companies in certain cases of liquidity events.
The MINE group of companies consist of several entities for intellectual, legal and financial reasons to secure a form of corporate governance largely controlled by the founder. The legal and corporate framework constituted by these entities ensures corporate governance which also is sufficiently independent from the influence of the strategic investors in order to qualify their investment as a financial investment in contrast to an operating expense. Also, MINE GmbH has a subsidiary MINE Inc. to be able to operate in the US.
Reality Ventures is a German GmbH and as such is subject to the German corporate tax law (“Körperschaftsteuergesetz”). The law foresees only an extremely marginal taxation on any proceeds which are reinvested in the business of Reality Ventures as long as these proceeds result from holding shares of at least 10% in the newly created companies. (See also questions 11 and 21.)
The venture capital fund-based approach to technology creation has become an increasingly inefficient method for the discovery and implementation of the “next big thing”.
At the same time, major leading technology companies find it increasingly difficult, if not impossible, to innovate within their organizations.
Although large technology companies have the resources to invest in the development of new technology, their size, structure, and their focus on existing products frequently hampers innovation.
Mine & Reality Ventures
MINE® and Reality Ventures® combined constitute a unique, vertically integrated, sustainable ecosystem for the targeted creation of new technologies and technology companies.
Reality Ventures funds the operations of MINE and, in a series of three secured and possibly optional additional funding rounds, funds the expansion of the start-up companies emerging from MINE and their establishment in the market.
Reality Ventures’ efficient and sustainable funding model for the creation and expansion of start-ups benefits both innovators and investors.
It provides the strategic corporate and financial investors cost-effective, lower risk technology innovation with higher ROI than traditional venture funding.
Innovation engineering projects are initially focused on the development of fundamental scalable platform solutions for Cloud computing and related Cloud-based consumer and professional applications.
The following domains are targeted:
- _Data and process distribution
- _Image processing
- _Data analytics
- _Artificial intelligence
Additional innovation engineering domains include:
- _Application specific processor logic design
- _Neural computing
- _Life Sciences and Medical Technologies
Our key difference is that we spend money on projects wisely due to the experience and qualification of our engineering staff, and that 1) we spend it on the actual innovation engineering and not also on lots of overhead; that 2) we spend it on projects that have a higher likelihood of success; and that 3) we shape those so that they have a higher chance of success. In addition, the input and involvement of our strategic partners is of great value in identifying and reviewing key areas of focus.
We do intend to promote MINE and Reality Ventures with dedicated PR measures in these environments to attract talent. We also plan to enter into partnerships with select academic institutions.
No, not at all. Operations will at least be as extensive in North America as in Europe. The incorporation in Germany is mainly due to tax and IP protection reasons. Also, Berlin offers logistic and economic advantages, for example, with regard to office and space availability and cost as well as with regard to the cost of living for the staff, while San Francisco offers an enormous talent pool MINE and Reality Ventures will tap into.
MINE and Reality Ventures provide an innovative and efficient funding model for start-ups that benefits both innovators and investors. Unlike traditional early stage venture capital fund-based approaches which invest in multitudes of start-up companies with minor variations of relatively simple but unproven ideas, the targeted innovation generation at MINE aims at creating start-up companies with relevant products that are biased toward high growth and a lower investment risk. In addition, the strategic investors, informed by deep insights into product success factors in numerous industries, help MINE to select its projects wisely. It also leverages effectively the cash reserves of these investors for targeted innovation engineering projects and the funding of the resulting technology companies without increasing their operating expenses and hence without decreasing their earnings per share. At the same time, it allows the strategic investors to share the associated risk with a group of large financial investors while having a Right of First Offer on the resulting companies, subject to financial terms approved by the board of shareholders. In return, we believe that the financial investors will benefit from the higher likelihood of success from the new model we are establishing.
Some of these technological challenges are:
- cloud-based professional environments for product creation and delivery
- cloud-based digital transaction technologies and platforms
- cloud-based technologies and platforms for security and privacy
- cloud-based intelligent support systems
- cloud-based future-generation telecommunication technologies and platforms
- revolutionary (computer) processor architectures and manufacturing processes
- scalable technologies for cost-efficient, sustainable energy creation
We provide a challenging, rewarding, stimulating environment which combines great scientific, business and financial resources for the process of turning idea development into the creation of successful companies. Because of these factors and the fact that our process makes it so much easier for an idea generator to overcome the burden of turning an idea into a business, we expect to attract engineers, scientists and various others who have credible ideas but would normally never take on the process of developing and commercializing these themselves. We are providing these people with a professional work environment, focus, the best colleagues for the project, and with not being bothered with overhead such as permanent fundraising and start-up management issues. Even many founders who have sold their start-up successfully prefer not to go through this pain again.
We can build transcontinental teams from the start by bringing the best people together for the task. We do not have to derive the task from the local available talent or lack thereof. We provide a collaborative environment that is shared among all teams which allows collaboration across borders and continents. Especially in the Inventing/Ingeneering™ phase at MINE, it is possible to get better results by having assembled the best qualified people.
A key part of the environment that we build is the experienced MINE core team. These seasoned, highly respected engineers and managers help with all aspects of engineering and guidance towards later marketable products as well as handling all the technical and managerial issues of maintaining and expanding our vertically integrated ecosystem for the creation of large technology companies. They are essential to being able to generate the pipeline that will generate attractive financial returns to our investors.
They have the financial means but have a problem with innovation. Often, they cannot allow their best people to innovate because they need to keep them focused on their main products. Also, corporations do not want to increase their OPEX and thereby lower their earnings per share. There is a disconnect between the financial divisions responsible for managing the cash reserves and the R&D division and its management. Hundreds of billions of dollars are kept invested in bonds, yielding next to nothing for the shareholders. We can expand the opportunities these companies see and are involved in, thus providing new growth and market opportunities that are already well developed. For many companies, our process could be less disruptive and more rewarding than what they experience today.
The MINE and Reality Venture enabled model of sharing the financial risk while having a say on the actual projects and the direction in which they are targeted and keeping a hand on the results via their Right of First Offer is a new, attractive third way for large technology companies to expand their business.
Our whole process is designed to create a river of ideas from exceptional people from many sources, develop those ideas cost effectively, identify those that should be advanced, create the right incentives for the team developing this pipeline, add the business and management with the financial resources to get the companies launched into the markets, and provide ongoing support until each company is monetized. Our financial resources to do this are adequate to the task but do not pressure us to spend capital faster than we can find good uses for it. All of this is done with the valuable input from knowledgeable strategic partners, and done with the oversight of all our investors. We believe that this approach stands a very good chance of resulting in superior returns to those seen from the broader field of venture capital in recent years.
The average return for VC funds during last ten years has been annually 6.4 percent. Inefficient use of funds is caused by overhead for funds management plus expenses for installing a huge start-up overhead at a time when it is not yet necessary because a prototype or proof of concept does not yet exist. There is no coordinated, targeted sense of direction by means of an alignment with industry leaders.
Who are the engineers and scientists going into start-ups? We claim that VCs can see and reach at most 10% of today's human capital for their start-ups because the other 90% are concerned with the reduced job security and punishing work hours that start-ups can entail. While not all of these scientist and engineers have great ideas and are inclined to join MINE, perhaps 10% of them are. That leaves us with about 10% of the human capital that we can reach with our approach. Ten percent are chased by all of the VC funds, another 10% are addressed by MINE and Reality Ventures alone.