UM Growth Capital News: NEF Builds its Capacity to Help Entrepreneurs Pursue New Business Opportunities

Over the past three years as president of New Enterprise Forum (NEF), Gerry Roston has spearheaded efforts to refocus NEF’s support for entrepreneurs, broaden its coaching services, improve members’ benefits and energize the state’s entrepreneurial ecosystem. In February the Ann Arbor-based nonprofit observed its 28th year, and this month, Roston hands the mantle of leadership to Bill McPherson, the managing director at McPherson Commercial Capital and a Ross School of Business MBA graduate.

“We are being proactive to make our organization more relevant and to create value in today’s changing world,” Roston says. “When we started in 1986, we were the only game in town. Now there are many entrepreneurial organizations operating in the state.” As a result, NEF has refined the scope of services to focus on helping entrepreneurs communicate more effectively with potential investors. “We work with high-growth-potential companies that need access to capital to pursue business opportunities across a wide breadth of sectors, including medical devices, software systems, alternative energy, automotive, electronics and industrial processes,” he explains. “We train entrepreneurs to speak about what they do in a way that investors expect to hear, and to talk in the language of the listeners.”

Coaching is NEF’s strong suit, according to Roston. “We’re known for our coaching services, and we’re trying to expand them,” he says, noting that NEF coaches 10 to 15 companies a year, and has helped more than 300 since its founding. “We also serve a dozen or more independent organizations in Michigan’s entrepreneurial ecosystem.” These include the Michigan Growth Capital Symposium, where NEF coaches review companies’ presentations to investors a month or so before the symposium and offer suggestions for improvement. As a result of this coaching, the quality of the presentations over the past five years has improved dramatically, Roston says. “The symposium offers start-ups a good opportunity to network and present their message to an audience of investors that otherwise would not be easily accessible to them,” he says. “The MGCS also helps to shine the spotlight on Southeast Michigan and what we offer here.”

At the annual University of Michigan campus-wide Michigan Business Challenge, NEF coaches help semifinalists refine their business plans and sharpen their pitches. Coaching assistance also is provided to entrepreneurial teams at Ann Arbor Angels, the Ann Arbor SPARK Boot Camp and Detroit-based TechTown’s Labs Venture Accelerator. “The nice thing about being a coach is that you work with other people and learn about their skills,” Roston remarks. “Many of our coaches become resources whom we can recommend for contract work and company positions.”

Recently, New Enterprise Forum upgraded its website, developed a more-integrated marketing and communications strategy and beefed up the benefits to its 120 members, who represent a wide range of organizations, including the Zell Lurie Institute, MiQuest and the Detroit Development Fund. “As part of our membership-building efforts, we are targeting service providers, such as website developers, attorneys, consultants and insurers, who will benefit by offering their services to entrepreneurial companies,” Roston says. “We plan to promote these members and their services on NEF’s website.” Monthly meetings are now open free-of-charge to entrepreneurs and members, and the meeting location has shifted to Ann Arbor SPARK Central on East Liberty Street.

As Roston steps down from his NEF post, he says he plans to devote more time to his own management-consulting company, Pair of Docs Consulting. The legacy he wants to leave to NEF is longevity. “In another 28 years, I hope someone still will be able to talk to NEF’s president about what’s new on NEF’s 56th anniversary,” Roston remarks.

Student-led Social Venture Fund Invests in Powerhouse Dynamics

The Social Venture Fund, the nation’s first student-led impact investing fund, has participated in a bridge financing round for Powerhouse Dynamics, a cloud-based provider of enterprise energy and asset management solutions. Powerhouse Dynamics secured Series A financing from a diverse group of early stage venture capital firms and angel groups. This marks the student-led fund’s fourth investment.

The Social Venture Fund makes early-stage investments of up to $100,000 in sustainable and innovative, for-profit organizations that deliver financial returns and place the generation of a significant social impact at the heart of their mission. It is managed by Uday Rajan, professor of finance at the Ross School of Business and by a team of 30-35 MBA students, many of whom are pursing dual-degrees with education, environment, health, law and public policy.

A team of seven students led by Sid Roy, MBA ’14 and Will Kletter, MBA/MS ’16, sourced the deal and conducted in-depth due diligence on the company.

“Our ability to leverage the expertise of our Erb dual degree members was immensely helpful in the due diligence process and speaks to the unique value that the Ross program can provide to Powerhouse Dynamics and cleantech firms moving forward,” said Roy.

Kletter adds, “Our decision to invest in Powerhouse Dynamics was largely driven by the management team’s demonstrated ability to effectively deploy its patented technology in a large and growing market. With enormous opportunity to deliver value to customers in various market segments and a quantifiable social impact, Powerhouse emerged as an excellent company for the Social Venture Fund to support.”

Powerhouse Dynamics’ SiteSage platform is a resource and asset management system for small commercial facilities that helps business owners manage energy consumption and improve business operations. Powerhouse’s primary value is helping its customers reduce their energy use, which also provides a strong, quantifiable social impact in terms of reduced carbon emissions and air pollution. Systems have been installed at restaurant and retail chains and other commercial accounts, including a full roll-out across all corporate-owned Arby’s and numerous pilot projects and smaller rollouts.

“Throughout this process, the Ross students have demonstrated a keen understanding of our business, coupled with a broader sense of the market dynamics that create opportunity for Powerhouse’s solutions,” said Martin Flusberg, CEO, Powerhouse Dynamics. “We look forward to partnering with the Social Venture Fund team and anticipate future opportunities to engage their consulting and research expertise on various growth strategy-related projects.”

To date, the Social Venture Fund is the only university impact investing fund with active investments. Along with the Wolverine Venture Fund and Zell Commercialization Fund, the Social Venture Fund completes the Ross trifecta of student-led venture funds managed by the Zell Lurie Institute. Together, these funds immerse 90 graduate students, from multiple disciplines, in experiencing all aspects of venture capital investing.

“Digital marketing software firm Silverpop bought by IBM”

Faculty Managing Editor of the Wolverine Venture Fund, Erik Gordon, spoke to The Detroit Free Press about IBM’s recent agreement to acquire Silverpop. The digital marketing software company was one of the first backed by the Wolverine Venture Fund in 2000. To check out the full article, click here.

“Chat Sports Startup Changing the Way You Follow Your Teams”

The Zell Lurie Institute was recently featured in the Monroe Street Journal in a story on Chat Sports’ chief operating officer Brett Scott. The article details how the Institute was able to connect Scott with Chat Sports during his MBA program and how that fostered a grander relationship with Ross and its students. Below is an excerpt from the piece.

“You just never know what opportunities you might uncover out in the wild world of startup firms.  One of the key services provided by the Zell-Lurie Institute (ZLI) is connecting entrepreneurial ventures with students looking for…..something.  That’s the short explanation of how MBA2 Brett Scott became Chief Operating Officer at Chat Sports.

Brett came to Ross from Deloitte and was looking for an opportunity to work for the summer in a startup environment or to explore sports management.  He found Chat Sports through ZLI.  In less than a year the Chat Sports company, and its relationship with Ross, has blossomed.”

To read the article in full, visit: http://themsj.com/chat-sports-startup-changing-the-way-you-follow-your-teams/.

 

University of Michigan Wolverine Venture Fund Continues Track Record of Success with Silverpop Exit

The Wolverine Venture Fund, managed by students at the Samuel Zell & Robert H. Lurie Institute for Entrepreneurial Studies at the University of Michigan Ross School of Business, today announced that one of its early portfolio companies, Silverpop, is under agreement to be acquired by IBM. Silverpop, a privately held software company based in Atlanta, is a leading marketing automation and real-time personalization technology.

As one of the Wolverine Venture Fund’s first investments made in August of 2000, the fund invested $200,000 participating in an early financing round with a syndicate of other investors and is one of the few dot com era investments to bear fruit. Student teams noted the company’s unique technology platform, experienced management team and the market opportunity for personalized marketing automation solutions as key drivers influencing their decision to invest.

This marks the Wolverine Venture Fund’s fourth successful exit since its formation. Students also directed investments in HandyLab. Upon its acquisition by BD, the investment earned a six-fold, cash-on-cash return delivering $2 million to the fund. Prior to that, medical device company IntraLase became the first portfolio company to go public returning more than $1 million in proceeds. The fund also scored a win when portfolio company Versity.com was acquired in 1999.

“The Wolverine Venture Fund was developed to provide students with a real-world educational experience, and over the years students have participated in the full spectrum of the investment process, including the excitement and reward that comes with a successful exit,” said Faculty Managing Director, Prof. Erik Gordon. “The fund and the students who led the due diligence and investment process in Silverpop had the foresight to invest in an innovative technology pioneer and in a market opportunity that would grow to become the huge marketing automation industry that it is today.”

The $6.5 million Wolverine Venture Fund was the country’s first student-led venture fund and serves as a shining example of the Institute’s action-based approach to entrepreneurial education. The Fund’s student members seek, screen and negotiate investments and develop significant experience in these areas – and in working with VCs and entrepreneurs. Since its inception, the Wolverine Venture Fund has invested in more than three dozen companies in a wide range of industries including information technology, life sciences and alternative energy.

The acquisition is subject to customary closing conditions and regulatory clearance and is expected to close in the second quarter of 2014.

UM Growth Capital News: HistoSonics Makes Key Advances in Clinical Studies and Venture Financing

Over the past year, HistoSonics Inc. has laid important groundwork for clinical studies and venture financing to advance the commercialization of its Vortx Rx histotripsy system. The Ann Arbor-based company is now well-positioned for rapid market entry and expansion.

Launched in 2009, HistoSonics is nearing completion of a U.S. pilot clinical trial to demonstrate the safety and effectiveness of the Vortx Rx system in treating benign prostatic hyperplasia, or BPH, a common condition in men caused by enlargement of the prostate. The clinical study, which began in July 2013, will enroll 25 patients at sites in Ann Arbor and Toledo. The Vortx Rx is based on histotripsy technology developed by University of Michigan scientists led by Charles A. Cain in the Department of Biomedical Engineering. The histotripsy technology and intellectual property were licensed by HistoSonics in early 2010.

“Moving from the development of this revolutionary technology into the first pilot clinical trial is a huge step and represents a major milestone,” says biomedical physiologist Thomas Davison, the chairman and CEO of HistoSonics. “We’re pleased with the results. There have been no adverse events related to histotripsy, and the patients are doing well. It’s still early, so there is not sufficient data to draw conclusions.” Patients will be evaluated over a six-month period to check for any unwanted side effects, such as bleeding, and to determine the extent to which the Vortx Rx relieves BPH symptoms, including frequent urination and urine retention. BPH affects two million men in the U.S. and four million worldwide, representing a global market potential for BPH treatment of more than $500 million annually.

“We expect the advantages of our device to be fewer adverse events, less pain and fewer complications,” Davison explains. “Patients will have a shorter recovery time and be able to resume their normal activity within a week or so.”  The Vortx Rx system integrates ultrasound therapy, real-time imaging and surgical planning to enable a surgeon to deliver histotripsy, a non-invasive, non-thermal therapy for treating BPH. Improved outcomes are expected because Vortx Rx image guidance and robotic control allow urologists to remove diseased tissue with greater precision. The system has the potential to replace open surgical and minimally invasive surgical procedures, and to reduce patient trauma, recovery time and health-care costs. Histotripsy technology has other potential applications, including thrombolysis, cancer treatments, breast fibroadenomas and uterine fibroids.

If all goes as planned, HistoSonics will return to the venture-capital market for additional funding in late spring, wrap up the pilot clinical trial in early fall and then begin preparations for a pivotal trial involving 200 patients in 2015. “This spring we expect we’ll have enough pilot clinical safety data and outcome data that will enable us to tell our story to a Series B investment group,” Davison says. “We’ll be raising an additional $12 to $15 million, which will get us through the pivotal clinical trial and early market launch outside the United States.” He says the company will submit a premarket approval in the U.S., but launch outside the U.S. ─ possibly in Europe, Australia, Canada and Japan ─ while waiting for the PMA. Follow-on financing plans call for raising a Series C round to finance commercialization, which is expected by late 2016 outside the U.S. and late 2017 in the U.S.

Presenting at the Michigan Growth Capital Symposium initially helped HistoSonics build a strong syndicate of venture-capital investors for its $12 million Series A round in 2009, which financed the company for four years. Lead investors include Jim Adox of Venture Investors in Ann Arbor, Rernard Charity of Fletcher Spaght Ventures in Boston and Bob Morff of Hatteras Venture Partners in Durham, North Carolina. TGap Ventures in Kalamazoo, Michigan, and Early Stage Partners in Cleveland also have come on board, according to Davison, who made his first fundraising pitch at the 2009 MGCS.

“The MGCS is second to none,” he says. “It’s a tremendous venue that is very well attended by Midwest VCs. Early on, the symposium gave us a platform to create awareness of our company and connect with investors. Our presence at the 2015 MGCS this year will help us with our Series B financing.”

To learn more about MGCS, visit the website: http://michigan-gcs.com/

Business Leader agrees with Stewart Thornhill’s Financial Times Article on Failure

This week, Zell Lurie Institute’s Executive Director Stewart Thornhill wrote an article for the Financial Times on the importance of failure in an entrepreneurial education. The following day James Gardner, SVP Product of MindJet Inc., responded to the editor agreeing with Thornhill’s article and adding that failure is not only vital for entrepreneurs, but also, for large enterprises.

To read Gardner’s response, visit the Financial Times website: http://on.ft.com/1egxmFu.

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