BioStar Ventures Matches Investment to Scientific, Clinical Needs

Petoskey, Michigan-based BioStar Ventures stands unique in the medical devices space, placing prime emphasis on science. “We focus on what we know best,” said Managing Director Dr. Steven Almany. “We have assembled a world-class scientific advisory board with emphasis on cardiovascular and orthopedic medical devices.  It is unique within the industry in that the doctors are partners in the fund.”

Founder and Senior Managing Director Dr. Louis Cannon said BioStar has deep business expertise, but its business deals must match science and clinical demands. “Most venture groups start on the business side, and they use physicians and advisors as consultants, having domain expertise in a certain area,” he said. “We’ve taken most of the physician advisors and strategic advisors to the big companies, established what the patient needs are and the clinical needs for frugal medicine, and we go out and look for answers to the clinical problems.”

BioStar deals exclusively in medical device technology. Its first fund closed about two years ago with nine of its 13 companies achieving exits. The second fund has already seen two acquisitions, and its net asset value has increased. An investment in Ablative Solutions is its first in a Michigan-based company.

One of BioStar’s portfolio companies, Kona Medical, presented at last year’s Michigan Growth Capital Symposium (MGCS). The company offers an application to treat hypertension in a non-invasive manner. “Basically someone would sit in a hypertension treatment chair,” Cannon said. “They might be in this chair for 20 minutes. Their blood pressure would be treated for three to five years, and maybe actually a lifetime.”

Cannon notes that the MGCS allows for networking with other Michigan-based funds and companies. “Michigan is focused on Ann Arbor and the Detroit area for the most part, and Kalamazoo. But I think what happens is we miss the deep relationships that other venture capital groups bring to the table,” he said. “The MGCS allows us to really get to know the Michigan groups better. It’s an eye-opener for all the good things that are happening in Michigan.”

Xconomy Confident in Michigan Comeback

“The way I would sum it up as an outsider, the big feeling is that Detroit is back!” So says Boston-based Bob Buderi, founder, CEO and editor-in-chief of Xconomy, a news and event network covering business technology and innovation. With offices in Boston, San Francisco, New York, San Diego, and Seattle, Xconomy laid roots in Michigan with a Detroit office in 2010, attracted by efforts in the state to strengthen and diversify the economic base by growing technology industries. Buderi saw the work being done in Michigan as “incredibly important to the country.” And, he says, Xconomy has received a warm welcome here. “Nowhere else in the country have we been so welcomed. There is a spirit of openness and collaboration that we don’t see everywhere.”

Buderi shares some insights he’s gained through Xconomy’s experience in Detroit:

In the fall of 2010, not long after we opened in Detroit, I wrote an essay for the Kauffman Foundation about Michigan and why we went there. In it I said, “If Michigan were a stock, I’d buy a ton of options.” What I’d say now is, first, that my options would be incredibly more valuable than they were in the fall of 2010 when I ‘bought’ them. And second, I would keep buying.

I feel a much greater confidence from within Michigan about what is going on there. In Detroit, there is action and buzz around mobile, design, security, gaming, and a lot more. Finally, the Detroit startup and innovation scene is being noticed. Detroit is cool again. Everybody loves a comeback story, and the Michigan economy is one. The stories we write about Michigan are becoming increasingly popular in our other regions. That means people are taking notice, and are interested in what is happening.

Xconomy has shown strong support for the Michigan Growth Capital Symposium (MGCS), taking a sponsorship role. “Xconomy has enjoyed supporting, attending, and promoting the MGCS and its mission of helping to build the innovation economy in Michigan,” said Buderi. “As a new company coming into Michigan, the MGCS has provided a great opportunity for Xconomy to build its network. The level of content and ideas are very high, as the University of Michigan, the Michigan Venture Capital Association and other partners provide a great way for entrepreneurs to network and discuss how to grow their businesses.”

State Funds Attracting Major Players to Michigan

Although fundraising is a constant challenge, things have been looking up in Michigan in the past five years, according to Credit Suisse Customized Fund Investment Group (CFIG) Vice-President Sean O’Donnell. Venture capital firms and assets under management have increased, resources such as the Venture Michigan Fund II (VMF II) are infusing more capital into Michigan companies, and the state is attracting some major players. A recent $15 million investment by VMF II has wooed Massachusetts-based Flagship Ventures to open an office in Michigan by the end of the year – a major win for the state. Flagship Ventures, a $900 million fund,  is known in Michigan for its success with University of Michigan spin-off company Accuri Cytometers.

CFIG manages or co-manages over $500 million in capital. VMF II falls under the group’s umbrella, along with other programs investing in VC, private equity funds, and growing companies in Michigan. As a founding member of the Michigan Venture Capital Association, CFIG has committed over $200 million to VC firms in the state since 2006, with another $80 million scheduled to be committed through 2013.

O’Donnell notes that innovation is what drive new technologies and industries, providing vital support to the state’s economy. “In the early stages, these new industries employ very highly skilled and educated workers,” he said. “In the long run, emerging companies in new industries assist in diversifying the Michigan economy and retaining and attracting human talent to Michigan.”

Credit Suisse has a longstanding relationship with the Michigan Growth Capital Symposium (MGCS), and is a sponsor of this year’s event. “CFIG is a strong supporter of the Michigan venture community, and has sponsored and attended hundreds of events in the state,” said O’Donnell. “I view the MGCS as the premier event in Michigan to bring together entrepreneurs, venture capitalists, limited partners and intermediaries. The event’s reach is by far the most comprehensive, attracting firms from the coasts who are not regular attendees at the numerous other Michigan events.”

Michigan Growth Capital Symposium Unveils Flagship Ventures’ Noubar Afeyan as Keynote Speaker

University of Michigan President Mary Sue Coleman and Foundry Group’s Jason Mendelson also Part of the Program for the Midwest’s Leading Venture Capital Event

Today, organizers of the Michigan Growth Capital Symposium announced that Noubar Afeyan, founder, managing partner and CEO of leading early stage venture capital firm Flagship Ventures, will deliver the keynote address to begin the second day of the 31st annual event.  University of Michigan President Mary Sue Coleman will provide opening remarks to introduce Dr. Afeyan and also share her thoughts on how the University’s commitment to research and development and entrepreneurship is helping to deliver on the promise of Michigan as a hotbed of innovation and investment activity.

Flagship Ventures is an active member of the greater Michigan venture capital community, and recently unveiled plans to establish a presence in the state by mid-2012. This comes on the heels of Venture Michigan Fund II, a fund-of-funds which is managed by Credit Suisse, making a $15 million investment commitment in Flagship Ventures Fund IV, which invests in early-stage companies.   Flagship  has recently invested in Tangent Medical, an innovator in IV therapy products, and had a successful exit with Accuri Cytometers, a University of Michigan spinout that makes scientific instruments and was bought by New Jersey medical device giant Becton, Dickinson and Company in 2011 for $205 million.

“Michigan is on the track to success and we’re excited to be a part of that,” said Afeyan. “Accuri is a prime example of how the talent, university research, entrepreneurial community, pubic support and growing investor base has converged to generate real success. The next Accuri may very well be at the Symposium.”

Afeyan has nearly a quarter century of experience as an inventor, entrepreneur, CEO and venture capitalist and currently leads Flagship Ventures’ VentureLabs unit that invests and launches transformative startups. Afeyan has authored numerous scientific publications and patents since earning his Ph.D. in Biochemical Engineering from MIT in 1987 and currently lectures widely in the United States and internationally on diverse topics ranging from entrepreneurship, innovation and venture capital to biological engineering, drug discovery, medical technologies and renewable energy. He also serves on a number of public and private company boards including Affinnova, BIND Biosciences, BG Medicine, Breathable Foods, Eleven Biotherapeutics, Essentient, Joule Unlimited, LS9 and moderna therapeutics.

In addition to Afeyan’s address on Wednesday morning, Foundry Group’s Jason Mendelson will deliver a keynote to open the event on Tuesday. Mendelson’s information technology background complements Afreyen’s medical and biotech expertise, and together they will provide Symposium attendees with a diverse level of insight into the trends shaping key industries in Michigan’s investment landscape. The program will also feature 32 presentations from companies seeking $500,000 to $20 million in funding and six panel presentations.

Presented by the University of Michigan Zell Lurie Institute‘s Center for Venture Capital & Private Equity Finance at the Ross School of Business with support from the Michigan Venture Capital Association, this year’s Symposium will be held May 15-16, 2012 at the Marriott Resort in Ypsilanti, Michigan.  To learn more or register to attend the Symposium, visit www.MichiganGCS.com.

3D Biomatrix CEO Offers Fundraising Tips

Ann Arbor-based 3D Biomatrix was launched to fill a niche in the drug discovery and bio-testing market. Its offerings include three-dimensional cell culture products that provide better, more biologically relevant results than standard two-dimensional systems. The company sought local investment during its early startup phase, and has widened its net in its current Series A round of funding. CEO Laura Schrader has found Michigan to be a great place to launch a startup. “It has both the mechanisms and the active desire in place to make startups happen with funding opportunities and networking events,” she said. “It is impressive at the state and local levels.”

Schrader offers the following tips to other entrepreneurs seeking a Series A round:

• Know what you need funding for, and practice asking for it. This may sound obvious, but it is key to showing investors that you know where you want to take the company, and how you’re going to do it.
• Get an understanding of what dilution scenarios will look like on the capitalization table, so you can best negotiate the terms of the investment round.
• Get your hands on a typical due diligence list and get your documents organized.
• Line up interested investors and stay actively in front of them. These are busy people, and you want the process to move as quickly as possible so you can direct your focus on building a successful company.
• Network, network, network.

Schrader notes that the Michigan Growth Capital Symposium is a great networking tool. “MGCS is a well-organized event for entrepreneurs and investors to network,” she said. “It’s nice because there is no secret why a startup company is at the event – it’s to raise awareness and get connected with funds to move the company forward.”

Hard Times Have Sharpened Entrepreneurial Landscape

The fundraising environment is challenging these days – for entrepreneurs and venture funds alike – but Peter Shagory, partner of Chicago-based Baird Venture Partners (BVP), doesn’t think that is necessarily a bad thing. “This lean environment is giving rise to new business models, more resourceful management teams and more capital efficient investment strategies that I believe are enabling the venture industry to generate attractive risk-adjusted returns,” he said. “We will see numerous successful companies and winning investments pursuing creative and capital-efficient growth strategies.”

While the economic shift is proving to be a benefit to the venture capital industry, Shagory said VC is, in return, a boon to the economy. “Studies have shown that job growth associated with venture-backed companies, particularly in life sciences, has a significant multiplicative effect on total job creation,” he said. “These companies generate the need for other outsourced skill positions. VC-backed companies are focused in sectors that demand knowledge-based workers who are, generally speaking, more highly skilled, highly paid, and more flexible as a workforce.” As a result, Shagory said, venture investment brings a positive employment dynamic that is also resilient to positive and negative economic cycles.

Shagory also notes that today’s startups are demonstrating more sophisticated levels of management and technology validation, with less paid-in capital than in recent years. Additionally, institutional resources for commercialization, governmental support for entrepreneurs and investors, and the influx of more experienced business people residing in theMidwestall factor into a hot entrepreneurial environment. And then, there’s the resurgence in IT: “I’m amazed at the proliferation of IT startups over the past five years,” said Shagory. “As Internet 2.0 companies have engineered business models that require less and less capital, such companies have been able to scale and even thrive in what remains a very challenging economic landscape.”

BVP is a sponsor of the Michigan Growth Capital Symposium. Shagory said events such as the MGCS are important to the entrepreneurial communities ofMichigan and theMidwest.  “It serves an educational purpose through the sharing of lessons learned among these constituents,” he said. “The MGCS serves as a compelling recruitment tool for innovators, executives, and investors through the celebration of entrepreneurial success stories, all of which reflect well onMichigan and theMidwest.”

Allos Ventures Finds Unique Value in Early Stage Investment

Over the past twelve years, Indianapolis-based Allos Ventures has found success targeting early stage technology companies. The firm’s portfolio includes a diverse array of businesses, including AssureRx Health, BidPal Network, Scale Computing and WebLink. Managing Director John McIlwraith said early-stage technology companies have proven to be a good bet for Allos. “We believe the early stage sector is greatly underserved due to the shortage of early stage venture capital in the region, and the growing number of angel-backed and other companies approaching the stage at which they will seek to raise their first round of institutional venture capital,” he said.

The firm’s second fund, Allos II, will invest in ten to twelve companies, and will follow the four guideposts of its first fund: providing hands-on leadership and company-building support; investment in first institutional VC rounds of companies with early revenue; focus in high-growth sectors intersecting with the principals’ experience (including software, advanced manufacturing/materials, and medical technology); and targeting companies within a four hour drive of either of its offices in Indianapolis and Cincinnati.Michigan– fromGrand RapidstoDetroit– is also an area of focus for Allos based on its level of company-building activity, and the firm’s successful investments in BlueGill Technologies, Sircon, and Health Care Solutions.

McIlwraith, a founding member of the Michigan Venture Capital Association Board of Directors, has been active inMichigansince 1997. He notes that early-stage companies provide value to theMidwest, through the potential for rapid growth, job creation, and an attractive rate of return for investors.  Additionally, they help develop a rich talent pool. “Successful early-stage companies will certainly create jobs in the region,” he said, “but they also will create the next generation of innovators and executives who will start companies and/or invest as angel investors in other start-ups in the region. These individuals will serve as mentors to the founders of future companies, and will help produce the kind of momentum that is critical to building a vibrant entrepreneurial ecosystem.”

Allos is a sponsor of this year’s Michigan Growth Capital Symposium, and has been involved since the event’s inception. Its principals have served as panelists, and regularly assist in evaluation of business plans for the selection process. “It is one of the best conferences of its type in the country, and is a valuable source of investment and networking opportunities,” said McIlwraith.

Foundry Group’s Jason Mendelson to Keynote Michigan Growth Capital Symposium

Ann Arbor, Mich. – April 13, 2012 – Today, organizers of the Michigan Growth Capital Symposium announced that Jason Mendelson, co-founder and managing director of Foundry Group, will deliver the opening keynote address at the 31^st annual event. Mendelson will provide the event’s opening keynote address, which will be followed by a robust program of panels and presentations from 32 startups seeking funding ranging from half a million to $20 million. A partial list of these presenting companies was also revealed today and the closing keynote, who will be be introduced by University of Michigan President Mary Sue Coleman, will be announced in the coming weeks.

“There’s a perfect storm of activity happening in Michigan, including incentives offered by the state, further development of the entrepreneurial community and sizable investments in R&D from local universities,” said David J. Brophy, founder and director of the Symposium and professor of finance at the University of Michigan Ross School of Business. “People are now paying close attention to activity here.”

Mendelson on the State of the State’s Venture Capital

A Michigan native and graduate of the University of Michigan, Mendelson will provide attendees with his view on the state of the Michigan venture capital investment landscape and the factors driving its marked success over the past five years.  He will also present on the energy found in the state and how those involved in the regional investment community can connect with recognized investors from across the U.S. and maximize the momentum created.

Mendelson has over a decade of experience in the venture capital and technology industries in a multitude of investing, operational and engineering roles. He co-founded Foundry Group, a Boulder, Colo.-based venture capital firm focused on making investments in early-stage information technology, Internet and software startups, most notably Zynga.

Select Presenting Companies Unveiled

A total of 32 emerging startups from the Midwest and beyond will present at the Symposium. The companies represent high growth industries such as medical devices, information technology and mobile, and many are drawn on technology commercialized at the state’s robust University research corridor.  Here is a sample of this year’s presenting companies:

• Swift Biosciences (Michigan) – develops enabling technologies for genomics and personalized medicine
• Commuter Advertising (Ohio) – provides active and entertaining audio advertising onboard public transit vehicles
• NeuWave Medical (Wisconsin) – specializes in developing and commercializing energy-based minimally invasive medical devices
• Alert Communications (Michigan) – a refurbisher and wholesale distributor of mobile phones
• Atterocor (Michigan) – a research and development company focused on therapeutics for adrenal disease
• Vestaron (Michigan) – developing a new generation of insecticides derived from peptides produced by spiders

The complete list of presenting companies will be made available on the Symposium’s website on May 8.

Presented by the University of Michigan Zell Lurie Institute‘s Center for Venture Capital & Private Equity Finance at the Ross School of Business with support from the Michigan Venture Capital Association, this year’s Symposium will be held May 15-16, 2012 at the Marriott Resort in Ypsilanti, Michigan.  To learn more or register to attend the Symposium, visit www.MichiganGCS.com.

About the Michigan Growth Capital Symposium (MGCS)

MGCS is the original university-based venture fair, which was first held in 1979. This nationally attended two-day event provides an opportunity for financiers to connect with up-and-coming Midwestbusinesses and learn about emerging technologies. The Symposium offers the opportunity to build relationships with an unparalleled business network of distinguished private equity industry leaders, leading university research faculty, and entrepreneurial business professionals. Entering its 31^st year, MGCS continues to draw top investors from coast to coast. MGCS is presented by the Center for Venture Capital & Private Equity Finance at the Ross School of Business at theUniversity ofMichigan with support from the Michigan Venture Capital Association and the Michigan Economic Development Corporation.

MGCS 2012: Top Investors; High Potential Deals – Join Us!

Thirty-two emerging and growth business ventures, actively seeking funding of $500K to $20M are scheduled to present over two days. Provided is a partial list of companies that represent a range of industries. The final list of presenting companies will be provided to the public on the MGCS website on Tuesday, May 8. The MGCS continues to be the Midwest’s leading event for attracting the best investors from across the U.S. and showcasing high-quality investable companies. It is also a critical contributor to the region’s economic development.

Partial list of MGCS Presenting Companies

Swift Biosciences, a Michigan based company developing enabling technologies for genomics and personalized medicine; Commuter Advertising, an Ohio based company providing active and entertaining audio advertising onboard public transit vehicles; NeuWave Medical, a Georgia based company specializing in developing and commercializing energy based minimally invasive medical devices; Alert Communications, a Michigan based company that refurbishes and distributes mobile phones; and Atterocor, a Michigan based research and development company focused on therapeutics for adrenal diseases.

MGCS Concurrent Presentation Tracks:  Tuesday, May 15 from 1:00-2:30 p.m. and 4:00-5:00 p.m.; Wednesday, May 16 from 10:20-11:20 a.m., 11:30 a.m.-12:30 p.m.

For event details, please see: www.MichiganGCS.com

Venture fund run by UM business students picks LearnZillion as its first investment

Check out this piece from Tom Henderson on UM’s student-led Social Venture Fund’s investment in LearnZillion:

The Social Venture Fund, a new fund operated by students at the Ross School of Business at the University of Michigan, announced its first investment this morning — in LearnZillion, a Washington, D.C.-based company that offers online video lessons for students in grades three through nine from top teachers around the country.

The Social Venture Fund makes early-stage investments of up to $200,000 in for-profit companies that have a social impact. The fund joined a syndicate of 17 investors from around the country in a $2.4 million round.

The fund is managed by Gautam Kaul,a professor of finance at UM, and 34 business school students.

UM now has three student-managed funds. The first, the Wolverine Venture Fund, co-invests in early-stage companies with established venture firms around the country. The Frankel Commercialization Fund does seed-stage investing in companies not ready for venture capital.