“The opportunities take shape within the problems,” Nelson A. Rockefeller once said. Nothing could be truer for Hopen Life Science Ventures.
The firm was established in 2008 in the midst of the nation’s severe financial crisis, which led to the retrenchment of the venture-capital community. Hopen chose to locate its headquarters in Michigan, which was considered at the time to be a fly-over state for investment by venture capitalists on the coasts. Furthermore, the fledgling company began investing in early and mid-stage companies in the life-science and health-care sector, which typically requires patient capital and long-term horizons to profitable exits.
Despite these initial problems, Hopen leveraged the state’s wealth of talent and opportunity and successfully expanded its investment footprint and developed a robust portfolio of high-growth companies. Today, the Grand Rapids-based firm has $69 million under management in its two investment funds.
“Health-care and life-science companies do have a long gestation period, and in the past, Michigan was not a place where investors spent a lot of their time,” observes Mark Olesnavage, managing director and co-founder of Hopen Life Science Ventures. “But if you know what you are looking for in terms of innovation and novelty, and have the capital fortitude to get a company to the finish line or to the point where you create value, you can be successful here.”
Hopen’s laser-sharp focus on sourcing and syndication has helped to keep its investment portfolio pipeline filled with innovative companies, particularly those specializing in the digital and health-care information technology space. “We try to stay on the cutting edge of technological innovation and to avoid the bleeding edge,” Olesnavage explains. “Over time, the bar has gotten higher in terms of what we look for.” To make the cut, he says, an early or mid-stage company must have:
- Identified paying customers for its technology, such as the reimbursement community, third-party payers or the provider itself
- Developed a pricing model and market-share projection with margin for error
- Outlined a clear path to market, such as a regulatory strategy
- Created innovative products or services that deliver both significantly better outcomes and significantly lower costs overall
- Demonstrated it can deliver returns for investors
The shortage of investment capital has been, and continues to be, a chronic problem in Michigan and the Midwest. To pursue investment opportunities, Hopen has carefully cultivated syndication as a means for attracting additional capital to its deals. “We have the ability to bring to the table the right group of investors, who are aligned with both the capital and strategy required to get an emerging company to where it needs to be,” Olesnavage says. “While this region still faces challenges, things have gotten a little better, and investors from the coasts are fishing [for deals] in Michigan more than they used to.” He credits the state government for its proactive efforts to provide a good environment for local venture capitalists and to attract outside investors who can help finance the growth of innovative companies.
The annual Michigan Growth Capital Symposium has proven to be fertile ground for networking within the VC community and prospecting for possible investment targets, according to Olesnavage. “We have made investments in companies that have presented at the MGCS,” he says. “It’s a great opportunity for the whole ecosystem to come together.”