Overview of Foley & Lardner’s Emerging Technologies Conference – Perspectives on Growth

Last week I attended an annual conference presented by Foley & Lardner. I attended two breakout sessions – the first on Growth Industry – Medical Devices and the second on Financing for Growth in Start Up and Early Stage Companies. 

The program started with welcoming remarks by Susan Pravda, Chair of the Emerging Technologies Industry Team. She shared highlights of the Emerging Companies Survey conducted by the firm, on the current trends in the emerging technology sector. She has been kind enough to share this with me, and a copy of the report can be found below. I found the most interesting part of the report was the differing perception of “green” technologies by investors and entrepreneurs. The answer has to do with the uncertainty of an industry that where economics are driven by government policies and tax (or lack of tax) credits.

Much of the discussion focused on the effect the current economic conditions have on the investment landscape. One speaker felt that we have hit the “Psychological Bottom” if not the actual bottom of the financial crisis. It was noted that most funds are not trying to raise additional monies at this time. However, it was felt that some may look more closely at their portfolio accounts and put aside more money for their existing investments, rather than fund new companies so easily. There was some discussion about the valuation of new investments – more specifically, lower valuation than a few years ago. Finally, and this point was reiterated multiple times throughout the day, investors are seeking lean, mean companies that are run well and focused on executing the tasks that will make them successful with a conservative burn rate.

emergingcompanysurvey20081

Continued Investment in New England

Energetiq pulls in $5M in third funding round

Woburn-based Energetiq Technology Inc., a maker of advanced light sources for nanoscale fabrication and analysis, has landed $3.8 million of a $5 million Series C round, according online reports. 

Investors in the round include Shea Ventures of California, Intel Capital and Ushio Inc., a Japanese maker of light and laser equipment for a variety of applications, with its U.S. headquarters in California, reported website PE Hub, citing a federal regulatory filing.

New Atlantic tests the waters in $500K first round for Koofers

New Atlantic Ventures has participated in a $500,000 tranche of a $2 million Series A round for Koofers Inc., according to online reports. Fellow investors include California-based Altos Ventures.

Based in Reston, Va., Koofers Inc. allows students to share old tests and quizzes as study aides. The site began with copies of old tests and quizzes compiled from files kept at fraternities and sororities at Virginia Polytechnic Institute. “Koofers” is Virginia Tech slang for such material. 

 

Healthcare Ventures, Novartis BioVentures help raise $40M for Catalyst Biosciences

Two Cambridge investment firms, Healthcare Ventures and Novartis BioVentures, participated in a $40.4 million Series C financing round of Catalyst Biosciences Inc., the South San Francisco-based biopharmaceutical firm announced.

The funding was led by Essex Woodlands Health Ventures, with additional funding support from return backers Burrill & Co., Johnson & Johnson Development Corp., Morgenthaler Ventures and Sofinnova Ventures. Per terms of the deal, Jeff Himawan of Essex Woodlands will join the board of directors at Catalyst Biosciences

Catalyst CEO Nassim Usman said in a press release that the company plans to use the funding to grow its business of engineered proteases known as Alterase therapeutics. Specifically, Catalyst plans to push its CB 813 lead protease, used to treat acute bleeding in hemophiliacs, through Phase 1/2 studies.

 

Retail Optimization scores $1.2M investment

Retail Optimization Inc. reports it has raised $1.2 million in new venture funding. Investors included Connecticut Innovations and Elm Street Ventures, as well as management and private investors.  The $1.2 million figure included a $400,000 investment that Connecticut Innovations announced in November, said a CI spokeswoman

“(ROI’s product) helps consumer product companies show to the retailers how their products can drive incremental profits if the shelf space is allocated differently,” said Connecticut Innovations executive director Peter Longoin an e-mailed statement. “To our knowledge, there is currently no other product in the marketplace that offers a similar result.”

 

Polaris leads $13M funding of rechargeable battery maker

Polaris Venture Partners is a leader on a $13 million Series B round of financing for Infinite Power Solutions Inc., according to a release from IPS. Fellow returning investor D.E. Shaw Ventures co-led the round with Waltham-based Polaris. Other returning investors include Core Capital Partners, Applied Ventures LLC and In-Q-Tel, as well as a new unnamed strategic investor.

 

N.H. home to new VC firm Harbor Light Capital Partners
Markem Corp. has launched a new private investment firm, the Keene, N.H.-based company reports. Harbor Light Capital Partners will be based in Keene and will invest in early- and growth-stage companies, with a focus on long-term investment, firm officials said.

 

New tech-focused investment funds dismiss down economy

Say what you want about the horrible economic conditions — a handful of tech entrepreneurs are launching investment funds, perhaps betting on the notion that there’s nowhere to go but up.

Two of the funds are first funds —Genovation Capital in Waltham and Clean Energy Investment Partners in Winchester  — formed by longtime Boston-area entrepreneurs. At least two other funds are being launched by established venture capitalists, including a new fund for Atlas Venture of Waltham and a new firm, called Kepha Partners LLC, from former Highland Capital Partners partner Jo Tango, according to federal documents.

Genovation Capital, which expects to begin raising money in the new year, was formed by Jeff Binder, Dave Fellows, and Vin Bisceglia, all veterans of the communications industry. The threesome now expects to bring its expertise to the investment side. All of them concede that times are tough in the financial sector but say that the timing is perfect to begin building a portfolio.

 

uTest Raises $5 Million More For Crowdsourced Bug Testing

uTest, the crowdsourcing QA startup that lets companies rely on external developers to help them identify bugs, has closed a $5 million Series B funding round led by Longworth Venture Partners and Egan-Managed Capital, along with existing investors Mesco Ltd. and Massachusetts Technology Development Corp. The new round brings the startup’s total funding to around $7.8 million after a $2.3 million Series A round last year and some early seed funding.

 

Viridity Software pulls in $7M Series A funding

Amesbury startup Viridity Software Inc. has raised $7 million in a first financing round with investment from Waltham firms Battery Ventures and North Bridge Venture Partners, according to Viridity officials.

 

Boston Scientific helps fund $11M in Calif. med device maker

Natick-based Boston Scientific Corp. and two California firms have invested $11 million in West Coast medical device maker Endoscopic Technologies Inc. 

 

UTest taps new investor in $5M second round

UTest Inc. has secured a $5 million Series B round of funding, the company said. New investor Longworth Venture Partners LP led the round, joined by Eagan Managed Capital LP. Returning investors are the Massachusetts Technology Development Corp. and Mesco Ltd. 

 

Angel investors help Aras expand to European market

Investors have supplied Aras Corp. with nearly $1.2 million in new cash, according to a November U.S. Securities and Exchange Commission filing, and the Andover-based open-source product life cycle management software provider is using it to establish beachheads in Europe, the Middle East and Africa.

 

Maine VC leads $14M round for KickApps

Social media application platform developer KickApps Corp. has landed a third round of funding worth $14 million, led by Portland, Maine-based North Atlantic Capital.

 

M2D2 funds two new med device startups

The Massachusetts Medical Device Development Center (M2D2) reported providing “fast-lane” funding last week to two early-stage companies, MedicaMetrix of Wayland and VeinAid LLC of Fairfield, Conn. 

 

General Catalyst leads $5.5M funding of event ticket search engine

Local venture capital and private equity firm General Catalyst Partners, of Cambridge, led a $5.5 million financing round of California-based FanSnap, a live event ticket search engine. FanSnap, which is working in beta mode, said it plans to continue growing its ticket provider base and building its search engine and team.

The funding was the second by General Catalyst, which also led an earlier $5 million round. Awarepoint makes real-time location systems that rely on radio frequency identification tags to track the movement of equipment and people. Venrock general partner Brian Asher said Awarepoint addresses a challenge facing health-care institutions. 

 

Local VCs push $100M investment in Pocket Communications’ wireless data

Battery Ventures, of Boston, has led a $100 million equity investment in Pocket Communications Northeast, a wireless voice and data service provider in Texas that plans to expand to the Northeast. Charles River Ventures, of Waltham, also participated in the investment, as did Pocket Communications CEO Paul Posner.

 

Venrock backs RFID system maker Awarepoint

Venrock Associates has invested in Awarepoint Corp., joining fellow new investor Cardinal Partners and existing investor Avalon Ventures in a $13.3 million Series D round, according to San Diego-based Awarepoint.

 

Thank you Roger Krakoff

Continuing the tradition of great information delivered in an understandable and interesting manner, Roger Krakoff discussed the ramifications of the current financial crisis on the investment landscape. The discussion was informative and lively. One point that came out loud and clear was the need to marshall resources (read: cash) and not spend imprudently. The age of excess is past.

krakoff_presentation

I did receive several posts from people who were not able to attend the meeting because of schedule conflicts who wanted me to send their regards to Roger and one post from somebody who missed an entire week and was prepared to be at the Best Western on the 20th. This reaffirmed my faith in the fact that I’m not the only one challenged by my calendar!

Latest Investment News from New England – 11/24/2008

SunEthanol renames as Qteros, raises $25M Series B fund

At today’s Conference on Clean Energy, Gov. Deval Patrick gave a keynote speech announcing that University of Massachusetts Amherst spinoutSunEthanol Inc. has changed its name officially to Qteros and has raised $25 million in Series B financing.

According to Qteros CEO William Frey, the name change is intended to reflect the company’s core technology, the Q-Microbe, which was discovered by company founder and chief scientist Susan Leschine. The Q-Microbe digests and ferments cellulosic feedstocks to ethanol in a single-step process.

New YES fund opens for Mass. medtech firms

Medical technology companies in Massachusetts have a new vehicle from which to draw funding. 

Yankee Equity Solutions (YES) has formed the YES Medical Technology Fund with $50 million in equity. YES plans to apply funding to profitable medtech firms with a minimum of $2 million EBITDA, pulling in at least $10 million in revenue and aiming for a first or second ranking in the company’s target market.

Ongoing Investment in New England

HarbourVest leads $22M round for secure web firm

Boston-based HarbourVest Partners LLC has returned as lead investor in a $22 million fifth-round funding for Finjan Inc., a San Jose, Calif.-based provider of secure enterprise web gateways.

The round, which brings Finjan’s total capital invested to $67 million, also included new and returning investors Benchmark Capital, Israel Seed Partners, Benhamou Global Ventures and Cisco Systems Inc. 

 —————–

Radius Health lands extra $15M in second Series C round 

Radius Health Inc. has pulled in $15 million to add to its total Series C financing of $82.5 million, increasing the Cambridge drug discovery firm’s total investment to $106.5 million, Radius officials reported. The latest investment round included all the same returning backers. 

  —————–

Saturn Capital funds $6M for Knopp Neurosciences

Boston-based broker and dealer Saturn Capital and its affiliated venture capital fund have raised more than $6 million for a neurosciences startup.

On Wednesday, Pittsburgh-based Knopp Neurosciences Inc. announced its current investors had exercised $6.6 million in Series B2 warrants, lifting the company’s overall capitalization to $27 million. This completes Knopp’s Series B2 Financing.

Saturn Capital, which has led Knopp’s financing, acted as the placement agent for the transaction. Its affiliated venture capital fund, Saturn Partners II, participated. The cash raised will be targeted for researching the mitochondrial causes of neurodegeneration.

—————–

Ascent Therapeutics Inc., a biotech start-up funded with $19 million in venture capital, emerged from stealth Monday with plans to make the biggest class of drug targets even bigger

—————–

ReGen Power Systems LLC, a maker of a new kind of low-temperature differential engine that converts heat to power, has landed $5 million in funding from 21Ventures LLC and the Quercus Trust.

The funding will be used to design and build two prototypes of the company’s engine, which is based on the principles of Stirling engines. The first prototype will be a 10 kilowatt version for evaluation and testing, while the second will be a 500 kilowatt version aimed at field testing, according to a company statement. The company will then move to beta versions of its product.

———————

Cambridge biopharmaceutical firm ZafGen Inc. has secured $14 million in a second round of funding, according to published reports. The financing was led by Third Rock Ventures, with additional investment support from return backer Atlas Venture.

———————————–

Online advertising technology company EyeView Inc. reports it has closed its first round of venture funding.

The company would not release the amount of the funding except to say it is “a bit more than $1 million.” The funding was led by Lightspeed-Gemini Internet Lab. Gigi Levi, CEO of 888 Holdings PLC and a member of EyeView’s board, also participated in the round.

Earlier this year, EyeView won the $20,000 prize at the Harvard Business School Business Plan Competition and was a semifinalist in the MIT $100K. The startup produces multimedia, including video, audio and interactive features made with Adobe Flash, coupled with reporting, streaming and support services. As a business plan competition entrant, the company was already profitable 

———————-

Boston-based Flybridge Capital Partners has led a $5 million first-round funding of digitalArbor, a Cohasset digital advertising, marketing and communications firm. The financing deal includes the addition of Flybridge’s Jeff Bussgang to digitalArbor’s board of directors.

DigitalArbor employs a cost-effective onshore/offshore business model, company officials said, with its digital marketing in Massachusetts and its technology and creative production business in Costa Rica.

Latest Investment news from New England

VCs told to expect clean tech, life sciences boost under Obama

The playing field in clean tech and life sciences is likely to shift quickly as soon as the administration of President-elect Barack Obama takes over the White House Jan. 20, according to National Venture Capital Association president Mark Heesen.

———————————–

Boston’s .406 Ventures leads $12M round in Digitalsmiths

Local venture capital firm .406 Ventures LLC is returning to portfolio company Digitalsmiths Inc., leading a $12 million series B round of equity financing in the North Carolina broadband video company.

Fellow returning investors include Kentucky-based Chrysalis Ventures Inc. and Aurora Funds Inc., a North Carolina venture firm.

———————————–

Boston Scientific leads $11M brain injury therapy funding

Natick medical devices firm Boston Scientific Corp. has led an investment of at least $11 million in Cleveland, Ohio-based Intelect Medical Inc., a developer of treatments for traumatic brain injury.

Latest Investment news from New England

Startup company IdeaPaint Inc. has taken in $5 million in its first venture funding from Boston-based firm Breakaway Ventures. IdeaPaint, also in Boston, has created a patented paint that makes any flat surface into a dry-erase writing surface once applied.

——————————

PeerApp Ltd., the leader in Intelligent Media Caching and bandwidth arbitrage solutions for Internet Service Providers (ISPs), today announced that it has raised US$ 8 Million in Series B funding. The round was led by existing investors Pilot House Ventures, Cedar Fund and Evergreen Venture Partners. The funds will be used to expand sales and marketing operations worldwide to meet increasing demand for PeerApp’s products from the broadband and wireless markets. 

———————————-

Waltham-based Summerhill Venture Partners has teamed up with several local and national VC firms to invest $14.5 million in Virginia-based Trust Digital Inc., a maker of enterprise mobility management software.
—————————————

A new venture capital and private equity firm focused on clean technology is looking to make a beachhead in Cambridge. C Change Investments LLC’s founders are John T. Preston, formerly director of technology development at MIT, and Russell Read, formerly chief investment officer at CalPERS, the state of California’s pension fund.

—————————————————-

The state has cut $10 million from this year’s disbursement of its ambitious $1 billion in biotech industry and research incentives. A spokesman for the Massachusetts Life Sciences Center confirmed the cut this week.

——————————

Boston startup Second Rotation Inc., which buys and sells used electronics through its online service Gazelle, has secured $6 million in a second round of financing, according to published reports. The funding was led by Boston-based Rockport Capital Partners, with additional investment from Venrock Associates, Austin Ligon and Henry Vogel.

The company said it plans to use the financing for new technology, as well as marketing efforts, website PE Hub reports.

——————————

Boston-based Oxford Bioscience Partners has joined Safeguard Scientifics Inc. in co-leading a $12 million first-round funding of Molecular Biometrics Inc., Safeguard officials reported. The financing will help Molecular Biometrics in further researching and developing its embryo development for in vitro fertilization and in bringing its diagnostic technology to Australia, Japan and Europe.

How to start a new Venture Capital fund …

Starting a new fund was the topic of a seminar given by Davd Kantaros and Ken Appleby of Foley & Lardner last Wednesday. I attended the meeting not because I want to start a fund, but because I needed to meet with some of the Foley folks about something else, and Dave suggested I sit in on the presentation. I am glad I did.

What I learned is that setting up a fund for venture investment can be very profitable for the principals, and very complicated for all concerned. There are a number of legislative rules that must be followed, all while trying to maximize profits and minimize tax consequences while making money.

I also learned this week that Atlas Ventures is starting to raise money for their next fund of $500 Million. How does this affect the entrepreneur? Come to the meeting on Thursday to find out.

Success Stories – Investment continues in New England

There have been a number of investments made in New England firms lately.

Ascent Venture Partners and Core Capital Parners have invested $4,000,000 in V.i. Laboratories, Inc. V.i. Labs provides powerful, out-of-the-box software protection solutions that enable application providers, enterprises and government agencies to easily protect existing applications without making source code modifications or adding complex security infrastructure.

In-Q-Tel, independent strategic investment firm that identifies innovative technology solutions to support the mission of the broader U.S. Intelligence Community invests in T2 Biosystems, Inc. The In-Q-Tel investment is also part of a $10.8 million Series B funding round, with additional participation by Flagship Ventures, Polaris Venture Partners, Flybridge Capital Partners and Partners Healthcare.  This agreement will fund the further development and enhancement of T2 Biosystems’ revolutionary diagnostic systems, as well as identify opportunities within the intelligence community for field applications.

Predictive Biosciences Closes $21.75 Million in Series B Financing

Leading Syndicate of New and Existing Investors Support Development of Non-Invasive Cancer Diagnostics

LEXINGTON, MA and SAN DIEGO, CA – October 16, 2008 – Predictive Biosciences, an emerging molecular diagnostics company developing non-invasive diagnostic products for informed cancer management™, today announced the closing of a $21.75 million Series B financing.  The financing was led by new investor New Enterprise Associates (NEA), a leading global healthcare and technology venture capital firm, with additional new participation from Kaiser Permanente Ventures, an investment arm of Kaiser Permanente, America’s leading integrated healthcare delivery system.  In addition, the existing investors from the company’s $10 million Series A financing, Flybridge Capital Partners and Highland Capital Partners, participated in the Series B raise.  In conjunction with this financing, Predictive Biosciences has appointed to its board of directors M. James Barrett, Ph.D., general partner with NEA, as well as Jordan Kramer, senior venture manager at Kaiser Permanente Ventures, as a board observer.

Mintera® Corporation, the high bit-rate optical transport systems solution leader, today announced that it has secured an $8 million revolving line of credit facility from Silicon Valley Bank (SVB).

“SVB’s support will allow us to finance our working capital needs and adds an important source of cash to fund our operational growth,” said John Anselmi, Mintera’s Chief Financial Officer.

Mintera is experiencing strong demand for its 40 Gbps Adaptive-DPSK™ DWDM modules worldwide from its rapidly expanding customer base. Adaptive-DPSK is the industry’s most cost-effective solution for sending 40 Gbps signals across ultra-long haul distances through Reconfigurable Add/Drop Multiplexers (ROADMs) with 50 GHz spaced signal wavelengths.

Promoting events for other groups….

When I first began running the 128 Innovation Capital Group I became very popular. Everyone wished to share another great event that would be of interest to our members. Hmmmm. We don’t have members. But we do have a database of about 4000 valid e-mail addresses. It didn’t take long for me to realize that I wasn’t the popular one. What everyone wants is access to the database. It is because of this that we have a rigid Privacy Policy (http://www.128icg.com/privacy.htm).

We developed reciprocal promotional programs with several other groups such as E-Net, WPI Venture Forum and the MDG group. Our audiences overlap, but the raison d’etre of our groups is different. You will note that in my monthly News Note, info is provided about the meetings of these groups.

Now when a group asks me to promote an event, I will ask, “What’s in it for me and the 128 ICG?” The answer is, “We’ll give you a meeting sponsorship and your name will appear on a piece of paper we distribute.” Sorry. That just doesn’t cut it.

Occasionally I will have the opportunity to pass along a discount if one of our “members” decides to register. Of course, there is no way to confirm that a person is a member of the 128ICG since we’re not a membership organization. To be a bit more gentle in my analysis, what is being trapped is lead source rather than what group folks belong to.

What is your feeling about the 128ICG promoting events for other groups? Are they of value to you as the recipient of the notices? Is this beyond the scope of what you expect from me and the 128ICG?