Medical Device Daily: NTEC connects investors to start-ups with partnership

Friday, July 30, 2010

 Medical Device Daily Staff Writer

Historically, investment dollars in the Dallas-Fort Worth region have been aimed toward the oil and real estate industry. This leaves many med-tech companies to travel outside of Texas' borders to seek funding. It also creates a scenario where some entrepreneurs have a much more difficult time garnering financings.

A business incubator, is working with both venture capitalist and start-up companies in a measure that will link the two parties together, and help grow the med-tech sector in Texas.

North Texas Enterprise Center for Technology (NTEC ; Frisco, Texas) reported that it launched its Venture Alliance Program (VAP) earlier this week and have snagged 10 venture capitalist to take part in the process.

"The [VAP} was born out of the need that venture capitalist funding was strong on the coast and not as strong here. Many of [Texas'] med-tech companies had to travel to other areas to seek out funding," NTEC senior director Hubert Zajicek, told Medical Device Daily. "The venture capitalists didn't just disappear here [Texas], they just didn't historically support med-tech. There was a gap between life science companies in Texas and the funding they needed."

Most of the companies in the Dallas-Fort Worth area fall into the $2 million to $3 million range, which is too small for many venture capitalists and too large for many angel investors. What the partnership will do specifically, is help identify and screen med-tech companies and coordinate meetings with investors. Southern Methodist University (Dallas) business students will help with the market research of the applicants.

"To us, it's a service really," Zajieck, told MDD. "The 10 investment firms will have a database of companies that have an interest in them. They're able to then touch base with us and pick out the companies they would like to work with. It's a chance to service both communities - venture capitalists and med-tech companies."

In a sense, the VAP will serve as a second set of eyes and ears for both investors and companies.

"We recognized the intersection of need and opportunity and decided to provide a solution in the form of our VAP Program," said Larry Calton, Executive Director at NTEC in a statement. The VAP Program is targeting venture capital firms, most of which are out of state, that commit to spending from two days a month to two days per quarter maintaining "office hours" at the NTEC facility in Frisco. NTEC will help identify and screen companies and coordinate meetings with the investors during their office hours at the facility."

Zajieck said that Carlton was the key driver behind the partnership and that a great deal of the companies were based on relationships that he had fostered throughout his career.

"The VAP is truly his brainchild," Zajieck said of Carlton. "He truly had the idea of forming this partnership."

Zajieck added that it started becoming abundantly obvious that there was a need for some entity to bridge the gap, after NTEC had seen more business plans in one year than it had since in started in 2002.

"In 2009 we had the most business plans reviewed than we've had in our [seven year history]," he said. "We saw 150 business plans."

But according to data the number of startups might be growing, but investment dollars in Dallas remain bleak.

Statistics from PricewaterhouseCoopers show that Dallas-area venture capital investments fell 47% to $68.1 million in the first half of this year from the same year-ago period. The firm goes on to say that investments in biotechnology and medical devices have risen but are still small: $12.1 million for the first half of this year, compared with nothing at all last year. In Texas, life sciences raised $57.2 million, beating the $9.4 million for the first half of 2009. Nationally, biotechnology raised the most money of any industry in the first half of 2010 - $2.1 billion, up 31% from a year ago.

Zajieck said that the area is still rife with opportunity. He said that the Dallas area was "well positioned" to support the medical device market, with a growing number of hospitals and strong medical schools.

He also said that at a recent MedVentures conference, the NTEC was inundated with applications from small companies looking for funding. The meeting served as an entry point for many in the partnership and a chance for many.

"MedVentures was a kick-off for us," he said. "For companies it as an opportunity for them to see what are the deals that are in front of them, and what firms are interested."

Here are the firms that currently make up the partnership; Arboretum Ventures (Ann Arbor Michigan), Ballast Point Ventures (St. Petersburg, Florida), Chrysalis Ventures (Lousiville, Kentucky), Heron Capital (Indianapolis), H.I.G. BioVentures (Atlanta) Noro-Moseley Partners (Atlanta), Prolog Ventures (Louis, Montana), River Cities Capital Funds (Cincinnati) Santé Ventures (Austin) and Sevin Rosen Funds (Dallas).

"We agree that Texas is an underserved market," Omar Khalil, a Senior Associate with Santé Ventures told MDD. "Even with all the leg work [Santé] is doing - reaching out to the universities, meeting with entrepreneurs - we're never going to be able to reach everyone. With this partnership we're leveraging NTEC's network and we'll be able to reach those companies that we might soon miss."

Omar Ford, 404-262-5546,

omar.ford@ahcmedia.com

Medical Device Daily  July 30, 2010