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VC highs and lows: Investment in Michigan sees fewer deals in 2014, but more dollars

VC Highs and Lows -- Michigan Deal Winter 2014Nationally, the year in venture capital is wrapping up as a strong one. For Michigan — yes and no.

The most recent MoneyTree compilation of U.S. venture capital investing data, released by PricewaterhouseCoopers LLP and the National Venture Capital Association, shows Michigan deal volume at its lowest point in three years.

Dollars invested, however, show one of the best periods in recent history.

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A kin-do attitude: Fischell clan drives interest in medical devices

A kin-do attitude - Fischell clan

Kalamazoo-based Ablative Solutions Inc. is being watched as it attracts investment dollars. But another big reason to watch this company is the force of the people behind it.

Namely, the Fischell family.

Tim Fischell, M.D., is a practicing interventional cardiologist and CEO of the company. His brother, David, has a Ph.D. in physics and is chairman of the company.

The Fischells have about 250 medical device patents among them and have started 16 companies and counting.

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Swift start: VC is in DNA of this Ann Arbor bioscience company

Swift start - Swift BiosciencesSwift Biosciences Inc. makes chemical reagents that prepare samples of DNA to go into the machines that read the DNA sequences for clinical research.

David Olson, president and CEO of the Ann Arbor-based company, likens reading DNA sequences to trying to read a shredded-up phone book of all the phone numbers on the planet. One thing that helps computer scanners to read those sequences is to tag the ends of them. Swift makes the tags.

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New stage ahead? FDA OK looks to spell sales for Delphinus

It was a long time coming, but Delphinus Medical Technologies Inc. started this year off with a big step toward entering the revenue stage.

The Plymouth Township-based company announced Jan. 7 that the U.S. Food & Drug Administration had cleared the company to sell its SoftVue device used to detect breast cancer.

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IPO in the genes? Investors eye ProNAi after successful trial

IPO in the genes - ProNAiProNAi Therapeutics Inc. has been watched by investors this year as the company, coming off a successful trial for its cancer-fighting drug, looks at a possible IPO.

The Plymouth Township-based company raised $12.5 million in a round that closed in December and was led by Capital Midwest Funding in Milwaukee and joined by Apjohn Ventures of Kalamazoo.

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Fields of vision: FarmLogs soaks up data, funding

Fields of Vision -- FarmLogsNational venture investment numbers were driven up last year by investors looking to be part of the buzz surrounding “disruptive” technologies that could change the way any number of industries do business.

One of those technologies comes from Ann Arbor-based AgriSight Inc., and its target industry is a little off the beaten investor path: farming.

The company is better known by its product — FarmLogs, a web-based farm management software that helps farmers track a range of data and better manage their operations.

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Deal with it: 2013 was good for VC – but no 2012

Deal with it -- 2013 was good for VC, but no 2012Early last year, the president of the National Venture Capital Association remarked that Michigan was headed in the opposite direction of the rest of the country — and that was a good thing.

Michigan’s deal volume and the dollars attached to those deals were on the rise, while the national numbers were headed downward.

“As Michigan goes, so does the rest of the country not go,” said Mark Heesen, NVCA president at the time.

The numbers for 2013 are in, and they show Michigan partly fell in line with the rest of the industry last year.

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Following regulations: Med device entrepreneurs must leap a higher hurdle

Like other startups, medical device entrepreneurs need to demonstrate a market for their products or services.

Then there’s another obstacle to clear before most investors will write a check: reimbursement.

As health care reform and hospital consolidation change the industry landscape, investors are increasingly looking for proof that new product will be reimbursable through Medicare and insurers. That takes more research, data and time.

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Need for talent: Michigan looks to add medical device heavyweights

The biggest element that’s lagging in Michigan’s medical device industry?

Talent.

That’s the most immediate and common answer among the state’s industry players.

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Back to its roots: Wright & Filippis returns focus to prosthetics, orthotics

Many medical device companies are started because a doctor sees a need in the field. Wright & Filippis Inc. was founded to meet an even more immediate need.

At age 13, Anthony Filippis lost his lower legs after badly hurting his feet in a train accident. He would later persuade the man who made his first prosthetic legs, Carl Wright, at a prosthetics company called Martin-Halstead Co., to start their own company in 1944.

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Florida-based RTI Biologics Inc. looks north for acquisition

Kalamazoo, Grand Rapids and Ann Arbor make it easy to overlook Marquette, sitting at the top of Michigan’s Upper Peninsula.

One company that didn’t overlook Marquette was RTI Biologics Inc. The Alachua, Fla.-based firm in July paid $130 million for a company based there, Pioneer Surgical Technology Inc., a maker of spinal implants, bone grafts and other products. The combined company is now called RTI Surgical Inc. and is based in Alachua.

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Setting a root system: Early Sarns startup spurred medical device industry

The impact of a successful startup can be felt long after it’s gone, adding jobs for years to come, as can be seen in the cases of Sarns Inc. and DLP Inc.

One of those entrepreneurs is Dick Sarns, described by one investor as a patriarch of the medical devices industry. He started Sarns Inc. in 1960 to make a heart-lung machine used in cardiac bypass surgery.

Sarns grew the company and, to grow it further, sold it to 3M Co. in 1981, staying on as general manager for several years. In 1999, 3M sold the business to Tokyo-based Terumo Corp.

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Deals done, to come: Big sales, what’s ahead in medical device industry

Michigan’s medical device industry has witnessed the sale of a growing number of its companies in recent years. The following lists some that state experts and players in the industry consistently mention as the most noteworthy.
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Michigan poised to take advantage of changing health care environment

On Michigan’s list of big industries, it might be easy to sell medical devices short.

But the assets show a different story: As many as 50 new companies, a short but sound list of exits, several major companies, a strong base of research universities and hospitals, low costs, a long manufacturing history and a pool of experienced managers and investors.

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Hole in manufacturing: State has many companies, few dialed in to devices

Manufacturing in Michigan has good news and bad news for medical device companies.

The state might have a well-established manufacturing base for sourcing metal and plastics parts or even finding a contract manufacturer to take control of the whole process.

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Funding path leads east for Lansing graphene maker

The path to growth-stage funding led to South Korea for XG Sciences Inc. in Lansing.

The company, founded in 2006, uses technology developed at Michigan State University to make an advanced nano-scale material called graphene. XG makes the carbon-based material for customers who develop lithium-ion batteries, a hot alternative-energy area of research for automakers and electronics manufacturers.

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LED maker draws investment

Relume Technologies Inc. in Oxford makes outdoor LED lighting for municipalities and businesses. It’s also an example of an established, growing company that began with automotive roots but has worked its way well beyond Michigan’s bedrock industry.
 
The company was a high-tech startup back when Peter Hochstein launched it in 1994 as a spinoff of a previous company he founded that made instrumentation and test equipment for the automotive industry.
 
Hochstein picked up 20 patents for Relume’s LED technology. In the beginning, the company mainly served the auto industry but then branched out to serve commercial and military customers. In more recent years, the company has seen rapid growth due in large part to a strategy of targeting municipalities.
 
Thanks to that strategy, Relume’s revenue has more than doubled since 2007. Last year the company posted $10 million and is on pace to reach $16 million this year, said CEO Crawford Lipsey, whom the board of directors brought on in 2010. Lipsey’s previous role was executive vice president of Acuity Brands Inc., a large Atlanta-based maker of lighting products.
 
Familiar names such as StarbucksMcDonald’sChase and Best Buy are among Relume’s corporate customers. Municipal customers include the cities of Ann Arbor and Arlington, Va.
 
In January of last year, Relume announced it had raised a $7 million Series D round to fund growth, with Beringea LLC, Michigan’s largest venture capital firm, leading the charge. Beringea committed $3.2 million, using money it manages in the state’s $300 million InvestMichiganfund. Also participating were Ann Arbor-based Plymouth Management Co., Detroit-based Invest Detroit and San Jose, Calif.-based Western Technology Investment, which provided venture debt.
 
Beringea played a matchmaker role in Relume’s growth strategy. Beringea’s managing director, Jeff Bocan, who is on Relume’s board, led the search that brought Lipsey into the company and helped make the connections with other local investors. Beringea also invested $1 million in Relume in 2009.
 
Then this past December, Beringea helped Relume raise $4 million in an internal round of investments, largely from existing individual shareholders but also with Beringea, Plymouth Management and Invest Detroit again participating.
 
Lipsey said having trusted insiders work the investment field freed management to concentrate on running the company.
 
“That was a big deal for us. It allowed me and my team to not worry about going out and getting more money,” he said.
 
Relume is using the funding to expand its sales and marketing team and to invest in proprietary technology, such as lighting controls technology that requires levels of investment that many small companies can’t or won’t spend, Lipsey said.
 
Examples of the technology Relume is developing include remote energy consumption controls that allow customers, from an office computer, to dim the lights during hours of low traffic and monitor energy use.
 
The company has had several new opportunities come about recently that could prompt another search for funding.
 
“We might be entertaining another round of funding later this year,” Lipsey said.
 
March 10, 2013 | Crain’s Detroit Business – New Michigan Deal Supplement
 
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Playing the strong suit: Plex deal combines manufacturing, finance and technology

One deal last year involved a breed of software company that played to Michigan’s strengths — combining manufacturing, finance and technology.

Plex Systems Inc. in Auburn Hills makes software that monitors manufacturing production lines while tying that data with back-end office functions such as accounting. The company was founded in 1995.

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Ann Arbor firm still writes the big checks for medical companies

Jeff Williams knows what it’s like to search his Michigan environs for follow-on investments.

Williams was the CEO of Accuri Cytometers Inc. and HandyLab Inc., two Ann Arbor-based medical device companies that were the source of some of Michigan’s biggest exits.

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Round two: Early-stage survivors hungry for second-stage investing

As more venture money has been invested in Michigan companies and deals have skewed toward early-stage companies, the next chapter in the state’s venture capital industry is to see whether these companies grab growth capital — and eventually bring about profitable exits.