Gary Anglebrandt CommunicationsSeries of special content marketing publications on Michigan’s venture capital industry, created by Crain Content Studio (custom publishing arm of Crain’s Detroit Business). I worked as a lead writer on the team that produced these and worked closely with the project leader to help guide the overall content.
Nationally, 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.
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.
Swift 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.
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.
ProNAi 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.
National 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.
Early 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.