Norwich Ventures Sticking to Early-Stage Medical Device Deals Amid Late-Stage Trend

6/18/09

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Arrow International, a Reading, PA-based developer and maker of specialty catheters and cardiac devices. Miller, a director of Norwich, retired from Arrow a few years before the company was sold to Teleflex (NYSE:TFX) for $2 billion in 2007, but Sandoski tells me that Miller was still among Arrow’s largest shareholders at the time of the sale. Miller operates from the firm’s Wyomissing, PA, office, which is within range of the firm’s portfolio companies in the Mid-Atlantic region and in Ohio.

Then there’s Sandoski, a former executive at DEKA Research and Development, the Manchester, NH, technology development firm founded and led by inventor extraordinaire Dean Kamen. Kamen is an inventor of a robotic prosthetic arm and a wheelchair that climbs stairs, among other medical innovations. (Sandoski says he was in charge of finding markets for DEKA’s inventions, but he is unable to talk about which specific products.) Here’s a link to the Norwich team bios.

Perhaps the best representation of a fund’s investment goals is to look at its portfolio companies. And when I did that, I realized that one of the reasons Norwich has flown under my own radar for so long is that most of the six startups it is backing are young firms operating quietly as they develop their products. In fact, Sandoski declined to talk about one of the three Boston-area startups in the firm’s portfolio because it’s in stealth mode. The firm also doesn’t list its portfolio companies on its website, but we did talk about two of the three Boston-area firms. Those firms include Intelligent Bio-Systems, a Waltham developer of next-generation DNA sequencing technology, and Rhythmia Medical, a Burlington, MA, startup that is quietly working on technology to provide 3-dimensional electrical mapping of the heart.

It’s been challenging in this economic climate to build syndicates of investors to back young medical devices startup, Sandoski says, because many venture firms continue to shift their investment strategies to adjust to changes in the market.

“I think what’s most challenging is that folks you might have gone to six months ago, who still have a lot of capital, may not be interested because they’ve changed their focus [to later-stage deals],” he says. “Likewise, people who you’ve never thought about going to before may now be very interesting partners.”

Part of the investment thesis for backing early-stage medical devices firms now, he explains, is that the window for IPOs is largely closed now but will probably open within the time that it will take for younger firms to become viable candidates to go public. And those younger firms have the potential to build a lot of value between now and then.

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