MC3, With Six Spinout Companies, Navigates Challenging Terrain of Medical Device Incubators

2/7/11Follow @xconomy

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create a science park next to the University of Minnesota in Minneapolis.

And talent and money may not be enough even in the Twin Cities, he says, which is home to one of the largest medical device clusters in the country.

In 2007, Mike Selzer, Dale Spencer, and Mike Berman, three well-known and successful entrepreneurs in Minnesota, launched a medical device accelerator called ConcepTx. Despite winning a $4 million investment from venture capital firms Versant Ventures and Advanced Technology Ventures, largely based on the entrepreneurs’? reputations, ConcepTx quickly flopped.

Incubators “are just extremely hard to do,” Bianco says.

What would help is a successful exit or two, which could provide the incubator with a strong reputation and much-needed cash to reinvest into business, he says,

So far, MC3, which holds equity in its startups, has not seen an exit, though all of its companies are still in business, no small feat in this weak economy.

Here’s a look at some of the MC3 companies:

  • Accord Biomaterials, which is developing a diagnostic sensor and device coating, has attracted $1 million from Arboretum Ventures in Ann Arbor and won a $1.3 million Small Business Innovation Research Grant from the National Institutes of Health.
  • Novalung, a German-based startup that makes artificial lungs, now boasts 50 employees and generates international sales.
  • Exatherm, headquartered in Kentucky, won NIH money to conduct a clinical trial this year of its hyperthermic device to treat cancer.

For now, MC3 survives on the fees it charges the companies for its services. Merz is also exploring other financing strategies, and has been speaking with angel groups about some sort of equity investment into MC3 in exchange for a first look opportunity at the technologies the firm is incubating.

But Merz says the idea is somewhat difficult to explain to potential investors.

Bianco agrees. Angels want to invest in the startups themselves; it would be hard to convince them that they could earn a return on the incubator, he says.


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