PhysioSonics, a University of Washington spinoff developing ultrasound imaging technology to monitor blood flow in the brain, has raised its second round of equity financing. The deal was led by medical device giant Medtronic (NYSE: MDT) and the prominent local investor Kirby Cramer, Xconomy has learned.
Brad Harlow, the CEO of Bellevue, WA-based PhysioSonics, says his company has closed its Series B round of equity financing. He isn’t disclosing the size of this financing, but says it’s in the “multi-millions,” yet is smaller than the $8 million he raised in his Series A round. The company plans to use the cash to complete development of the PhysioSonics ultrasound technology, hire another 10 people to boost its staff to about 15 people, and hopefully win FDA clearance in the next 12 to 15 months, Harlow says.
“This is really a capstone event for us,” Harlow says.
While Medtronic and Johnson & Johnson—two traditional acquirers of medtech startups—have both invested in PhysioSonics, not a single dollar from a VC firm has gone into the company, Harlow says. Most venture capitalists have lost the hunger they once had to get in on the ground floor with cutting-edge medical devices, and can’t stomach the tribulations these companies often experience with the FDA, and with insurance reimbursement. So Harlow, who previously worked in investment banking, tapped his network of big strategic investors.
Cramer, someone you could call a local super angel for medical technology, met Harlow for the first time last June. They met and talked about PhysioSonics through a meeting of Wings, the new Seattle-area angel investing network for medical device startups. Cramer already had a deep understanding of ultrasound through his experience as the longtime chairman of Bothell, WA-based SonoSite (NASDAQ: SONO). Cramer also helped connect Harlow with other angel investors who ended up putting money in the deal, Harlow says.
Cramer says he followed up on the first meeting with Harlow, by meeting the scientific founders of PhysioSonics—Michel Kliot, Pierre Mourad, and Bob Frederickson. He says he liked what he heard.
“A blind man could see they are very talented people with a great idea!” Cramer wrote in an e-mail. He liked the combination of its intellectual property, and its big corporate partners. “After doing further due diligence, I decided to lead a group of private investors to take PSI [PhysioSonics] to the next level. They are all sophisticated investors who are well experienced in medical device investing. This confirmed my belief that this is a terrific investment opportunity.”
The PhysioSonics technology, as I described in a story back in June 2009, could be used to help doctors and nurses monitor a stroke patient for signs of complications in an easier, more automated way than can be done with today’s ultrasound.