When Barry Fogel first started developing a new treatment 15 years ago, his main goal was to help his own patients. Fogel, a physician trained in both psychiatry and neurology, saw many patients with a movement disorder called tardive dyskinesia (TD). The condition—which can be caused by drugs that block dopamine, such as antipsychotics—is characterized by involuntary movements of the face like puckering, closed eyes, and grimacing. Some patients suffer writhing of their hands and feet, or difficulty moving their upper bodies. “At its worst, it’s quite disfiguring,” Fogel says. And there is no approved drug to treat TD.

Fogel developed a treatment for the condition in the late 1990s, patented it, and set out to try to get it on the market. On Monday, Fogel’s dream took a huge leap towards reality when his Waltham, MA-based company, Synchroneuron, announced it had raised its first round of venture capital—$6 million from Morningside Technology Ventures. It’s enough to take the drug through a substantial portion of the clinical trials Synchroneuron will need to complete to apply for FDA approval, says chief financial officer Marc Cote.

Synchroneuron’s journey from idea to Series A could be a case study in stick-to-it-tiveness—and the value of networking. Fogel, a clinical professor of psychiatry at Harvard Medical School, suspected that modulating two brain chemicals, glutamate and GABA, would relieve TD. So he did a bit of experimenting on his own patients, prescribing them existing drugs that targeted those chemicals but were approved to treat other conditions. “I established that if you modulate glutamate, in particular, the TD gets better,” Fogel says.

So Fogel developed and patented a method for using a drug called acamprosate to do just that, and in 2004, he licensed it to San Diego-based Somaxon Pharmaceuticals (NASDAQ: SOMX). But Somaxon was developing an insomnia drug, which took precedence over the acamprosate program, Fogel says. “They didn’t give sufficient resources to acamprosate,” he says. “The progress was disappointing.” Somaxon declined to comment. (A sidenote: Somaxon eventually did get its insomnia drug on the market, but has struggled to make it stand out in a competitive market.)

In 2007, Fogel got his patents back from Somaxon and began looking for an alternate path to FDA approval. It wasn’t easy: Fogel and his wife had to do all the work to … Next Page »

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OncoSec Medical CEO Punit Dhillon tells me the startup he helped establish in San Diego last March is beginning mid-stage safety and efficacy trials of its proprietary technology for enhancing drug delivery in treatments of several types of skin cancer.

The technology, which OncoSec acquired from Blue Bell, PA-based Inovio Pharmaceuticals (AMEX: INO) almost a year ago, transmits intense electrical pulses into skin tumors through six electrode needles that are pushed into the skin. The electricity causes the tumor cells to become permeable with each jolt, and makes it easier for anti-cancer drugs injected into the region to pass through the tumor cells’ tough outer membrane. Known as electroporation, the process increases the concentration of an anti-cancer drug within the tumor.

“What we’re doing is a much more elegant and targeted approach,” says Dhillon, who estimates the technique increases the uptake of anti-cancer drugs by 4,000 to 10,000 times. As a result, doctors can reduce the dosage of anti-cancer drugs used with electroporation technology.

Dhillon, who previously served as Inovio’s vice president of finance and operations, says Inovio has been an electroporation pioneer. The Pennsylvania company decided last year, however, to sell technology that was unrelated to its strategic focus on developing DNA vaccines for cervical dysplasia, leukemia, and hepatitis C virus therapies.

The deal to acquire Inovio’s assets didn’t happen by chance. Inovio chairman and former CEO Avtar Dhillon is Punit Dhillon’s uncle, and their family and friends raised the initial $1.1 million that funded OncoSec after the company sprang to life through a reverse merger with a dormant public company. The San Diego startup raised another $3 million last June from two New York health funds, Hudson Bay Capital and Heights Capital. That should be enough cash for OncoSec to complete three mid-stage trials the company plans to begin before the end of March.

The three studies will use OncoSec’s electroporation technology to deliver the company’s lead drug candidate, called Interleukin-12 (IL-12) cytokine, to three groups of patients with different lethal skin cancers—metastatic melanoma, Merkel cell carcinoma, and cutaneous T-cell lymphoma. The experimental drug is intended to both trigger and boost a strong immune response to each type of cancer. The combined treatment, known as electroimmunotherapy, represents a potential new anti-cancer treatment with broad applicability, although Punit Dhillon says the company must pursue separate regulatory approvals to treat each type of cancer (as a combination drug-and-device product) on an application-by-application basis.

OncoSec says its technology also can be used in the same way in electrochemotherapy, which uses an established anti-cancer drug like bleomycin while a tumor is being electroporated. The use of electroporation in chemotherapy has been studied more throroughly, and Punit Dhillon says he wants to advance OncoSec’s approach through a partnership with a bigger pharmaceutical company.

“2011 was a great year for us,” he says, “and we’ve got some exciting milestones to look forward to in 2012.” Once the latest studies have been completed, OncoSec’s Dhillon says he looks forward to licensing opportunities and other commercial prospects, and he adds, “We also still have the chemotherapy program in the wings.”

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Plans for IPOs and venture funding dominated the New England deals news this week.

—A new seed fund, backed by venture firm New Enterprise Associates and hosted by Harvard, came out of the woodwork last week. The Experiment Fund will invest up to $250,000 in seed funding in selected startups, with a focus on technologies that come out of Cambridge, MA. The news broke just a few days ahead of Facebook—the one that got away—revealing its plans to go public.

—Radius Health, a Cambridge-based startup working on treatments for osteoporosis, filed paperwork indicating its plans to raise as much as $86 million in an initial public offering.

—A PricewaterhouseCoopers and National Venture Capital Association report shows a mixed picture for life sciences investing in 2011, my colleague Arlene reported. Biotech companies raised $4.7 billion, showing a 22 percent increase over 2010, but the deal volume for the sector dropped 9 percent to 446 transactions. Medical devices companies also showed an increase in funding dollars but a drop in number of deals.

—Cambridge-based Brightcove set the price range of its initial public offering at $10 to $12 per share, according to an amended filing with the SEC. The video hosting startup plans to sell 5 million shares, and give underwriters the option to purchase another 750,000 shares. Brightcove first filed paperwork last August indicating it intended to raise $50 million in an IPO.

—Synchroneuron of Waltham, MA, nabbed $6 million in Series A funding from Morningside Technology Ventures. The startup is developing treatments for movement disorders such as tardive dyskinesia.

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At first glance, a report released last week by PricewaterhouseCoopers and the National Venture Capital Association seems to portend rich times for life sciences startups. Biotech companies raised $4.7 billion in 2011—more than any other sector except for software and enough to help make last year one of the top three years for venture fundraising in the past decade.

But drill down into the report, based on data provided by Thomson Reuters, and the numbers tell more of a mixed story. Total VC dollars poured into the life sciences sector, which also includes medical devices, increased 21 percent to $7.5 billion in 2011. The biotech portion of the haul marked a 22 percent increase over 2010. But the volume of biotech deals dropped 9 percent to 446. What’s more, the medical device portion rose 20 percent in dollar terms (to $2.8 billion) but dropped 2 percent in deal volume (to 339).

What it all means is that VCs in life sciences remain supportive of the sector, but uncertain about its future, says Tracy Lefteroff, global managing partner in PwC’s venture capital practice. “There are still some major challenges ahead in terms of getting the FDA to provide transparency to young companies about what they need to do to get their products out of the pipeline,” Lefteroff says. “For anything [in investing] to be sustainable, FDA issues will need to be worked out.”

Still, some investing trends last year showed clear signs of optimism in life sciences. During the fourth quarter, for example, VC investing in early-stage companies totaled $987 million—a 47 percent jump from … Next Page »

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We’re starting to see fresh signs of life among the Internet software startups in San Diego. Check out this news.

—During a visit last week, TechStars CEO David Cohen talked with the leaders of San Diego’s grassroots Web startup community about the factors that help to create and sustain entrepreneurial communities. One crucial issue confronting San Diego is a crying need for savvy and experienced Internet entrepreneurs who are willing to “pay it forward” by mentoring a new generation of startups.

—A dozen seed-stage companies moved into the new EvoNexus incubator in downtown San Diego. EvoNexus, which was founded by the CommNexus non-profit industry group, will continue to operate its original incubator in University City, where eight startups are taking root. In both locations, EvoNexus provides office space, utilities, and other services free of charge and with no strings attached.

—Sigma Partners led a $10 million round in venture funding for San Diego-based MOGL, a Web startup that has developed a comprehensive customer loyalty program for restaurants and bars, to fuel its expansion into San Francisco and New York. San Diego’s Avalon Ventures and Austin, TX-based Austin Ventures joined in the round.

—San Diego’s MicroPower Technologies named two new board members after raising $6.5 million in Series C funding in a deal that was led by Motorola Solutions Venture Capital and joined by an undisclosed private fund. MicroPower Technologies, which uses wireless networking technologies to create low-cost surveillance capabilities, named PacketVideo CEO Jim Brailean and former DivX CEO Kevin Hell to its board. Hell, who is now chairman of San Diego’s EvoNexus incubator, will join as MicroPower chairman.

—San Diego’s StockTwits said it has established a partnership with Toronto’s Q4 Web Systems, which provides … Next Page »

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Boston startups should be focusing more on creating strategic partnerships with big companies.

An “if we build it, they will come” mindset appears to dominate the Boston startup scene. Too many startups also rely mostly on a pricing and plans revenue model combined with implementing the latest inside sales and marketing 2.0 tools to “get found” while driving demand. A complementary and proactive approach in targeting big companies for strategic partnerships is needed.

Wake up… Most big companies have realized that their current set of technology providers lack the innovation and speed to deliver new competitive solutions. There are new sets of problems that need to be solved that may not have existed even a few years ago. As a result, new innovation programs and budgets have been established, led by senior executives. Their motivation is to fund pilots with emerging technology providers that most times lead to a much larger transaction and partnership strategy. Interesting areas include mobility, social, analytics, and cloud computing.

Take advantage of these customer-funded opportunities as these dollars may also complement your angel and VC funding efforts. Plus, for those leveraging lean startup principles, incorporating a big company “voice” to validate your product development roadmap may commit them to buy additional products and enhancements in the future.

If big companies are approached correctly, senior executives leading innovation programs will make swift decisions. Unfortunately, there are major challenges I see within the startup community to take advantage of these budgets. These include:

• Little focus on proactively targeting big companies. Also, the startup team and their mentors may not possess the sales skills or experience to effectively connect with and relate to big-company senior executives.

• Boston startups are too focused on the product and technology. Big companies are also evaluating their ability to work and collaborate with the startup team. Chemistry is important to these executives.

• You are not the center of the universe. There may be additional value in extending and leveraging existing ecosystem investments.

What I am describing here is not an outdated sales process where the cost to acquire a customer is high and the sales cycles are very long.

Keep in mind that big companies would rather … Next Page »

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When it comes to tech startups—especially in Internet software and app development—San Diego has been adrift in the horse latitudes. That’s the term Spanish mariners had for the waters where the trade winds died out for days and even weeks at a time. Becalmed sailors desperate to gain some headway would heave their horses overboard to reach the New World.

It hasn’t reached that point yet in San Diego, but you would never know that software was once a thriving entrepreneurial community here. Even now, the software sector accounts for more than a third of San Diego’s private technology companies. But as I’ve written previously, it feels as if the local software companies speak different languages. In contrast to the flourishing tech hubs in Seattle, Boston, and New York—not to mention Silicon Valley—San Diego’s software scene is sleepy and indifferent.

Still, there are signs of a freshening breeze.

David Cohen last week at UC San Diego

Scores of new seed-stage startups have begun to emerge throughout the region, including a dozen that just moved into the new EvoNexus incubator in downtown San Diego. These emerging companies are led by young entrepreneurs who view San Diego’s innovation establishment as old-school and irrelevant. They are turning out instead for informal “hackathons” and “meetups.” They tell me they’re yearning for real mentoring by real tech entrepreneurs, and for access to real tech investors who are really investing.

Last week, more than 200 people turned out to hear David Cohen talk at U.C. San Diego about TechStars, the early stage fund and accelerator program for Internet startups that he co-founded with three partners in Boulder, CO, six years ago. Cohen is the CEO, and by any measure, the startup program has been wildly successful.

TechStars enrolled its first 10 Internet startups in 2007, providing as much as $18,000 in seed funding and an intense, three-month mentorship program for each company in exchange for a 6 percent stake. Since then, TechStars has expanded to … Next Page »

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Much like the New York Giants charging onto the football field, companies such as bitly, BarkBox, and Gilt Groupe—along with their backers—have upped the caliber of innovation expected from startups in New York. In response to this upswell of activity, Xconomy brought some 250 members of the local investor and entrepreneurial community together Wednesday to catch a glimpse of the city’s potential as a venture hub. (And to debate the merits of the Giants vs. the Patriots.)

Fred Wilson, managing partner of Union Square Ventures, and Todd Dagres, general partner and founder of Spark Capital, discussed the role media hype plays with some startups and the rise of social media, during a keynote chat moderated by David Rosenblatt, CEO of 1stdibs.

Admittedly, the media is notorious for picking its darlings when discussing innovation while barely mentioning some growing companies. Though Instagram, for example, makes headlines when it lands funding, Wilson said, Union Square Ventures has companies in its portfolio quickly building their businesses under the radar. “They don’t get caught up in a bunch of nonsense,” he said. “We have companies like Indeed.com and Return Path that will be public companies in three or four years—maybe less.” The management teams at those companies, Wilson said, are more focused on developing their products than building their media following.

Dagres said that some companies simply do not talk up their plans. He compared Twitter, a usual suspect on many blogs and news sites, with Tumblr, which until recently was not as vocal. “Tumblr couldn’t get arrested even though it was growing like crazy and was very substantial,” he said. “You didn’t hear anything about it. Now it’s starting to catch on.”

New York’s Tumblr could be on to something by shrugging at hype in order to endure in the social media arena, Wilson said. He noted that early players such GeoCities gave way to MySpace, Facebook, and now Foursquare and Pinterest. “People are figuring out how to make these services more useful and how to also make them businesses,” he said.

The trouble with GeoCities, Wilson said, was in spite of the high hit counts on those … Next Page »

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Employment in San Diego’s life sciences sector grew by 15 percent over the past two years, as biopharmas, medical device companies, and other employers added roughly 5,550 jobs here—raising employment in the sector to 41,937 in 2011, according to a report released today by Biocom. The report says overall employment in San Diego increased by 1.1 percent over the same period, gaining about 20,600 jobs to reach 1.83 million in 2011.

The 40-page economic study says San Diego’s life sciences cluster also is expected to outpace the nation in terms of job growth and economic impact over the next two years, as another 2,770 jobs are added by 2013. A broader snapshot that includes life sciences companies in neighboring Orange, Riverside, and Imperial Counties projects the region will add more than 6,000 workers over the next two years.

Despite a significant decline in venture capital funding, the report says the four-county region of Southern California will continue to retain its high standing and competitive advantage in the life sciences. By 2013, there will be 70 percent more jobs in the life sciences in these four counties than the national average.

While venture capital funding is a key indicator of entrepreneurial activity and business formation, the report says the sharp decline in Southern California VC investments, from $1.1 billion in 2007 to $553 million in 2010, reflects the severe economic downturn and other industry trends underway nationwide.

San Diego’s strength was especially apparent in federal funding for biomedical research. Of the top 10 research institutions receiving National Institutes of Health grants in 2011, nine are in San Diego. The $835 million in grants awarded last year to San Diego scientists accounted for more than 85 percent of the grants allocated in the four-county region.

The report says the four-county life sciences cluster comprises more than 3,500 companies and employs over 97,000 people. On average, salaries range between $54,141 and $116,462, well above the national and regional averages. Including direct, indirect, and induced employment, the report says this region supports a total of 248,800 jobs that pay over $17.7 billion in wages and generate $57 billion in economic activity.

San Diego County alone accounts for 1,700 companies that employ 41,937 people. Including direct, indirect, and induced job, San Diego’s industry supports more than 106,000 jobs that pay $7.5 billion in wages and generate roughly $22 billion in overall economic activity. A .pdf file of the full report can be downloaded here.

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This week’s deal news covered a breadth of sectors: biotech, medical devices, mobile applications, software, and robotics. Not to mention a major venture capital fund raise.

—Waltham, MA-based drugmaker Avila Therapeutics was bought by New Jersey-based Celgene (NASDAQ: CELG) for $350 million, with as much as another $575 million available in milestones. Avila is a maker of “covalent” drugs that are designed to shut down the activity of disease-causing proteins for a prolonged period of time.

—Verastem, a young Cambridge, MA-based biotech working on drugs targeting cancer stem cells, completed its initial public offering, led by UBS and Leerink Swann. The IPO (5.5 million shares sold at $10 apiece) represented a strong showing among investors, as Verastem originally indicated it planned to sell 4.5 million shares priced between $9 and $11 each. The underwriters have a 30-day option to buy another 825,000 shares.

—Burlington, MA-based ConforMIS, a maker of knee implant systems, raised $89 million in a Series E funding from private equity investors and government investment funds abroad. The company said it will put the money toward sales, manufacturing, and expansion of its technology.

—Co3 Systems, a maker of data loss management software, received new funding from Fairhaven Capital. The Cambridge, MA-based startup said it will put the money (whose sum was undisclosed) toward sales, marketing, and engineering.

—Malborough, MA-based medical device startup Navilyst Medical will be acquired by Albany, NY-based AngioDynamics (NASDAQ: ANGO) in a transaction valued at $372 million, based on the company’s $14.20 per share closing stock price Monday. Navilyst, which focuses on … Next Page »

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When Long Island, NY-based Kemp Technologies revealed on its blog on January 24 that it had raised $16 million in venture capital, it might have been easy to overlook the funding as just another sign of the latest tech boom. But this was no ordinary funding: Kemp is an 11-year-old company with revenues and profits that’s entering the venture capital market for the first time. The company, which makes equipment to help small and medium-sized businesses manage traffic on their computer servers, was funded by Edison Ventures, with participation from Kennet Partners, and Orix.

Why did Kemp’s founders jump into the VC game now when their company was fully self-sustaining and on a fast growth path? Peter Melerud, Kemp’s co-founder and executive vice president of product management, got on the phone recently with Xconomy to explain the reasoning behind the funding round and to provide insight to other business owners who are weighing an entry into the VC game.

Xconomy: As a profitable, self-sustaining company, why did you feel you needed to raise venture capital?
Peter Melerud: We started the company in 2000, and in 2003 we launched our very first product. Our revenues and profitability started to happen not too long after the time we launched our first product. We were able to quickly start re-using the profits for seeding growth. But obviously it was slow and deliberate, with an eye towards the bottom line, because we were self-funded.

Over the past three years, we experienced dramatic growth. In 2011 we saw 116 percent growth in revenues and we have 8,000 deployments worldwide. We realized that in order to take advantage of that growth and keep up with it, we needed to aggressively step up every area of the company, from R&D to tech support, to marketing and sales. To do that, we realized, we needed external funding.

X: What made you optimistic it was a good time to raise capital?
PM: The relative environment for VCs and fundings didn’t really have a big impact on our decision. We are a New York-based company—not a Silicon Valley-based company. Even though there was VC activity happening in this area, we were a little off the beaten track. We got engaged in the process with the current investors a pretty long time ago—almost a year and a half ago. It was definitely a getting-to-know-you process between us and the investors. We needed to be comfortable that we were really going to be working with good partners, not just VCs.

X: What will your group of VCs bring to the table, beyond the money, of course?
PM: Our roots are in product R&D and marketing. That’s what our expertise is. What the investors bring to us is more of a strategic growth-management capability that we’ll certainly be able to leverage.

We’re planning significant international growth. In the past, we relied on developing a channel network internationally. In 2010, we established a subsidiary in Ireland. We’re definitely looking to staff that up, but also to expand into other European territories, perhaps Central and Eastern Europe. We’re also going to be growing our support infrastructure. Support is a very key element of our business model—we don’t outsource it. We have to grow support capabilities internally, and we can do that more aggressively now. We’re going to be increasing our marketing and sales capabilities, too.

X: The poor IPO market makes exit strategies difficult, but now that you have VCs on board, it’s something you have to think about. How are you looking at the exit strategy at this point?
PM: Looking forward, we see our technology as becoming more and more core to a lot of other parallel areas, certainly in the cloud space. Being in the position to take advantage of those opportunities as they come up makes sense.

Looking at potential exits, I think there’s a broader set of options than just an IPO. It’s not something that we’re looking at short term though. It’s more of a three-to-five year plan. How will the market look at that stage? No one has a crystal ball, but certainly everybody thinks it can only get better.

X: What advice would you pass along to other late-stage companies thinking about raising venture capital for the first time?
PM: My first suggestion is to be clear with yourself as to why you’re doing it. There are lots of reasons to bring VCs in, so you need to understand the market, the opportunity, and where you fit within your space. How will the additional capital help the organization grow, assuming growth is driving the decision? Having that clarity is very important.

Also you have to match yourself to the right investor. Investors can vary dramatically based on their investment criteria. Make sure there’s a match, and make sure there is a match in personalities, as well. An investor is someone you’ll work very closely with, so you need to be sure that’s something you can do. Hopefully the two of you together will make a much stronger entity.

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San Diego’s MOGL, a Web-based customer loyalty and rewards program for restaurants and bars, says it has raised $10 million in venture funding to fuel its expansion into San Francisco, New York, and other markets.

The Menlo Park, CA, office of Sigma Partners led the Series B round, which was joined by San Diego’s Avalon Ventures and Austin, TX-based Austin Ventures. That brings total funding for MOGL to $12.4 million, according to a statement from the company. Entrepreneurs Jon Carder, Jarrod Cuzens, and Jeff Federman started MOGL in 2010.

The Internet startup offers its customers multiple incentives for returning to member restaurants and bars, using a mixture of technology, games, and psychology. The incentives include a 10 percent cash back each time a customer returns to eat at participating restaurants. A contest  offers monthly cash prizes to the top three most-frequent customers at each locale. Customers also can automatically donate a meal to someone in need every time they spend $20.

MOGL Homepage Screenshot

MOGL says it provides customer analytics and return-on-investment data for participating bars and eateries. In a statement from the company, Sigma partner Peter Solvik says, “The MOGL team has generated an explosive response from both consumers and restaurant partners, while effectively positioning itself as the most innovative loyalty platform of its kind.”

Since it was launched last April, MOGL has signed up nearly 350 Southern California-based eateries and bars, donated more than 27,000 meals to Feeding America, and has rewarded its members with more than $350,000 in cash back to date.

The company also offers a location-based mobile app for iPhone and Android, so MOGL members can easily locate participating restaurants while on the go. The mobile apps also help customers track their cash rewards and jackpot opportunities, as well as the number of meals donated in their name.

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—Peter Clarke of EE Times reported that San Diego’s Qualcomm (NASDAQ: QCOM) has acquired Andover, MA-based Pixtronix, a startup founded in 2005 to develop Microelectromechanical systems (MEMS) display technology. Qualcomm, which confirmed the deal with EE Times but provided no details or press release about the deal, reportedly spent between $175 million and $200 million for Pixtronix. The Massachusetts company founded by Nesbitt Hagood raised more than $53 million in venture funding, athough the Pixtronix technology has not yet been introduced to the market. Qualcomm has spent years working to refine its own MEMS-based display technology—known as Mirasol.

—More than 200 entrepreneurs turned out to hear TechStars founder and CEO David Cohen talk about the startup accelerator program he helped to launch in Boulder, CO, in 2007. Cohen told the rapt audience during a San Diego Tech Founders meetup that the Internet software community in Boulder “is just totally on fire” compared to five years ago. This was the night after Cohen met with local tech leaders to discuss the steps that helped boost the entrepreneurial ecosystem in the Colorado college town. Xconomy San Diego arranged the dinner discussion, and I plan to have more about our conversation later this week.

—Meteorologist Stephen Bennett and investor John Plavan founded San Diego’s EarthRisk Technologies in mid-2010 with the idea of creating predictive analytics technology that could extend the range of weather long-term forecasts from two weeks to 30 or 40 days. They are now providing their Web-based technology to commodities and energy-trading firms on a subscription-basis. Bennett told me the core business at EarthRisk Technologies is focusing on extreme weather events—heat waves, frigid cold snaps, and storms because extreme events are the ones with the highest impact.

—Mark Heesen of the National Venture Capital Association gave a good-news, bad-news presentation to the San Diego Venture Group last week. Among the interesting bright spots: Corporate venture capital is growing and San Diego-based Qualcomm now ranks as the nation’s second-largest corporate venture outfit. The bad news? U.S. VC firms invested $28 billion in startups last year, but only … Next Page »

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Burlington, MA-based ConforMIS, a medical device company with a newly FDA approved knee replacement system, announced today that it has secured $89 million in a Series E investment.

The money comes from London-based AGC Equity Partners, New York-based Axel Johnson, government investment funds from Asia and the United Arab Emirates, as well as other private equity funds in the U.S., Europe, Asia and the Middle East. ConforMIS raised $50 million in Series D financing in July 2009 from sovereign funds of Kuwait and Singapore, and private equity investors such as Aeris Capital of Zurich, Switzerland, and Palo Alto, CA. CEO Philipp Lang says many of the startup’s return backers participated in the newest funding round.

Lang noted that the Series E investors are largely private equity investors focused on public transactions, meaning that if the time comes, they could invest the amount they did in the Series E in an initial public offering. So, is an IPO in the works for ConforMIS?

“This fundraise is very execution focused,” says Lang. “[An IPO] is not the primary objective for us right now.”

Last year, the FDA approved ConforMIS’s patient-specific, total knee replacement system, which Lang says is the first of its kind. The company, founded in 2004, originally sold patient-specific partial knee replacements. Lang says that the FDA approval of its newest system opens up a huge market for the company, as total knee replacements make up 90 percent of the roughly 700,000 knee replacement surgeries that occur each year in the U.S. ConforMIS plans to expand its technology this year to develop implants for another joint, Lang says.

ConforMIS also plans to use the new funding to expand its sales force in the U.S. and abroad to support the new market opportunity. It is planning to move the manufacturing of the implants in-house, and is in the process of looking for a new site in Massachusetts for that purpose. It currently manufactures personalized surgical instruments that go along with the knee implants. ConforMIS has 200 employees in Massachusetts, but that number is “going to increase significantly” in the next year as a result of this expansion, Lang says.

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An acquisition and startup financings made up the New England deals news this week.

—Waltham, MA-based marketing software firm Constant Contact acquired the Boston startup CardStar, the developer of a mobile app for customer loyalty and rewards programs. The deal, whose terms were undisclosed, enables Constant Contact (NASDAQ: CTCT) to expand its marketing offerings for small businesses.

—My colleague Greg rounded up the top 10 venture deals in the Boston area from the fourth quarter of 2011. Rapid7, Warp Drive Bio, and Agios Pharmaceuticals were at the top.

—Hewlett-Packard has spent more than $10 million to set up a new office near the Alewife train station in Cambridge, MA. The office serves as the new headquarters for Vertica, the big data company HP acquired last winter (previously based in Billerica). The new facility will also serve as a center for technology development and local outreach.

—Bluefin Labs, a Cambridge-based startup focused on understanding social media conversation surrounding TV, nabbed $12 million in Series B financing. The deal was led by Time Warner Investments, and included new investor SoftBank Capital and return backers Redpoint Ventures and Lerer Ventures. Bluefins says it will put the money toward sales and client services, as well as its social analytics technology and further R&D.

—Mevion Medical Systems, a radiation therapy company based in Littleton, MA, announced it had pulled in $45 million in funding from ProQuest Investments and existing investors Caxton Heath Life Sciences, Venrock, and CHL Medical Partners. The money will go toward development of its proton beam radiation therapy system, which is designed to be smaller and less expensive than existing X-ray radiation therapy devices.

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—Venture capitalists invested $269 million in 23 deals in the San Diego area during the last three months of 2011, according to the MoneyTree Report from the National Venture Capital Association, PwC, and Thomson Reuters. That was almost a 20 percent gain in dollars, but a 28 percent slide in deal count from MoneyTree data for the fourth quarter of 2010. For the full year of 2011, the MoneyTree VC survey said $829 million was invested in 104 deals in San Diego, a 5 percent decline in dollars and a 17 percent slide in deals from the $871.7 million sunk into 126 San Diego deals in 2010.

—What should students study now to be prepared for the workplace 10 years from now? We asked that question of 22 Xconomists, including San Diego Xconomists Ramesh Rao, Duane Roth, Drew Senyei, Larry Bock, and Robert Noble. We’ve compiled all 22 answers in an Xconomy special report on education, which you can find here.

—San Diego Gas & Electric hosted a grand opening of its new Energy Innovation Center, which is designed to serve as an energy innovation showcase and education facility, and to meet the U.S. Green Building Council’s requirements for a platinum LEED (Leadership in Energy & Environmental Design) certificate. The center includes a full commercial “food service demonstration kitchen” where San Diego chefs can test their recipes on energy efficient appliances and restaurant owners can learn about the advantages of new and more energy efficient equipment. Utility officials said Commercial kitchens are particularly energy intensive.

—San Diego-based Tealium raised $1.1 million in Series A financing from private investors, and plans to use the funding to expand development of the tag management technology the company created to help enterprise customers manage their online marketing. Tealium said the investors include Limelight Networks CEO Jeff Lunsford, former Visual Sciences CEO Jim MacIntyre, Collective CEO Joe Apprendi, EyeWonder CEO John Vincent, and eValue Group CEO Thomas Falk.

—After previewing their plans last year, the X Prize Foundation and San Diego-based Qualcomm Foundation officially unveiled the Qualcomm “Tricorder” X Prize, a competition offering $10 million to the team that can develop new wireless diagnostics technology. The winning entry must be able to accurately diagnose a set of 15 diseases across 30 consumers in three days, capturing real time, critical health metrics such as blood pressure, respiratory rate, and temperature, and providing information in a consumer-friendly way.

—Qualcomm’s leadership has been talking for several years about the anticipated competition between its ARM-based semiconductors and the CPUs developed for desktop computing in the expanding market for smart devices. Now some of those skirmishes are beginning. Illinois-based Motorola Mobility (NYSE: MMI)  said recently it would use Intel’s (NASDAQ: INTC) latest low-power x86 Atom processor in a number of future Motorola products, marking Intel’s opening move into the smartphone market. A Motorola spokeswoman told me by email, “We will continue to use multiple chip set vendors.” Qualcomm (NASDAQ: QCOM) already has hundreds of mobile devices using its Snapdragon processor, and has been working with manufacturers on hundreds more.

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When New York-based e-commerce site Totsy raised a $5 million Series A in late 2010, the startup gained the expertise of two of New York’s best-known venture capital groups: Rho Ventures and DFJ Gotham Ventures, which led the round. Since then, the site—which holds limited time “flash sales” of merchandise for parents and children—has grown exponentially. Within a year of the funding, monthly revenues were up 3,000 percent, according to the company, and the number of brands willing to sell on Totsy’s site had grown from 96 to 500.

A source close to Totsy says the company is currently in the process of raising additional funding.

Daniel Shultz, co-founder and managing director of DFJ Gotham (pictured at right), is a member of Totsy’s board of directors, and a key advisor to CEO Guillaume Gauthereau (at left). The company has recruited marketing talent from the likes of FAO Schwartz and 1800FLOWERS.com. Now the management team is gearing up for the next stage of the company’s growth, which will require them to deftly navigate a rapidly expanding and extremely competitive e-commerce environment. In August, Totsy’s top competitor—Seattle-based, mom-friendly site Zulily—raised $43 million in funding. But the explosion of new e-commerce sites has sparked a fair amount of consolidation: In the fall, for example, flash-sales site Gilt Groupe bought struggling daily deals site BuyWithMe.

Shultz and Gauthereau sat down with Xconomy New York last week at the offices of DFJ Gotham to talk about e-commerce strategies, and what it will take to keep Totsy at the top of the pack.

X: The flash-sales category is very crowded, with players such as Gilt Groupe, ideeli, and Rue La La. How was Totsy designed to stand out from the competition?
GG: When we started we went for a very difference audience. We weren’t targeting the woman living in the rich neighborhood in Boston. We were approaching every single mom. From day one we had the vision that we believe every woman in the country is going to buy something in a flash sale at some point. So we went broad. The second element is that we tried from day one to be representative of everything you buy. I would say 70 or 80 percent of the sites are about what you wear. We believed that was part of what we should do, but it should not be the only thing we do.

X: How did Totsy connect with DFJ Gotham, and what made it a good marriage?
GG: We felt we wanted a local partner in New York City because we are based here. And New York is becoming one of the great cities for online retail. We thought that DFJ Gotham really understood our space and had great insights on our vision. When I looked at DFJ Gotham’s investing track record I thought, “they see what’s coming up next.” We want to benefit from that.

DFJ Gotham has been able to connect us to a few interesting companies in their portfolio, like StellaService, which is becoming really big in the consumer space. They’re benchmarking customer service practices. DFJ also has an investment in a company called SailThru. They have an e-mail marketing platform that reacts to behavior. It looks at what time you open your e-mail, when you read it, what articles you look at, and instead of sending you the same e-mail as everyone else, it sends you something personal. The products might be different, or you might receive it later because you don’t open your e-mail until 10 p.m. Now we’re on contract with both SailThru and StellaService.

DS: We’re not only investors in sites like Totsy, but we like e-commerce infrastructure and enablers, as well. SailThru and StellaService are not destination sites, but they enhance the performance of them, or they enable better conversion of customers on e-commerce sites.

X: But there are so many e-commerce companies popping up now, particularly in New York. How does DFJ Gotham predict which ones are likely to rise to the top?
DS: There has to be a certain amount of moxie and bravado coupled with some realism and tactical ability. It’s hard to find that combination. In the case of Totsy, we really tracked the business. We looked at potentially participating in the seed round, but we felt we had our work cut out for us … Next Page »

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Money pumped into San Diego’s regional economy by venture capital firms hit an eight-year low in 2011, with a total of $829 million invested in 104 startups throughout the year, according to the MoneyTree VC survey being released today. The 2011 deal count was the lowest seen in San Diego since 1997.

The 2011 numbers represent a 5 percent decline in dollars and a 17 percent decline in deals in comparison with the previous year, when VCs put a total of $871.7 million in 126 startups, according to the MoneyTree Report from PricewaterhouseCoopers, the National Venture Capital Association (NVCA) and Thomson Reuters.

The decline in San Diego’s venture activity ran counter to the nationwide trend in 2011, in which $28.5 billion was invested in 3,673 deals—and ranks as the third-highest total in the past decade. The U.S. numbers represent a 22 percent increase over the $23.6 billion in 2010 VC funding and a 4 percent rise over the previous year’s deal count, according to the MoneyTree analysis.

The overall U.S. trend depicted in the MoneyTree Report generally agrees with the rise in venture activity nationwide that CB Insights charted last week in its 2011 findings. CB Insights, the New York financial analysis firm, said the $30.6 billion VCs invested in 3,051 deals throughout 2011 was a 10-year high in terms of both dollars and deals. (The two sets of numbers don’t line up exactly because the firms use different methods to collect their venture data, and count dollars and deals in different ways.)

In the fourth quarter of 2011, the MoneyTree Report shows that venture capitalists invested $269 million in 23 deals in the San Diego area, with life sciences startups in diagnostics, drugs, and devices accounting for roughly two-thirds of the transactions. It represented a … Next Page »

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Here’s our weekly roundup of San Diego’s life sciences news.

—Jeff Shuren, director of the FDA’s Center for Devices and Radiological Health (CDRH), briefed reporters in San Diego on his efforts to make the regulatory review of new medical devices more predictable, transparent, and efficient. Shuren is undertaking reforms at a time when eight out of 10 biomedical CEOs say they “agree or strongly agree” that the FDA regulatory approval process has slowed the growth of their organizations.

—More than 500 people turned out Monday evening for the open house that Johnson & Johnson’s (NYSE: JNJ) new Janssen Labs startup center. The first four startups to be inducted are Diomics (diagnostics, integrated DNA analysis); Neurolixis (drugs for schizophrenia, Parkinson’s and other CNS disorders); Tem Systems (comprehensive blood test for anti-coagulants); and Yolia Health (optometry device company).

—San Diego-based Auspex Pharmaceuticals, which is developing deuterium-based drugs, has raised $3 million of a $6 million round of debt and convertible promissory notes, according to a regulatory filing. Previous investors include CMEA Ventures, Costa Verde Capital, and Thomas McNerney & Partners. Auspex uses deuterium to replace metabolically sensitive hydrogen atoms in compounds to create new versions of existing drugs.

—BrainCells, a San Diego developer of neurological drugs, raised $2 million toward an $8 million round of debt, rights and securities, according to a regulatory filing. BrainCells previously raised $77 million from Alexandria Real Estate Equities, Bay City Capital, MedImmune Ventures, Mitsubishi UFJ Capital, Mizuho Capital, NeuroVentures, New Enterprise Associates, Oxford Bioscience Partners, Pappas Ventures and Technology Partners, according to VentureWire. The company says it is developing novel therapies for treating central nervous system (CNS) diseases, based on the principal of blocking select metabotropic glutamate receptors (mGluR).

—To have the skills needed in 2022, San Diego Xconomists Robert Noble and Larry Bock recommend that students should “learn how to learn.” Drew Senyei says students should study anything they are passionate about; Duane Roth would like to see a new major that encompasses engineering, biology, chemistry, physics, law, business, humanities and communications; and Ramesh Rao would emphasize studying new techniques for sensing data, as well as data analysis. They all offered their views for an Xconomy special report on education, and what students should be studying today to be prepared for 10 years from now. Their comments are available online here.

—In a talk with Sanofi CEO Chris Viehbacher, Luke explained the company’s strategy since it acquired Cambridge, MA-based Genzyme, and cut back on its internal research and development.

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A flotilla of fifteen startups from Atlanta presented their ideas in New York on Wednesday for a demo day at the offices of Union Square Ventures. Merrick Furst, director of the Flashpoint accelerator at the Georgia Institute of Technology, said the program helps entrepreneurs develop their concepts beyond their startup phase. “They are trying to figure out what the business opportunity is,” he said.

Flashpoint offers entrepreneurial education to startups, access to mentors, and opportunities for early-stage funding through the Flashpoint Investment Fund, angel investors, and other sources. Furst said the startups that presented at demo day are backed by the Flashpoint Investment Fund, which typically invests $15,000 to $25,000 at a time. The Atlanta startups presented ideas ranging from improving corporate data security in the cloud, to preventing phone scams that spoof caller ID systems, to a 3D scanning technology that runs on iPhones.

Furst said the Flashpoint startups visit cities to seek potential backers. Wednesday’s demo day was sponsored in conjunction with the Harvard Business School Angel Alumni Association and ff Venture Capital. Union Square Ventures provided space for the event. Flashpoint takes some of its inspiration from the Y Combinator accelerator program and plans to bring its startups to visit venture capital firm Andreessen Horowitz in Menlo Park, CA next.

Social Fortress, the first startup to present on Wednesday, offers technology to help companies in regulated industries such as financial services and health care use the cloud more securely. Adam Ghetti, co-founder of Social Fortress, said such companies view the cloud as a major security risk. “They have data that’s very important to them,” he said. “They have laws and regulations that say they can only do certain things with that data in certain places.”

Ghetti said Social Fortress’s technology abates some of that risk by encrypting data before it is shared on the cloud. Social Fortress’s technology can also track how data is used after it’s shared with a third party such as Salesforce.com. Ghetti says angel investors have committed about $1.5 million to back Social Fortress and the startup is talks to raise another $500,000.

Trimensional, another startup presenting at demo day, already has a bit of New York connection. Grant Schindler, founder of Trimensional, developed an iPhone app that captures objects and people in 3D. After his presentation, Schindler told Xconomy he connected with MakerBot, a Brooklyn-based maker of 3D printers, in January 2011 shortly after Trimensional’s app went live. “The day I released the app, Bre Pettis [CEO of MakerBot] emailed me,” Schindler says. The companies developed a way for users to export 3D images captured by Trimensional’s app for use with MakerBot 3D printers, which print objects layer-by-layer using thermoplastics.

Schindler says his technology gives consumers access to scanning technology that might otherwise require expensive equipment. It may not be on par with the gear and … Next Page »

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