Venture Michigan Fund II announced today that it has made a $15 million investment in Venture Investors Early Stage Fund V, a Madison, WI-based operation with an office in Ann Arbor, MI that focuses on investing in startups spun out of technology from midwestern universities. Venture Investors is expected to make 15 to 18 investments in Michigan companies, each worth between $7.5 million to $12.5 million.
“We are proud to announce this most recent investment commitment to Venture Investors, one of the Midwest’s top firms,” said Sean O’Donnell of the Credit Suisse CFIG Michigan investment office in a press release. (Venture Michigan Fund II is managed by Credit Suisse CFIG.) “The Venture Investors team has a proven track record and we look forward to working with them and sharing in their success.”
Jim Adox, who runs Venture Investors’ Ann Arbor office, says the firm has been operating in Michigan since 2006 and looks for startups with the best commercialization-ready ideas for solving big-market problems. Venture Investors has funded four Michigan companies: Tissue Regeneration Systems, which focuses on medical devices for skeletal reconstruction; HistoSonics, which is developing non-invasive ultrasound treatments for benign prostate disease; NanoBio, which has created a proprietary nanoemulsion for a variety of uses including vaccines and anti-infectives; and Incept Biosystems, which has pioneered a method to improve in-vitro fertilization success rates. All four of the companies are University of Michigan spinoffs.
Adox says that Venture Investors’ Early Stage Fund IV focused primarily on life sciences startups, but the investment trends are shifting, and he expects venture funds to increasingly focus more on the tech and alternative energy sectors. “Life science requires more money and more time,” Adox says. “And also more risk. Everything at the FDA seems subject to change right now. It makes it hard to invest when the regulatory environment is so uncertain.”
Adox says that with wealthy baby boomers getting older and living longer, a lucrative market has been created for things like knee and hip replacements. and ophthalmology treatments to improve vision. Despite that, delays in the FDA approval process have slowed healthcare investment. Adox points out that some of the bigger venture funds have left healthcare investing entirely, with others choosing to work outside the United States—which he sees as a big loss not only to U.S. patients, but to the U.S. economy.
“Typically, the biggest part of a medical device startup’s budget is getting into clinical trials,” Adox says. “If companies choose to do that overseas, that’s money and jobs that won’t happen in the United States.”
Adox says the Midwest provides fertile investing ground thanks to the billons of dollars spent on research each year at its public universities. “Thousands of the world’s brightest researchers are working out of midwestern universities,” Adox says, adding that U-M and the University of Wisconsin are the largest public research universities in the nation. “They’re huge idea-producing engines.”
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