Venture Investors Health Fund talks latest investments
Photo courtesy of Venture Investors Health Fund
Venture Investors Health Fund, a Madison-based venture capital firm that has been around for more than 40 years, recently closed its seventh fund. It raised $80 million.
So far, the firm has supported five companies with the new dollars: Elephas Biosciences, a cancer imaging company in Madison; Rivermark Medical, a medical device company in Milwaukee; Sanacor, a therapeutics company in Milwaukee; Ten Bay Bio, a therapeutics company in Milwaukee; and EarliTec Diagnostics, an autism diagnostics company in Atlanta.
Venture Investors Health Fund team members spoke with Wisconsin Health News about the new fund and how the state’s early-stage health tech scene stacks up.
Edited excerpts are below.
WHN: What is the focus of this latest fund?
Jenni Le, principal: This most recent fund is focused on medical devices, diagnostics, therapeutics and digital health. We tend to focus on companies that have a Midwest presence, but we do have a national reach. A lot of our companies are spinning out of major research institutions. We’re based here in Madison, David (Arnstein, partner and chief financial officer, is) in Milwaukee and one of our other partners is based in Ann Arbor, Mich. We have historically made investments spinning out of those universities.
WHN: How many companies are you planning to support with this fund?
Arnstein: We’ll invest in 10 to 12 companies. We have made five investments to date. Our check sizes are $500,000 to about $3 million initially … We like to play a pivotal role in the investment early on and help on the strategic side and these big decisions that can create success.
WHN: Why are you focused on the Midwest in particular?
Arnstein: You’ve got powerful research institutions in the Midwest. The University of Wisconsin-Madison and the University of Michigan are two of the top 10 universities for research in the country. A lot of research is in life sciences, where we invest.
The second reason is that the Midwest is typically overlooked. We see us as having a competitive advantage because we are on the ground and in the backyards of these institutions. We can have proximity to these companies at the startup stage, help them grow and get them to the next financing stage … We believe that there’s a great opportunity to invest in the Midwest and build world-class companies.
For example, we had our largest exit as a fund ever about two weeks ago, called HistoSonics. That company is out of the University of Michigan and developed a non-invasive technology to remove tumors. It was sold for $2.25 billion to an investor consortium.
So that company was out of University of Michigan, world-class technology and team, and now it’s going to change the standard of care in its space in cancer.
Paul Weiss, partner: And it remains headquartered in Minnesota, which is also in the Midwest. So it shows very powerful things can be done in the Midwest.
WHN: Changes at the National Institutes of Health this year rattled universities. Given your focus on university spinouts, do you have concerns?
Arnstein: There’s a lot of noise right now in that market. For example, the Senate recently put forward a bill to actually increase NIH funding over last year … We’re paying close attention to it, but it isn’t known where it’s going to end up. We still see good opportunity in these companies.
Furthermore, just to add, Milwaukee is another great market. You’ve got the Medical College of Wisconsin, Marquette University and UW-Milwaukee in that area. If you combine the research dollars of those three institutions, that’s $450 million. You’ve got a huge nugget of research in Milwaukee going on. MCW recently built the new cancer center. Versiti is building a new blood research center right on the campus with Children’s Wisconsin, Froedtert and MCW. You’ve got a lot going on, and you’re going to see a lot of momentum. There could be some changes, obviously, depending on the funding outcome, but strong momentum still for opportunities.
Weiss: The UW hospital recently requested additional money from the state to build out their radiopharmaceutical business. Of course, we’ve got two core companies to provide those in the state as well. So, as David said, we view Wisconsin as working hard in these areas.
WHN: How does Wisconsin stack up nationally?
Le: Thanks to a lot of passionate people in our ecosystem, who helped with the (request for proposal), Wisconsin was designated as a biohealth tech hub. As a result, we have some federal funding to put towards initiatives, primarily in the theranostics and personalized medicine space. I think that the reason why we received that money is because, between the Universities of Wisconsin and MCW, you have a lot of activity that is promoting theranostics. The hope is that you will be able to turn those discoveries into innovations.
Oftentimes, the part where you translate research into commercialization tends to be high-risk investment dollars. That’s not to say that there’s not the potential for the high reward, but there’s a limit to the federal funding that goes into spinning out those projects. Where we see the opportunity to play is that when we are forming relationships with the (principal investigators) and the inventors, and when essentially these inventions are still at a project stage, we have that first look into what could potentially become a great company.
For the venture landscape in life sciences, I’m seeing positive signals. Given the liquidity issues in the market, some VC firms have been a little reticent to do a lot of deals. But, I personally feel like there’s a little bit of a thaw happening.
WHN: The Wisconsin Tech Council praised your new fund, while noting a gap exists in the state for supporting the scaling up of companies. What do you think?
Arnstein: You think about the three ingredients for a good ecosystem. You need great ideas, talent and capital. If you ask me on those three where Wisconsin probably lacks, it is in capital formation and it is in that next level of financing.
Seed early-stage financing seems to be available, the ability to secure that through family, friends or some early-stage funds. But then when it’s either a Series A or Series B, which require that $5, $15, $20 million kind of rounds, it is more challenging in Wisconsin. I think there is a need to fill in that gap. We do help fill the gap. But we’re one fund, and we’re not a huge fund. So we need others.
This article first appeared in the Wisconsin Health News daily email newsletter. Sign up for your free trial here.
