UW Business News Wire - Connecting the Dots

UW–Madison Office of Corporate Relations links startup companies with venture capital

By Doug Bradley, Office of Corporate Relations

Don’t lecture Paul Radspinner about pressure. The president and CEO of FluGen Inc., a recently incorporated (June 2007) startup business in Madison, had just stood up in front of a room full of angel and venture capital investors and had just three minutes to convince them to invest in his company.

“As much as I practiced, I had a hard time getting my pitch under four minutes,” Radspinner recalls with a smile. “You don’t know how hard it is to convey the excitement and the possibility of your business until you’re forced to — and in less than 200 seconds.”

Radspinner was one of 16 presidents/CEOs of new businesses who made their three-minutecases at the Midwest Emerging Company Showcase held during last month’s BIO Mid-America Venture Forum in Milwaukee. Six of those presenting companies — FluGen Inc. among them — have been working with the University of Wisconsin–Madison Office of Corporate Relations (OCR), whose main goal is to connect business and industry with the
resources of UW–Madison. But as these emerging companies would attest, several OCR activities are, in effect, subsets of the private sector financial community, especially those companies and individuals operating in the private equity markets.

“Angel investors and early stage venture capital investors are of special interest to OCR,” says Charles Hoslet, OCR managing director. “They provide the capital that makes it possible for startup companies, many based on cutting-edge research and ideas at UW–Madison, to develop their technology into viable products that can sustain their growing businesses.”

FluGen Inc. is a case in point. Besides Radspinner, a former executive withDeltanoid Pharmaceuticals and Eli Lilly, FluGen’s founders are Yoshihiro Kawaoka and Gabriele Neumann of UW–Madison. Kawaoka is arguably the world’s leading expert on influenza; Neumann teamed with him to make the seminal discovery of “reverse genetics,” which is being used throughout the vaccine industry.

“The combination of great UW science, extraordinary facilities at the University Research Park and the Waisman Biomanufacturing Center, expert assistance and support from OCR and WARF, and venture capital will help us to keep scientists like Dr. Kawaoka and their businesses here in Paul Radspinner, president and CEO of FluGen Inc., presents to angel and venture capital investors at the Midwest Emerging Company Showcase in Milwaukee. He had three slides — and three minutes — to make his case. “You don’t know how hard it is to convey the excitement and the possibility of your business until you’re forced to,” he says. Photo: Alan Magayne-Roshak Wisconsin,” adds Radspinner.

There’s precedent for this type of entrepreneurial activity at UW–Madison. From the early discoveries of vitamin D to the emergence of Tomotherapy today, Wisconsin has long been a generator of research innovations that have, in turn, spawned companies that serve people’s needs and improve the quality of our lives. But while long on researchto-commercialization accomplishment, Wisconsin has often been short on investment capital that is increasingly critical to moving ideas from the laboratory to the marketplace.

“Last year, barely 5 percent of the $236 billion of total venture capital in the United States was invested in the Midwest,” Peter Shagory of Baird Venture Partners told the participants at BIO Mid-America Venture Forum. “The reality is that venture capital is a scarce commodity in the U.S., particularly the Midwest.”

Although he agrees with Shagory’s overall assessment, John Neis, managing director of Venture Investors LLC of Madison, was quick to remind conference attendees that “the quality of the startup material in the Midwest is among the best in the country” and that angel investing, recognized as the source of a startup company’s “seed” capital before even venture capital firms become interested, is growing.

“Tomotherapy was the fourth largest health care IPO in the nation since 1997,” observed Neis, indicating that all of the company’s venture support came from the Midwest. Added Gregg Fergus, executive in residence with Baird Venture Partners: “Midwest research universities, too, are getting a lot smarter. [At UW–Madison] WARF is exceptionally good at getting technology thrown over the wall and into the marketplace.”

Recognizing this need and opportunity, OCR has cultivated relationships with angel and venture capital investors to draw attention to the investment opportunities inherent with a major research institution such as UW–Madison (see sidebar). Given the importance of initial funding, these relationships and opportunities are “priority one” for CEOs like Radspinner, Terry Barry (AquaMost LLC), Daniel Stewart (Isomark LLC) and Ray Harter (Marvel Medtech LLC). Each of them works with OCR and each made a pitch to potential investors at the Midwest Emerging Company Showcase.

“I’d say unequivocally that OCR got AquaMost going,” admits Barry, whose company will bring to market products that will benefit consumers through innovative water purification solutions. “Their First Look Investor Forum last April was the place where our momentum coalesced.

“I was absolutely amazed by the very enthusiastic response we received from investors,” Barry continued, pointing out that the OCR forum put AquaMost in front of Wisconsin Investment Partners (WIP) and two large venture firms from Chicago and Boston.

Allen Dines, OCR assistant director, says the First Look Investor Forums are held bimonthly during the academic year and are designed to bring together researchers and investors, specifically those Terry Barry, president of startup company AquaMost LLC, makes his three-minute presentation to a room full of angel and venture capital investors at the Midwest Emerging Company Showcase in Milwaukee. venture capital and angel investors focused on “early stage private-equity opportunities.”

“These forums are a great venue for early stage and concept-stage UW entrepreneurs to discuss their research and preliminary business concepts with representatives from the venture-capital community,” says Dines. “The fledging companies are able to get valuable feedback on how to convert technology innovations into fundable business value propositions, and the angel investors can size up their prospects.”

According to Ray Harter, president of Marvel Medtech, a UW–Madison spinoff company that’s developing a clinical platform for interactive magnetic resonance imaging (MRI) for breast disease intervention and therapy, OCR has been instrumental in Marvel Medtech’s development.

“It’s a huge learning curve for startups,” says Harter, “and OCR does a great job of introducing companies to resources and opportunities.They help us to connect all the dots.”

“There’s not enough capital to fund all the great opportunities that exist in the Midwest,” says Venture Investors’ Neis. “We don’t have the venture density in the Midwest. Angels are helping, but we need state governments to step up too. There’s just too much at stake.”