MINNEAPOLIS, Minnesota — Affinity Capital Management, a well-known local venture capital firm that invests heavily in medical device and health care start-ups, is collaborating with Triathlon Medical Ventures of Cincinnati to launch a $10 million seed and early stage fund in Minnesota.
Affinity venture partner Serafin Samson will lead the fund along with Barbara Nelson, a business consultant and a former MGI Pharma executive and associate director at the University of Minnesota’s Office of Technology Commercialization.
In a phone interview, Samson said the fund will focus on biotechnology, medical devices, health care and diagnostics. He’s also interested in platform technology that can apply animal science to human health, citing Rapid Diagnostek in Hudson, Wis., as a good example.
Samson said there is a real need for early stage money in Minnesota. The state is home to some great innovation, but it lacks the capital to commercialize it, he said.
The new fund comes amid other planned venture firms targeting young medical start-ups. Coordinate Capital LLC, backed by San Francisco-based biotech investor Steven Burrill, is trying to raise $25 million, in part to fund firms taking root at a planned Elk Run BioBusiness Center near Pine Island, Minn.
The University of Minnesota is working with private developers to create a $20 million venture fund to anchor a planned incubator center at the school’s Biomedical Discovery District.
Yet, unlike Coordinate Capital and the university fund, the Affinity/Triathlon fund is not tied to a specific incubator, which means the firm will cast a larger net for start-ups. Given its history of investing exclusively in late stage companies, Affinity’s move could provide Minnesota’s early stage entrepreneurs a real shot in the arm.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Affinity’s portfolio includes promising companies like Anulex Technologies, Atritech, CoAxia and Spineology. Affinity, Spit Rock Partners in Eden Prairie, Minn., and Thomas, McNerney & Partners in Minneapolis form the Big Three in Minnesota’s relatively small venture capital community.
The state has struggled to generate early stage capital. Minnesota start-ups, mostly medical device firms, raised $255.5 million in 2009, down a whopping 40 percent from the previous year of $426.5 million, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson Reuters. Nationally, investments in medical devices, the lifeblood of Minnesota’s economy, dropped 27 percent to $2.5 billion.
Gov. Tim Pawlenty and legislative leaders are trying to push a three-year, $40 million tax credit to spur angel investment in young companies. Such a credit will help the new fund, Samson said.
Across the country, early stage money has dried up as the weak economy and lackluster demand for initial public offerings forced venture firms to focus most on keeping alive more advanced, experienced companies generating sales from real products. Early stage investments last year fell 13 percent to $4.6 billion from 2008, according to the MoneyTree report.
Samson was a former equity analyst with Dain Rauscher Wessels Medical Technology Group. He spent 12 years developing products for early stage orthopedic firms, including Spine-Tech Inc. and Orthomet Inc. He earned a MBA from University of Minnesota’s Carlson School of Management and master’s degree in biomedical and mechanical engineering from the University of Michigan.
