MINNEAPOLIS, Minnesota — “…local start-ups have struggled to raise money from venture capitalists, especially from local investors who are most likely to keep the companies in Minnesota. … The dearth of early-stage venture capital money comes at an especially sensitive time for the state: Minnesota’s job growth, which for years outpaced the national average, is lagging behind in nearly every major sector.”
You can find that convincing — and incredibly well-written — observation in the presentation materials for Coordinate Capital LLC, a new local venture capital firm trying to raise $25 million to invest in biomass, energy and life science start-ups, including pharmaceuticals and medical devices. The paragraph also happens to be authored by me.
That Coordinate would sell investors using a Star Tribune piece I penned two years ago is flattering, though the firm incorrectly called me a columnist when I was just a grunt reporter. (I wonder if I should ask my previous employer for a retroactive raise.)
But the presentation caught my attention for two reasons: 1. Coordinate is focusing its pitch on Minnesota economic development; and 2. C. Steven Burrill is the firm’s main backer.
Burrill, you may remember, is trying to raise a $1 billion fund to back Elk Run, a major real estate project in rural southeastern Minnesota, which includes a biotech incubator designed in part to commercialize technologies from the University of Minnesota and the Mayo Clinic in nearby Rochester.
Not sure how Coordinate fits into those plans but there’s a clear relationship. The firm lists as “affiliates” Elk Run and its developer, Tower Investments.
Burrill and Victor Herbert, managing director, chief administrative officer and chief legal counsel for Burrill & Co. in San Francisco, sit on Coordinate’s Investment Committee. Burrill is also chair of Coordinate’s board of advisers.
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.
As I previously reported, Burrill is having trouble finding local money for the $500 million of the Elk Run fund that will purchase direct equity stakes in start-ups housed at the planned Elk Run BioBusiness Park. So it’s no surprise that Coordinate is trying to appeal to the state’s sense of economic pride — or fear depending on how you look at it. In addition to my piece, the materials includes this call to arms from the BioBusiness Alliance of Minnesota: “Minnesota’s current competitiveness is under threat as other states invest heavily, aggressively and creatively in developing their own bioscience industries. Our state needs to act strategically and decisively to maintain a position in biobusiness in future years.”
Coordinate argues, quite correctly, there is a gaping hole in Minnesota’s ability to nurture high-tech start-ups. Money from founders, families and friends are too small to make a difference. Angel investors and angel groups can only devote so much time and resources to evaluating investment deals and mentoring entrepreneurs. Larger venture capital firms are favoring later stage, more developed companies. So there’s a crucial need for a firm that can guide promising start-ups from seed stage to a point where they can attract the attention of larger institutional investors.
The question is whether appealing to investor’s hometown loyalties will be enough for Coordinate to raise $25 million and start operations in the fourth quarter of 2010 amid a nationwide venture capital drought.
Coordinate has hired a local slate of entrepreneurs, investors and scientists and engineers to guide the firm. The company is led by CEO Andrew Pulkrabek, a former managing director at Strategic Leadership Group Inc. in Burnsville, a consulting firm that advises medical, biotech and pharmaceutical companies. Pulkrabek is also the past CEO of HFT Inc. and worked in business development at Novartis.
Joining him is Phil Goldman, an intellectual property attorney who previously worked at 3M’s Office of Intellectual Property Counsel and the law firm of Fredrikson & Byron. Coordinate’s advisers include Jim Bracke, founder and past CEO of Lifecore Biomedical; Tom Byrne, chief financial officer of XL Renewables, CEO of Algaedyne, founding member of the Algae Biomass Organization; Ruth Shuman, former CEO of Gentra Systems and past president of the Minnesota Biotechnology Association; Todd Taylor, lead shareholder in Fredrikson & Byron’s renewable energy practice; and Luca Zullo, co-founder and CEO of BioCee Inc. and former technical director and chemical engineer at Cargill Inc.
