GRAND RAPIDS — Opening a Cleveland office staffed by an industry veteran gives Hopen Life Science Ventures a broader presence in the Midwest to scout for potential deals with life sciences startups.
As the six-year-old Grand Rapids venture capital firm seeks to raise capital in addition to the $40 million already committed to a second fund, the move into Cleveland was a “logical” step to extend its reach across the Midwest and deepen its management, said Mark Olesnavage, Hopen’s managing director.
“We have a very Midwest focus, and there’s something to be said about having different feet on the ground in the Midwest. It extends our web and network for attracting opportunities and resources,” Olesnavage said.
Olesnavage notes that one of Hopen’s existing portfolio companies, Tolera Therapeutics Inc. in Kalamazoo, was spun out of research conducted at the Cleveland Clinic.
Staffing the new Cleveland office is Michael Fulton, a physician with more than 20 years of experience in life sciences who’s also an entrepreneur and investor in the medical device field. He provides Hopen a strong background in medical device startups and health care services, Olesnavage said. Fulton plans pursue prospects in those industries in Ohio, Michigan and across the Midwest.
“He’ll be a perfect fit,” Olesnavage said.
Through the Cleveland office, Hopen now has a physical presence in the top market in the Midwest for life sciences investing. At midyear, the Cleveland market had 34 venture deals totaling $104.1 million, according to Cleveland-based BioEnterprise.
Across the whole Midwest as of June 30, venture investing in life sciences startups grew to $510.6 million through 97 deals, which compares with 86 deals for $315.1 million though the first six months of 2011. That’s the best first half of the year since 2007, prior to the recession.
“It’s been a great year to date for Midwest health care startups,” said BioEnterprise President and CEO Baiju Shah, whose company tracks life sciences venture investing in the Midwest. “The regional company pipeline continues to advance, requiring larger financing rounds and attracting broader investor interest.”
More than half of the money in the venture deals, $259 million, went to biopharmaceutical companies, while firms invested $131 million in device companies, BioEntreprise reported. The remaining $118 million went to companies involved in health care software and services.
As Hopen scouts for new deals in the Midwest, it’s finding no shortage of prospects, Olesnavage said. With venture capital fundraising and investing down nationally in recent years, those firms with capital to deploy are finding good deals, he said.
“There’s a lot of innovation out there,” Olesnavage said. “When you do have the capital, you’re in a buyer’s market. The quality of the deals is higher and the terms are better.”
Formed in 2006, Hopen Life Science Ventures manages $65 million in capital invested in five companies, all of which are based in Michigan. The investments came from the venture firm’s Fund I and Fund II, the latter of which recorded an initial closure in August 2011. Hopen hopes to grow Fund II to $50 million to $60 million and have a final closure in fundraising targeted by end of 2012.
The $40 million committed so far to Fund II came from nearly 20 individuals, family offices and institutional investors, Olesnavage said. He’s confident that Hopen can meet its $50 million to $60 million goal.
“We have lines in the water,” Olesnavage said.
Fund II will go to follow-on investments in existing portfolio companies and to new deals, Olesnavage said. He expects Hopen to grow its portfolio to eight to 12 companies in the next four to five years and said that it may see its first exit within 12 to 24 months.