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Sunday, 26 October 2014 22:00

Value of Michigan VC investments up as deal flow lags last year

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Venture capital deal flow in Michigan in 2014 lags the pace of investment last year, although a single large investment in the spring has the total amount invested through the third quarter exceeding all of last year.

Seven Michigan-based companies received venture investments collectively totaling $14.5 million in the third quarter, according to the quarterly MoneyTree report from PricewaterhouseCoopers and the National Venture Capital Association. That compares to 19 deals for $29.04 million in the same period in 2013.

The lone investment in West Michigan was for Kalamazoo-based Vestaron Corp., a company developing spider venom-based bio-pesticides that closed in May in a Series B preferred stock financing from new and existing investors for $10.2 million.

Through the third quarter, year-to-date venture capital investments in Michigan totaled 32 deals for $166.7 million. That’s down from the 47 deals last year, but more than three times the $53.5 million invested in the state during the first nine months of 2013, according to the MoneyTree report.

The 2014 year-to-date figures include a major investment from earlier this year when ProNAi Therapeutics Inc. in Kalamazoo closed on $59.5 million in new capital. The company will use the funding for several Phase II clinical studies involving patients with non-Hodgkin’s lymphoma and its main candidate for an anti-cancer drug, known as PNT2258.

ProNAi Therapeutics raised the Series D financing from a collection of existing and new investors led by Vivo Capital in Palo Alto, Calif. Local investors included Hopen Life Science Ventures in Grand Rapids, Apjohn Ventures Fund in Kalamazoo and Grand Angels.

Michigan attracted 74 venture capital investments for $111.0 million in all of 2013. Even excluding the ProNAi deal — the largest venture investment ever in the state — the amount of venture capital invested in Michigan companies to date in 2014 far outpaces 2013.

“This year is shaping up to be a really strong year and will continue the steady growth of the venture capital entrepreneurial community in Michigan,” said Emily Heintz, associate director of the Michigan Venture Capital Association.

Heintz attributes the growth in the value of venture capital invested in Michigan this year to companies progressing along their product development process and requiring later-stage investments for larger amounts.

“The companies are getting the money they need to move along with their milestones,” she said. “All across the board, things are sort of maturing.”

Although year-to-date volumes in 2014 lag the same period of the prior year, one venture capital fund manager said recently that he’s seeing good deal flow.

Speaking this month at MiBiz’s second-annual M&A Deals and Dealmakers Awards, Michigan Accelerator Fund I co-managing director John Kerschen said he’s finding good investment prospects.

“We’re finding lots of deal flow,” Kerschen said. “We’re not feeling a shortage.”

Formed three and a half years ago, the $15.1 million Michigan Accelerator Fund I has invested in eight companies so far and the venture firm may make one or two additional investments with its initial fund, Kerschen said. The Grand Rapids-based venture fund has reviewed “somewhere north of” 700 business plans since forming and is now examining potential investments in companies that previously weren’t ready for a venture capital investment, Kerschen said.

“We are seeing deals that have matured. We may have liked the team, we may have liked something about the technology or the market, but the deal wasn’t quite ready,” he said. “They’ve matured along with us continuing our activity, so we are taking a look at some deals that we didn’t invest in one or two years ago.”

Nationally, venture capital investors put $9.9 billion into 1,230 deals during the third quarter, the sixth straight period of 1,000-plus deals, according to the MoneyTree report. Year-to-date venture capital investments totaled $33.1 billion through 3,154 deals, versus $21.2 billion and 2,994 deals through the first nine months of 2013.

Read 3097 times Last modified on Sunday, 26 October 2014 21:24

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