The $62 million investment in an Ann Arbor drug developer, the largest-ever venture capital investment in Michigan, has the potential to drive momentum in the state’s investment capital industry going forward.
The Series B financing for Millendo Therapeutics Inc. led by New Enterprise Associates of Chevy Chase, Md. includes an array of new and existing investors from around the U.S. and Michigan.
As Michigan’s venture capital industry continues to build, the Millendo Therapeutics deal could help to draw further attention from out-of-state venture capital funds into the state, said John Kerschen, managing director of the $15.1 million Michigan Accelerator Fund I that invests in life sciences startups.
“It does cast light on Michigan as a market,” Kerschen said. “It casts light on Michigan technologies and for Michigan entrepreneurship, and that’s good for the companies and that’s good for us as a venture community.”
Michigan has seen more out-of-state funds opening offices or making investments here, often through partnerships with state-based funds. That has helped to grow the pool of capital available in Michigan, especially as startups that received early-stage funding years ago mature and now require larger capital investments to develop further.
Securing that later-round funding generally means they have to secure investments from major venture funds based outside of Michigan.
Phil Torrence, a law partner at the Kalamazoo office of Honigman Miller Schwartz and Cohn LLP who works with life science startups backed by venture capital, said the Millendo deal can showcase the kind of innovation occurring in the state.
“It builds reputational legitimacy that allows some of these coastal funds to say, ‘Hey, just because they’re in Michigan doesn’t mean we’re going to say no,’” Torrence said.
The Millendo Therapeutics deal came nearly two years after the previous record in Michigan, a $59.5 million investment for Kalamazoo- and Plymouth-based ProNAI Therapeutics Inc., which later went public with a $158 million stock offering in July 2015 and moved its headquarters to Canada.
In announcing the investment this month, Millendo said that it signed a licensing agreement with London-based AstraZeneca plc to conduct clinical trials and to commercialize a drug it’s developing to treat polycystic ovary syndrome in women.
Millendo’s investment reflects the larger venture investments that Michigan has begun to see, said Maureen Miller-Brosnan, executive director of the Michigan Venture Capital Association.
2015 was a “banner year” for VC investments in Michigan companies in terms of venture rounds at or above the “significant benchmark” of $20 million, she said.
“We think this may be an indication that the entrepreneurial and the investment community is maturing and that we’re able to launch and grow companies that can thrive nationally,” Miller-Brosnan said. “This is part of our evolutionary process and our growth, and it clearly shows to us stability in the industry.”
The quarterly MoneyTree report from the National Venture Capital Association and PricewaterhouseCoopers shows that Michigan-based companies received a collective $328.3 million in venture capital investments in 2015 through 54 deals.
That’s a record amount and an indication of the larger financing rounds now occurring in the state. It compares with the $223.9 million and 51 investments in 2014, according to the MoneyTree report, which uses data from Thomson Reuters.
The report for 2015 included $35 million of the Millendo investment that came in the fourth quarter, as well as six other investments ranging from $20 million to $50 million that occurred during the year.