Crain's Detroit Business: The Michigan Deal, Winter 2014 by Crain's Detroit Business

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WINTER 2014

The Michigan Deal The money and the companies getting it

One idea ... and a $200 million exit Vic Strecher’s path from prof to entrepreneur – and more than 50 other university spinoffs

Update on Michigan’s VC scene | Deals executed across the state | Startup contest winners

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About this issue T

here are things that many of us have in common with Vic Strecher. In particular, he saw an entrepreneurial idea that went beyond the scope of his job. I think that’s something most of us have in common with him, at least in having a business idea cross our minds. Here’s where we (at least most of us) are different. His idea turned into a business with $20 million in annual revenue and was sold for a sum near $200 million. We can all hope to get there someday. Inside the pages of this supplement, though, you’ll find lots of businesses on the same track Strecher and his HealthMedia followed. It started in a university research department, it was fostered by the university itself, and then spun off as a business. That process, spinning off a business from a university program, is the focus of this issue of the Michigan Deal. Starting on Page 10, you’ll find five stories of university spinoffs, followed by a compilation of companies that have come out of Michigan universities in the last three or four years. For some background, the Michigan Deal is a twice-a-year project that Crain’s has been fostering since 2012. The goal is to highlight the investment in companies across the state. Universities, as Tom Henderson reports on Page 3, are a fertile ground for startups. And it’s been attracting investment. Investment. Other than the business idea — perhaps more so than the idea — that’s the key to turning an idea into a business. Well, the money is here. In an update on Michigan’s venture capital outlook, Gary Anglebrandt reports on Page 20 that while the number of deals in Michigan is down, the actual dollars invested in 2014 will stand out as a positive story. So, whether your idea is the next $200 million exit — or just something that can support itself — hopefully there’s an inspiration among the business stories in this special edition.

Daniel Duggan Managing Editor/ Custom and Special Projects Crain’s Detroit Business

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Contents FOCUS ON: University spinoffs transfer Change 5 3 Tech goes to school makers

The spinoffs 8 Get 16 connected of Michigan

Michigan universities capitalize on growth of state VC industry.

Professors looking to be startup CEOs have pitfalls and traps to navigate, but there are also plenty of returns. Read how to turn an idea into a business.

Key players in the development of university spinoffs in Michigan

Businesses that have been created out of university research departments

From idea to innovation to business Five stories of startups that started off as university research projects

HealthMedia

EndresMachining Lumigen

A digital solution to help people focus on wellness

Cutting tools for the industrial sector

A chemical agent to detect diseases in a person’s blood

13 IntraLase

TempoRun

Lasers created for the medical industry

App to match music to running pace

FOCUS ON: Deals and investments

Highs and lows Venture capital situation for Michigan: fewer deals, more money

Deal briefs

An overview of venture capital and M&A coverage from past Crain’s and MiBiz issues

Startups and pitches

A look back at pitch competitions across Michigan and the startups that prevailed

About the writers: ■ Gary Anglebrandt is a Detroitbased writer and editor with more than 10 years of experience in journalism and corporate communications. A native of Michigan, he lived in South Korea for five years, editing English-language news for Korean media outlets and covering the automotive industry for Automotive News. He currently works as an editor and freelancer and as a public relations consultant.

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■ Anna Clark is a freelance journalist living in Detroit. Her writing has appeared in The New York Times, The New Republic, The American Prospect, Grantland, NBCNews.com, the Columbia Journalism Review and other publications. She edited A Detroit Anthology (2014), and she is the founder of Literary Detroit.

■ Tom Henderson has been a reporter at Crain’s Detroit Business since 2005 and covers banking, private equity, venture capital, accounting, technology transfer and earlystage tech companies. A political science major from Michigan State University, he previously was a sports writer at the Detroit Free Press, where he covered the Detroit Red Wings and University of Michigan football.

■ Doug Henze is a metro Detroit journalist who has covered business, the environment and public policy issues for more than two decades. He has served as a beat reporter for five Michigan newspapers, including The Oakland Press, The Bay City Times and The Midland Daily News, winning awards for coverage of urban sprawl, the silicone-gel breast implant controversy and other topics.

Design

Copyediting

Production

Lisa Sawyer, Bob Allen

Gary Piatek, Heidi Bitsoli, Bob Allen

Wendy Kobylarz

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Tech transfer goes to school Michigan universities capitalize on growth of state VC industry By Tom Henderson hen EDF Ventures launched in Ann Arbor in 1987 to invest in university-based technologies, the University of Michigan had one person working part time on technology transfer. And at the time, the only other local venture capitalist in Southeast Michigan was Ian Bund. “We were considered an oddity,” said EDF co-founder Mary Campbell. “‘You’re going to fund a professor? Why would you do that?’” Today, the tech transfer office at UM employs 28 and has a variety of entrepreneurial support services, including incubator space at the school’s north campus for some of its licensed startups. Growth of UM’s tech transfer is mirrored by growth of Michigan’s venture capital industry. Funds that Campbell and Bund were associated with, less than $10 million, are quaint by today’s standards. Being an early adopter has been good to EDF. It has made a lot of money for its limited partners over the years through the sale or public offerings of such universitylicensed portfolio companies as IntraLase, HandyLab Inc. and HealthMedia Inc. — deals that sold for $808 million, $275 million and $200 million respectively. Since its first investment in BioQuant Inc., a UM spin-off, in 1988, EDF has invested in companies spun off from Michigan State University, Wayne State University, Purdue University and the University of Wisconsin. Universities have taken notice. Universities around the state, even those not generally considered research universities, now employ vice presidents of research, most of them scientists with a history of creating companies and jobs, and tech transfer is considered an integral university function. Wayne State University is a prime example. When M. Roy Wilson, an ophthalmologist and researcher who had been an executive at the National Institutes of Health, became president of Wayne State in August 2013, he immediately began focusing on improving the school’s techtransfer operations. In May, John Shallman, who had more than 24 years of experience in technology commercialization, the last six as director of commercialization at Beaumont Health System, was named the depart-

LON HORWEDEL

A key development for university spinoffs was the hiring of Ken Nisbet at the University of Michigan’s tech transfer office in 1996. He remains at the university, as associate vice president for research and director of technology transfer.

ment’s senior director of licensing. Kenneth Massey, who had 28 years combined of biomedical research and business experience in academic, pharmaceutical and biotech, was named senior director of venture development. In June, Stephen Lanier, who had been associate provost for research and a professor of cell and molecular pharmacology and experimental therapeutics at the Medical University of South Carolina in Charleston, S.C., joined WSU as vice president of research. The growth of tech transfer at institutions from Ann Arbor in Southeast Michigan to Michigan Tech University in the far reaches of the Upper Peninsula has been intertwined with the growth of the state’s venture capital industry. “It’s been a spectacular change,” said Bund. “There’s a much greater acceptance that building young technology-based companies fits well with our economy in Michigan.”

VC helps fuel growth VCs have become more commonplace than in the late ’80s, as have funds of $100 million or more. And what was once a flyover state for venture capitalists heading

east or west is anything but. According to the annual report in May by the Ann Arbor-based Michigan Venture Capital Association, there are 33 VC firms with offices in the state, 11 of them headquartered out of state. And 94 out-of-state firms currently have investments here. The most recent out-of-state firm to open an office in Michigan, in the Kerrytown district of Ann Arbor, is the Houstonbased Mercury Fund, which announced the opening in November and recruited Adrian Fortino, formerly a vice president at Invest Detroit, to run it. Blair Garrou, a partner and co-founder of the firm, said that Mercury is about to close on a new fund of more than $100 million and plans to invest a fourth of it — or more — in Michigan, and plans to move other Midwest companies it invests in here. “Ten years ago, something like that absolutely never would have happened,” said Ken Nisbet, associate vice president for research and director of technology transfer at UM. Another new arrival in the state, Chicagobased Baird Capital, opened an Ann Arbor office in March, run by David Gregorka, a co-founder in 1998, along with now-Gov. Rick Snyder and UM professor Vic Strecher, of HealthMedia Inc., which was sold to Johnson & Johnson in 2008. In November, Baird finished raising its fourth and largest fund of $185 million. In April, that fund, Pfizer Venture Investments of New York and Ann Arbor-based Arboretum Ventures LLC raised a $21 million round of capital for NeuMoDx Molecular Inc., a medical device company based in Ann Arbor. Both Gregorka and NeuMoDx are examples of the serial entrepreneurship the area can now claim. The company was founded by Sundaresh Brahmasandra, one of the founders of HandyLab Inc., and by Jeff Williams, HandyLab’s CEO when the medical device company was sold in 2009 to New Jersey-based Becton, Dickinson and Co. for $275 million. Based on that successful exit, the two had no trouble raising money for their new company.

UM was an accelerant Campbell and other local venture capitalists credit the arrival of Nisbet at UM’s tech transfer office in 1996 and the naming of Mary Sue Coleman, a biochemist by training, as school president in 2002 for changing the entrepreneurial culture at UM, traditionally one of the highest funded public research universities in the world. See Page 4

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Arboretum was founded with a fund of $24 million in 2002. Its third and largest fund, of $140 million, was raised in 2011, a fund that was oversubscribed in part because of the successful sale of such portfolio companies as HandyLab, HealthMedia and Accuri Cytometers Inc. Arboretum co-founder Tim Petersen recalls an article in the late 1990s in the Chronicle of Higher Education that asked why the second-best funded public research university in the U.S. was so bad at tech transfer. “After that, the university made some policy changes that incentivized faculty to participate in tech transfer, and the school built up its tech-transfer office,” he said. “They brought in Ken, who recruited a lot of good people.” It’s now easier to retain spin-off companies in Michigan as well. In the past, it was common practice for out-of-state VC firms to invest in Michigan companies and then insist they move to the east or west coasts. IntraLase, a maker of laser surgery devices that was spun out from UM, moved to California by its investors and then bought for $808 million in 2007. Now, the subject of moving a portfolio company often isn’t even discussed, now, said Petersen.

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“Tangent is a good example of that,” said Petersen, referring to Ann Arborbased Tangent Medical Technologies Inc., a maker of intravenous catheters and related products. “It came out of UM, and we set up an investment round with Flagship Ventures out of Boston. When Harry Wilcox of Flagship joined the round, there was never any talk about moving the company to Boston.” Nisbet credited Snyder with jumpstarting the state’s VC community in 1997, when he returned to Michigan from Gateway, the California-based computer company where he had been president and COO and launched a $100 million VC fund with his firm, Avalon Investments. “It was a crazy amount of money at the time,” said Chris Rizik, Snyder’s former partner and currently CEO and fund manager at Ann Arbor-based Renaissance Venture Capital Fund, a fund-of-funds. “When we first started, there was a strong feeling at universities that commercializing technology compromised the university instead of enhancing it. Snyder was an early investor trying to pry technologies loose from universities. “At the time, 1997, there was only EDF and Ian Bund, and when Rick came to town, it had a big impact. He had a lot of money and was very aggressive in getting things going,” said Nisbet.

734.944.2120 www.lectronics.net

HIGH

Snyder was an early investor in numerous UM spin-offs and is credited with writing personal checks to keep the lights on at HealthMedia during its toughest times.

Federal, state changes helped The path to translating university research to off-campus profits and jobs was laid out by the federal Bayh-Dole Act of 1980, which allowed universities and their researchers to profit from inventions funded by federal grants. Until then, inventions using federal funding had to be assigned to the U.S. government. While this would eventually create a sea change, universities were reluctant to change. “Bayh-Dole got everything rolling, but it took probably 15 years for Midwest universities to really start thinking about spin-offs. People at universities were afraid to spin things off. It was better to not do anything,” said Jim Adox, the chairman of the Michigan Venture Capital Association who runs the Ann Arbor office of Madison, Wis.based Venture Investors LLC. Slowly, though, eyeing fortunes being made by founders of companies in Silicon Valley, academics who once looked down their noses at profit-driven research began

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to listen to investors wanting to license their work. Venture Investors was one of them. It was a pioneer in translating university research into jobs and profits, having been founded in 1982 with a $7 million fund. It now has more than $200 million under management. Since 1993, the firm has invested in 31 university spin-outs from nine institutions, and currently has 14 spin-offs in its portfolio, including three from UM — HistoSonics Inc., a medical device company; NanoBio Corp., a maker of topical anti-infective products and vaccines; NeuMoDx; and Tissue Regeneration Systems, which makes devices to aid bone and soft-tissue regeneration. Nisbet said that the Michigan Economic Development Corp. deserves a lot of credit for the healthier entrepreneur ecosystem because of investment programs it put in place to fund venture capital firms willing to do business here, including the $120 million 21st Century Investment Fund, the $95 million Venture Michigan Fund I and the $120 Venture Michigan Fund II. “That provided incentives to get out-ofstate venture capitalists to look at deals here. It got good people here to help pull technologies out of the university. We ended up with more venture capital companies, a bigger supply of portfolio companies and a better supply of talent to run companies.” “What has set Michigan up for continued growth has been the culture change at the universities, the investment participation by the state (retirement funds) and by foundations and, through Renaissance, the participation of the corporate community, both as investors and as strategic partners in portfolio companies,” said Rizik.

Night and day Adox was with EDF in 1997 when it spun off some UM technology as a company called XTera Communications. “It was such a challenging process to spin it out. It took us over a year, and then it was hard to hire a management team because there weren’t many local veteran entrepreneurs,” he said. “Now, you can do a spin off in three months and put a team together quickly.” Contrast that with the current approach by Mercury Fund’s Fortino. In May, while still with Invest Detroit, after meetings with researchers at WSU’s College of Engineering, Fortino invested $250,000 from the Detroit Innovate Fund to launch a new company, Detroit Materials Inc., to make cast-steel parts for the military, mining and off-road markets. The company will use that money, and

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$150,000 awarded though a phase-one Small Business Innovative Research grant from the National Science Foundation, to do small-scale prototyping and validation testing at Michigan Tech University. The SBIR grant came with a matching grant of $25,000 from the state’s Emerging Technology Fund. With that ease of deal flow, Fortino is currently looking at a list of 75 different technologies from UM right now for potential investment. “It’s a fantastic time to be a VC,” said Fortino.

Worries starting to fade The epicenter of VC investment remains at the coasts, but key players are being courted. Charlie Moret, for example, was recruited to TechTown in 2012 after spending 13 years in Connecticut, where he ran a $20 million seed fund for startups and founded CTech, an incubator affiliated with Yale University and the University of Connecticut. “Everyone talks about Silicon Valley or Route 128 in Boston, but for a Midwest state, this is the place to be,” said Moret, who is president and CEO of Invest Michigan, a Detroit organization affiliated with the MEDC that launched in May to run the Michigan Pre-Seed Capital Fund 2.0. “Wait 10 years and people will be flocking to Michigan.” There is also criticism by some local entrepreneurs that venture capitalists have grown too cautious, are now leery of investing in pre-revenue companies, and want to see quick exits from their investments. “I disagree with all of that,” said Lindsay Aspegren, a founding partner of North Coast Technology Investors LP, which is based in Ann Arbor and has an office in Midland. North Coast launched in 1999 and finished raising its first fund of $100 million in 2000. Aspegren shared an anecdote that he said sums up how far the state has come in recent years from its former status as a flyover state. “I had someone from the tech transfer office at MIT out to visit us three weeks ago. We met at Café Zola. He wanted us to look at some of their companies,” he said. Someone from the hotbed of Boston in Ann Arbor looking to get deals done? “Who would ever have thought?” asked Aspegren. “Venture activity is more sophisticated, now, it’s better funded, it’s better understood than it’s ever been, and everyone benefits.”

Change makers Michigan’s community of investors and startups credit some key players and policy changes with the development of the state’s tech transfer industry. Here are some of standouts: ■ Jan Garfinkle and Tim Petersen: Co-founders of Arboretum Ventures LLC in 2002, they have been a driving force in tech transfer since. Their first fund was just $24 million, but their third and biggest fund was oversubscribed at $140 million in 2011, largely on the basis of huge exits for its investors from such portfolio companies spun out from UM as HandyLab Inc., Health Media Inc. and Accuri Cytometers Inc. ■ Mary Campbell: Co-founded EDF Ventures, the state’s oldest VC firm, in Ann Arbor in 1987 with a $6.5 million fund to invest in university-based technologies. ■ Ken Nisbet: His arrival at the University of Michigan’s techtransfer office in 1996 is seen as a key appointment. Under the university’s then-president, Mary Sue Coleman, he was able to recruit key technology players. ■ Rick Snyder: Long before politics, he’s credited with jumpstarting the state’s VC community in 1997. He launched a $100 million VC fund with his firm, Avalon Investments. He was an early investor in many UM spin-offs. ■ Jim Adox: The chairman of the Michigan Venture Capital Association, he runs the Ann Arbor office of Madison, Wis.-based Venture Investors LLC, a pioneer of tech transfer that was founded in 1982. Since 1993, the firm has invested in 31 university spin-outs from nine universities and currently has 14 in its portfolio, three of which are from UM. ■ The Bayh-Dole Act of 1980: Allowed universities and their researchers to profit from inventions funded by federal grants. It took 15 years to get traction in the state but made a business case for universities. ■ Michigan Economic Development Corp.: Investment programs helped fund venture capital firms willing to do business here, including the $120 million 21st Century Investment Fund, the $95 million Venture Michigan Fund I and the $120 Venture Michigan Fund II. Page 5

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Get connected Tech transfer office can help a professor turn intellectual gifts into gold By Doug Henze

oming up with a technological breakthrough is a feather in a university researcher’s cap. But taking that brilliant notion, and forming a profitable business, involves another degree of difficulty. So professors and other researchers who want to turn their intellectual gifts into gold will probably need a little help along the way. “It takes more than a great idea,” said Paul Riser Jr., managing director of technology-based entrepreneurship for Detroit business incubator TechTown. “Professors sometimes are great technologists or great engineers and sometimes they don’t have the know-how, from a business perspective.” The place to start may be the university’s technology transfer office. “The sooner they engage with the office, the better,” said Riser, whose nonprofit group works closely with technology transfer offices at Wayne State University and other schools. The offices teach professors how to identify funding sources to help turn a research project into a for-profit enterprise.

Make the right connections “One of the biggest challenges for faculty spinning off companies … is making the right connections to find strategic partners, investors or potential customers,” said Amy Butler, executive director of OU Inc., the business Amy Butler incubator at Oakland University. “They often have key networks well established — in the research and development focus — but may not have a robust network in the needs and partnerships that are necessary to build a business.” Technology transfer offices, as well as incubators, also help determine whether an idea is viable. “There’s a great learning curve about defining the market potential,” Riser said. “Speed to market sometimes is vital. (And) it’s not always about having huge, successful output. We don’t want to lose sight of Page 8 FALL 2006

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A good idea isn’t the only thing that is needed to create a business from a university research project, it’s know-how that’s needed as well, said Paul Riser Jr., managing director of technology-based entrepreneurship for Detroit business incubator TechTown.

the singles and doubles while searching for the home run.” Technology transfer offices sometimes work as a conduit for university departments that otherwise wouldn’t communicate, Riser said. By working together, the result is better for all.

Who owns it? Then, there’s the question of ownership. If a research team develops a process or a product it wants to market, using university time and equipment, who owns the WINTER 2014

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You have to go to the university “ and work something out with them. You want to get all your ducks in a row up front.

”

Mark Cantor, president of Southfield law firm Brooks Kushman P.C.

idea? “When I started in 1980, either the university owned everything or the professor owned everything,” said Mark Cantor, president of Southfield law firm Brooks Kushman P.C., an expert in intellectual property law. While that was the practice then, it’s common today for universities and professors to have a shared stake in a spin-off company. “You have to go to the university and work something out with them,” Cantor said. “You want to get all your ducks in a row up front.” That task shouldn’t be such a daunting one, considering that the researchers’ interests are aligned — at least somewhat — with those of the university. “Historically, the reason the universities (wanted to help researchers commercialize) is because they didn’t feel they were leveraging their intellectual capital as well as they should,” Cantor said. “Universities used to do a lot of work and a lot of research but didn’t know how to monetize it.” Now, Cantor said, he is unaware of a university without a technology transfer office. “Generally, universities are not in the business of running businesses,” Cantor said. Instead, they license their technologies to the researchers who developed them and help them set up businesses, by steering them toward resources. “The more money the spin-off makes, the more money the university makes,” Cantor said, adding that the university also gets recognition for being the source of a given discovery. “You can have it set up so the university receives a royalty. The university can own part of the company.” Many times, the deal is cut before a professor begins his or her research, Cantor said. “The one thing I have noticed over the last 30 years is the increase in the business sophistication of professors,” he said. Benefiting universities during negotiations with professors is the Bayh-Dole statute of 1980, said David Parsigian, a partner with Honigman Miller Schwartz

and Cohn LLP in Ann Arbor. The law firm gives annual lectures to university students and faculty on how to protect ownership rights. “If there are federal research dollars awarded, the university owns all the technology from that research,” Parsigian said, summing up Bayh-Dole. The law also set up mechanisms for researchers themselves to profit. The act does not apply to intellectual property created by students, he said.

Avoid the pitfalls Spin-off companies need to make sure students assign technology rights to those startups, he said. Not doing so is a key pitfall spin-off companies need to avoid. Another one involves the internal struggle between professors as “publish or perish” academics and professors as business people, said Fernando Alberdi, also a Honigman partner. “It’s normal for an academic researcher to want to go ahead and divulge information,” he said, pointing to the need to receive grants or other funding. But once the information is public, there’s a one-year clock, in the United States, to protect it with a patent application without hindrance from outside parties. “They have to be educated about that and may have to hold the publication until the university has the ability to file a protective application,” Parsigian said. “The

culture is shifting in favor of the business instead of wanting to publish at all costs.” Professors spinning off companies often underestimate the costs of protecting intellectual property, Alberdi said. “They believe just because they have a patentable technology they’re free to develop that technology,” he said. Instead, they must conduct a freedom to operate assessment to ensure that someone else doesn’t hold a patent that, in a general way, covers whatever specific product or process they’ve developed. “You need to make sure … you know who the players are,” Alberdi said, explaining that the attorneys sometimes charge up to $100,000 for assessments. Licensees, not universities, typically pay the freight. To keep that and other costs down, it’s in the interests of licensees to narrow the scope of whatever they’re licensing, Parsigian said. That’s where negotiations between professors and universities come in. “You want to license the technology for as little cost as possible,” he said. “It’s incumbent on the startups to do their homework and present a real business plan to the universities.”

Need for flexibility Universities, meanwhile, try to maintain flexibility when licensing a technology, Parsigian said. “If the licensee doesn’t do something with that license, it goes back to the university,” he said. While academics are negotiating with universities, it’s common to line up funding, so everyone is a party to the negotiation, Cantor said. Business incubators assist with finding funding — including crafting proposals to federal agencies that provide grants — and in providing other resources. OU Inc. has a technology innovation center that leases space to spin-offs, while TechTown has two “entrepreneurs in residence” who work with universities to help them see ideas with the most potential. “Being aware of the resources and the overall ecosystem is important,” Riser said.

If there are federal research dollars “awarded, the university owns all the technology from that research. ” David Parsigian, a partner with Honigman Miller Schwartz and Cohn LLP

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On the following pages, five university spinoffs are profiled, offering a view of the progression from idea to startup, and in some cases, exit. Lesson to be learned: It needs to start with a good idea, but, execution is a key to the deal.

HOW They Did It Patience and persistence Mentor is crucial to bringing idea to next level HealthMedia (Now known as Wellness & Prevention, a Johnson & Johnson company) University tie: University of Michigan Spun off from university: 1998 ealthMedia was born because Vic Strecher was frustrated. As a researcher in the University of Michigan’s School of Public Health in the mid-1990s, he was discovering that computer-tailored software could act effectively as a digital health coach to help people manage, for example, their hypertension, or their exercise routine. “We were finding really significant results when we could use computer software to mimic what expert (counselors) could do,” Strecher said. Plus, this was an inexpensive intervention that could be widely accessible to millions of people. But when the software was offered to the Centers for Disease Control, “what I got back was that people won’t be using the internet, and certainly not for their health,” Strecher said. He realized that if he wanted the idea to get outside the scholarly journals and actually have an impact on the world, he needed the private market. In 1997, Rick Snyder — now the governor of Michigan — contacted him with an offer of venture capital through Avalon Investments. Strecher talked with other VCs and had not been impressed. But he found Snyder to have an intelligent and enthusiastic approach. They shook hands. Strecher served as CEO for two years before Ted Dacko took over and Strecher shifted to chief science officer. The company stayed alive through the dot-com bust, though Strecher had to put a second mortgage on his house and Snyder wrote another large check. Dacko’s tenure began in 2000, when the company had 85 people — many of whom would be laid off as the company navigated the “nuclear winter” of the bust, as Dacko put it. But when Dacko left the company in 2009, it had more than 200 employees, including contractors. “My role was to figure out how take our products and build them into something scalable that fit into community needs,” Dacko said. HealthMedia had “one or two” products when he took on the chief role. By 2009, it had “15 or 16.” The company was bought by Johnson & Johnson in 2008 for a sum that is believed to be in the neighborhood of $200 million. At the time, HealthMedia reportedly had about $20 million in annual revenue. The university’s technology transfer office, which had equity, made about $17 million in the sale. The company was eventually renamed Wellness & Prevention, but retained its Ann Arbor home. In shifting from the public university to the private market, Strecher’s first point of advice is that “it’s very difficult and not for everybody.” Not everyone has the same fire in their belly to have real-world impacts with their research, and some very smart people, he said,

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LON HORWEDEL

Vic Strecher founded HealthMedia while he was a researcher in the University of Michigan’s School of Public Health. It’s since been one of the best-known spinoff deals, selling for sum of roughly $200 million.

aren’t fortunate in finding the right situations and right business mentors, which he said he had with Snyder. “It does place a lot of pressure on your whole family and even your career, if you don’t handle it the right way,” Strecher said. Patience — the virtue that paid off with HealthMedia — is painful. To help others in the position he once was in, Strecher is now the School of Public Health’s director of innovation and social entrepreneurship. He helps guide people in developing research into licensable concepts. They also bring a Hollywood screenwriter to train researchers into how to tell their story in 30-second, five-minute and 20-minute elevator pitches. “Most faculty would love to transcend their own disciplines and help solve real-world problems,” Strecher said. “They want to make a good impact on the world; they just don’t know how to do it.” — Anna Clark WINTER 2014

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Classroom to boardroom Professor learns the ABCs of starting a business Endres Machining Innovations University tie: Michigan Technological University Spun off from university: 2005 illiam Endres was a professor of advanced machining at Michigan Technological University when he realized that he wanted to go beyond the incremental work of writing papers. Instead, he wanted to have a transformational impact on the industry. So he founded Endres Machining Innovations in 2005, with the support of the university, which encourages faculty to pursue entrepreneurial ventures. The company develops new machines for the cutting-tool industry and offers engineering services to customers. It was a risk, though. The nature of the industry requires substantial upfront investment in machinery — Endres has invested in more than $1 million worth of equipment — which is why the company is just now in the process of launching its first product on the market. It’s called Revocut, and it is promoted as a device that delivers better cutting performance and more productivity while lasting longer than similar tools. Endres is in the MTEC SmartZone businesses accelerator, created by Michigan Tech and the cities of Houghton and Hancock. This is a substantial boon for the company — it wouldn’t be easy to build up the technical space it needs from scratch. The plan is for product sales to be reinvested in the company through research and design, which in turn William Endres will lead to new product development. Current gross revenue is roughly $500,000. William Endres is running the company while still working half time at the university, focusing on Michigan Tech’s senior design program in mechanical engineering, an entrepreneurial program for students. There are a total of four employees. This isn’t the first business Endres has launched — soon after he graduated in the 1990s, he and his college roommate developed software for the industry. “What I learned there is that you can’t go

PHOTO COURTESY OF ENDRES MACHINING

One of the machines developed by Endres Machining Innovations.

on passion alone,” Endres said. “You have got to understand the market and really be addressing a major need.” In launching the machining company, he did things differently: He first spent about a year reading up on accounting, taxes and the other essentials of running a business. “I wasn’t expecting to become an expert, but I needed to have enough understanding to communicate with the experts.”

Running a company is vastly different that being a professor, he discovered. “I’m signing the front of paychecks now, not the back,” Endres said. “Employees, even if there are not a lot of them, rely on this for their mortgage payments and to support their families. It’s a big responsibility.” To do things right, he discovered that the people doing sales needed to have technical expertise — which is why he is on the road himself to let the industry know about his new product. This helps the new company build credibility with potential customers, while also giving Endres a chance to learn from them and scout their other needs — which may in turn lead to new machining innovations. Altogether, the necessary work of turning a profit isn’t the primary driver for Endres: It’s impacting the industry for the better with what he sees as a game-changing product. “If it was only about making money, I wouldn’t be doing it,” he said. “It’s too hard for that.” — Anna Clark

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Spinoff success WSU showed foresight in backing Lumigen Lumigen University tie: Wayne State University Spun off from university: 1987 hanks to a chemical agent supplied by Southfield-based Lumigen, a person’s blood test can be analyzed to detect certain diseases, including AIDS, cancer, hepatitis and other illnesses. While the company was built from its work with amino acid testing, it is looking into doing more with genetic and molecular testing in the future. As Mark Sanderson, Lumigen’s research and development manager, put it, genetic testing is “faster, more accurate, and you can find different organic sub-types…This is an area that typically required a couple days to get your results, but with some new technology we’re working on, you could get your results in a couple hours.” Sanderson was a graduate student working with chemistry professor Paul Schaap at the time that Lumigen spun off from Wayne State University in 1987. This was in the very early years of startups transitioning from the campus to the market — Lumigen was Wayne State’s very first spinoff, in fact — and in many ways, the support the university provided Lumigen showed a remarkable level of foresight. Sanderson said the university “bent over backwards” to supply the nascent company with licensed technology from its departments. Lumigen also rented space at the university. Being a forerunner also meant that the modern-day best practices for support had yet to be learned. “My sense is that universities have gotten better (at incubating and spinning off companies), and it’s become a more integral part of their mission, if you will, to do spinoffs and look for outlets for technology developments,” Sanderson said. Much has transpired in the years since. Lumigen bought out Wayne State in 2003 for more than $10 million.

PHOTO COURTESY OF HARLEY ELLIS DEVEREAUX

Paul Schaap speaks at the ribbon-cutting for the A. Paul Schaap Chemistry Building on Wayne State University’s campus in 2009. Without the support of the university, he said, Lumigen would never have happened.

Beckman Coulter, a California-based company with whom Lumigen had previously collaborated, bought the company for $185 million in cash in 2006. In the year prior to sale, Lumigen had $33 million in revenue (with 40 percent of its sales coming from Beckman Coulter) and 45 employees, who retained their Southfield jobs. Lumigen retained its distribution network even as its products shifted to Beckman Coulter’s market. A sign of how far university incubation and Lumigen have come? The university remodeled its chemistry building. It’s named the A. Paul Schaap Chemistry Building after the company’s founder. The building houses the Lumigen Instrumentation Center. Schaap, who had done well with Lumi-

gen’s success, retired from the university in 2000 to become full-time president of Lumigen. He later went back to donate a total of $11 million to the university. “Without the support we received from former WSU President David Adamany and the university’s Board of Governors and without the collaboration of the graduate students of my research group, Lumigen would not exist,” he said at the time of the initial donation in 2007. “Without Lumigen, we would not have the resources to make this commitment.” With facilities that foster faculty-student interaction, the hope is to create an environment like the one where Schaap and Sanderson flourished — and the next major lifesaving startup can flourish. — Anna Clark

My sense is that universities have gotten better (at incubating and spinning off companies), “ and it’s become a more integral part of the mission, if you will, to do spinoffs and look for outlets for technology developments. ” Mark Sanderson, Lumigen’s research and development manager Page 12 FALL 2006

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Laser focus Talent-nurturing environment key to IntraLase success IntraLase Corp. University tie: University of Michigan Spun off from university: 1997

he idea behind IntraLase Corp. was a simple one: to produce safe and effective lasers for the medical industry, especially in eye surgery. With the use of a femtosecond laser that the company designed, developed and manufactured, IntraLase made it possible for surgeons to perform the crucial first steps of LASIK eye correction. IntraLase also produced software and devices that support the technique. Ron Kurtz, then a second-year resident with the University of Michigan’s Kellogg Eye Center, formulated the IntraLase concept after treating a patient whose eye had been burned by a laser at the Center for Ultrafast Optical Science — but whose vision was unimpaired. Kurtz partnered with a physicist at the university, Tibor Juhasz, and filed for a patent in 1994. Patent expenses were paid by the university, and reimbursed years later. In 1997, they prepared to spin off (though the university initially held a 25percent stake in the new company). As an incubator, the university made it possible for Kurtz to prepare the technology and turn to colleagues — especially his department chair — for insight on the early stages of development. Kellogg also became one of the early adopters of the IntraLase LASIK technology. In 1998, the university entered into a licensing agreement with IntraLase that detailed how patent royalties would be distributed among the company’s founders and the university. Ultimately, the university earned more than $5 million from its investment in IntraLase and its creators. Two in-state investors — EDF Ventures and the Wolverine Venture Fund — made it possible for IntraLase to make the leap from idea to business. Their bets paid off. The company went public in 2004 and quickly made $84 million. Michigan, however, had reason for regret: In 1998, the company moved to Irvine, Calif. As Mike DeVries, managing director of Ann Arborbased EDF Ventures, previously told Crain’s, “It moved to where all ophthalmology companies exist, which is Irvine, Calif.” IntraLase has since become part of Abbott Park, Ill.-based Abbott Laboratories. It was bought for $808 million in cash in

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PHOTO COURTESY OF ABBOTT LABORATORIES

The femtosecond laser that IntraLase designed, developed and manufactured makes it possible for surgeons to perform the crucial first steps of LASIK eye correction.

2007 by Advanced Medical Optics, or about $25 per share. AMO was in turn was bought by Abbott in 2009. IntraLase is now

a registered trademark of Abbott, and its technology is used to perform IntraLASIK eye surgery. Abbott is one of the world’s largest consumer-facing health care organizations, drawing in about $22 billion in annual sales from 150 countries. The company employs 69,000 people worldwide, including 4,000 people in its medical optics division. “The Intralase laser technology platform is an important part of Abbott’s current refractive product portfolio,” said Krysta Pellagrino, Abbott’s director of public affairs. IntraLase, then, is considered one of the most successful startups incubated at the University of Michigan. The lesson it delivers is one that the university leaders have told many times over: Immense talent and ingenuity exist on its campus. The gap isn’t in the ideas or even in the skill in translating great ideas into marketable products: it’s in deepening the pool of talent to support the long-term growth of startups. That will take some longtime investment to build. — Anna Clark

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MICHIGAN’S

FUTURE

IS IN

COLLEGE

RESEARCH, ENTREPRENEURSHIP AND TALENT FOR TOMORROW Michigan’s public universities are among Michigan’s strongest economic assets, accounting for an increasing share of research and development that fuels the innovation and entrepreneurship vital for our future, and providing businesses with the talented graduates needed for prosperity. One of the best ways to develop new innovations and businesses, create more and better jobs and make Michigan a Top Ten state is to invest in higher education. Governor Snyder and the Legislature supported that goal by increasing state support for university students over recent years – and it’s important that trend continue. FOR MORE INFORMATION VISIT PCSUM.ORG.

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Ready, set, go MSU’s support got TempoRun off to a running start TempoRun University tie: Michigan State University Spun off: May 2013 empoRun is an app that makes it easy for individuals to match their running music to their running pace. It’s a simple concept that makes exercise more fun — and therefore makes it easier for runners to stay motivated. Available for free for iPhones through the Apple iTunes store, TempoRun categorizes the user’s music library based on the beats per minute of each song. So when a user runs at a certain tempo level — from walking to springing — every song they hear on a shuffled playlist will be at about the same number tempo. The app also allows users to track their running stats — distance, paces and calories burned. Josh Leider conceived the idea while jogging in May 2012. A marketing student at Michigan State University at the time, he partnered with a friend who is an avid marathon runner, as well as a team of student developers in the university’s computer science program. TempoRun effectively spun off from the university after they graduated a year later. Along the way, it picked up some awards: MSU’s Eli Broad Business Pitch Competition in 2013; the Student Startup Madness tournament at South by Southwest in Austin, Texas; and the Michigan GreenLight college division competition. The SXSW win earned TempoRun $5,000 from Google Cloud Platform to get its product to the market. “The university set us up to build an incredible company,” said Leider, who now serves as CEO. He turned down a job offer in Seattle to continue guiding TempoRun. “Not only did they give us continuous funding, but they really helped guide us through the process of creating a company.” This included legal guidance, financial modeling, logo design and market analysis from The Hatch, the East Lansing business incubator sponsored by MSU, and Spartan Innovations, which provides practical support and training for MSU-born startups. “Every MSU entrepreneur should be part of the Hatch,” Leider said. TempoRun has more than 50,000 users. It has five employees — all five of the founders, three of whom work on the technical side and two on the business side. Lei-

PHOTO COURTESY OF TEMPORUN

TempoRun was created by students at Michigan State University. Founders, pictured above, include Phil Getzen, Benny Ebert-Zavos, Adam Proschek and Josh Leider.

der said that the company is currently seeking and raising capital support in metro Detroit. With additional capital, TempoRun intends to develop an Android version of the app and open its headquarters in Detroit. Leider’s advice for others interested in spinning a business concept off from the university campus is to “stay connected … especially in an entrepreneurial sense.”

The university that incubated the idea is likely to “promote the heck out of any articles or media released by your company” and willing to help out in other tangible ways. This level of support, even when the start-up moves off campus, doesn’t strike Leider as surprising. “Why wouldn’t they? If you’re successful, they look good, too.” — Anna Clark Page 15

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Spinoffs from Michigan universities C

rain’s worked with the technology transfer departments of universities across Michigan to find companies that have come out of university research departments. Companies are arranged by university, and then alphabetized. Many companies have drawn grants and investments, rather than earned revenue. In those cases where revenue numbers are available, it’s included. This list includes companies that were identified by universities and responded to requests by Crain’s for information. Note: Due to the large volume of companies from the University of Michigan, only companies spun off in the last three years are listed.

University of Michigan

AlertWatch Inc. Ann Arbor Year created: 2012 Top executive: Justin Adams Founder: Kevin Tremper AlertWatch develops real-time patient monitoring dashboards to help hospitals improve clinical quality, provider workflow and billing accuracy. Funded by $400,000 in investments from state organizations.

Animal Diversity Web Ann Arbor Year created: 2014 Top executive: Tanya Dewey Animal Diversity Web is an online database of animal natural history, distribution, classification and conservation biology at the University of Michigan and building products based on that database. Funded by $12 million in grants.

Arborlight LLC Ann Arbor Year created: 2013 Top executive: Michael Forbis Founders: PC Chu and Max Shtein Arborlight’s Daylight Emulation Systems deliver daylight quality illumination, tuned to geography and time, matching color, intensity and directionality of outdoor conditions real time. Last year the company posted $300,000 in revenue. It has $225,000 in grant funding and $500,000 in venture capital.

Atterocor Ann Arbor Year created: 2013 Top executive: Julia Owens Founder: Gary Hammer and Tom Kerppola Atterocor is a drug development company focused on the accelerated developPage 16 FALL 2006

ment of a novel treatment for adrenal cancer, a rare endocrine cancer. The company is pre-revenue and has received $16 million in VC funding.

Baker-Calling (dba Vesper) Santa Monica Year created: 2012 Top executive: Matt Crowley Founder: Karl Grosh Baker-Calling develops piezoelectric MEMS microphones for test equipment, hearing aids and consumer electronics. The company has received $2.5 million in grant revenue.

Court Innovations Ann Arbor Year created: 2014 Top executive: MaryJo Cartwright Founder: JJ Prescott Court Innovations is developing and implementing online negotiation systems for courts and constituents. It has generated $3 million in grants.

Diamond Kinetics

of health management research and consultative expertise with powerful webbased software to help organizations develop healthy and high-performing workplaces.

e-Sens Inc. Salt Lake City Year created: 2012 CEO/founder: Richard Brown Developer of multi-parameter liquid chemical sensing instruments. A majority of the company was spun out of the University of Utah; however, many of the company’s patent licenses are through UM. Still pre-revenue, the company has won $80,000 in grants and raised $3.63 million in VC funding.

H3D Inc. Ann Arbor Year created: 2013 Founder: Zhong He H3D offers the world’s highest-performance imaging H3D’s powerful spectrometers based crystal cube on more than a decade of groundbreaking research in the highly ranked Nuclear Engineering department at the University of Michigan. The company has won more than $20 million in federal grants, including one of more than $2.3 million announced in October 2012 from the U.S. Department of Defense to develop ultrasensitive, handheld radiation detectors.

Pittsburgh Year created: 2014 Top executive: CJ Handron Founder: Noel Perkins Diamond Kinetics is focused on bringing motion data and analytics to baseball and softball players of all ages and skill levels, as well as their coaches. The company is pre-revenue.

Edington Associates Ann Arbor Year created: 2012 CEO/founder: Dee Edington Edington Associates marries 30 years Dee Edington

Inmatech (Supercapacitor) Ann Arbor Year created: 2014 Founder: Levi Thompson Inmatech is an emerging company dedicated to next-generation supercapacitors that incorporate low-cost, high-performing materials to optimize energy storage for several key industries. Funding has come from two small-business innovation grants totaling $610,000 from the National Science Foundation and smaller grants and awards, including $25,000 from the Great Lakes Entrepreneur’s Quest business plan competition in Lansing. WINTER 2014

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LectureTools Inc. Ann Arbor Year created: 2012 Founder: Perry Sampson Developer of software products for modern technologies, including cellphones, tablets and laptops that improve the classroom learning experience for instructors and students. The company was acquired in 2012 by Echo360.

Maize Analytics Nashville Year created: 2014 CEO/founder: Dan Fabbri Maize Analytics applies data analytics algorithms to health data to improve patient care and help preserve the privacy of their health records. Funded by $100,000 in grants.

ONL Therapeutics Ann Arbor Year created: 2014 Top executive: John Freshley Founder: David Zacks A biopharmaceutical company committed to protecting and improving the vision of patients with a range of retinal conditions by advancing technology to protect photoreceptors against programmed cell death. Funded by $2 million in grants.

PhasiQ Inc. Plymouth Year created: 2014 CEO/founder: Shu Takayama PhasiQ is focused on accelerating diagnostics and therapeutics development and addressing the growing need for high-quality, low-cost multiplex immunoassays. Funded by $180,000 in grants.

Sen Sigma Ann Arbor Year created: 2013 CEO/founder: Jyoti Mazumder SenSigma produces sensors for realtime defect and quality evaluation for weld in various manufacturing processes using smart spectroscopic monitoring systems Revenue in 2013 was $250,000. The company is also funded by $900,000 in grants.

Spider9 Northville Year created: 2012 Founder: Kang Shin

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Provider of energy storage solutions that deliver lower cost, longer life and improved reliability by using patented technology that adds dynamic controls and intelligence to conventional energy components. Received $1 million in state incentives and a $5 million, low-interest loan from Huntington Bank.

Ventris Learning Sun Prarie, Wis. Year created: 2014 CEO/founder: Robert Meyer Ventris Learning provides programs that help teachers meet the unique instructional needs of linguistically diverse and other students who read at the below basic level on standardized tests. The company is pre-revenue and funded by angel investors.

chemical development.

CourseWeaver East Lansing Year created: 2013 Top executive: Robert Fulk Integrates educational content and student performance so that you see how shared content is effective for students and others around CourseWeaver CEO Robert Fulk the world. Revenue was $700,000 in 2013, but the company is also funded by $600,000 in grants.

Diversified Natural Products Scottville

Michigan State University

AquaBiochip LLC Lansing Year created: 2007 Top executive: Syed Hashsham The company commercializes novel instrumentation and services for rapidly and accurately conducting high-throughput diagnostics for pathogen identification in air, food and water. The company is pre-revenue.

BioPlastic Polymers and Composites LLC Okemos Year created: 2003 Top executive: Dr. Ramani Narayan The company researches, develops and commercializes products based on annually renewable resources. Contract research comes from federal and other agency funds and various corporations. The company is funded by $500,000 in grant and contract funding.

BoroPharm Inc. Novi Year created: 2005 Top executive: Todd Zahn Develops and manufactures chemical building blocks to organizations who utilize boron containing intermediates to produce marketable products with unique and functional characteristics. Grant funding includes $475,412 for

Year created: 2003 This industrial biotechnology company develops and commercializes products for chemical and healthcare industries. The company operates two divisions: Natural Health and Green Chemistry. Venture capital funding includes an unidentified amount from WestView Capital Partners and Tudor Ventures.

EduCog LLC Haslett Year created: 2005 Top executive: Robert Fulk Integrates educational content and student performance so that you see how shared content is effective for students and others around the world. The company was acquired by CourseWeaver in February.

GEMA Diagnostics Inc. Ann Arbor Year created: 2004 Top executive: David Repp Improves fetal health and reduces physical and emotional burdens on women undergoing infertility treatment by giving clinicians solutions to select the healthiest oocytes and embryos. The company received an $800,000 grant from the Michigan Economic Development Corp. as well as seed money from Ann Arbor-based venture-capital firm North Coast Technology Investors LP and another unnamed investor.

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Monarch Antenna Inc. Ann Arbor Year created: 2007 Top executive: John Carney Monarch Antenna’s patented Self-Structuring Antenna improves the reliability of the wireless link by reconfiguring its electrical shape to maximize the signal-to-noise-ratio. Grant funding includes $200,000 from the National Institute of Standards and Technology, $127,000 from Virtual EM Inc. and $110,000 from Rajant Corp. The company also received $300,000 from Automation Alley’s seed fund. Revenue for 2013 was $40,000.

NamesforLife LLC Okemos Year created: 2007 Top executive: George Garrity NamesforLife was founded to resolve the ambiguity between nomenclature and biological objects and concepts. NamesforLife technology, N4L, makes names actionable. Funded by grants from the Department of Energy and the state of Michigan. Revenue is under $100,000.

nanoRETE Inc. Grand Rapids Year created: 2012 Top executive: Linda Chamberlain Developing a platform to provide rapid detection of pathogens and markers using customized lateral flow biosensors. The company received $500,000 from the Pure Michigan Venture Match Fund.

Niowave Inc. Lansing Year created: 2006 Top executive: Terry Grimm Builds superconducting electron accelerators to tackle America’s high-tech challenges in fields as diverse as health care and national security. The company has received $3 million in state funding

Opti O2 LLC

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Phenometrics Inc. Lansing Year created: 2011 Top executive: Michael Chaparian Phenometrics Inc. is dedicated to accelerating algal discoveries and enhancing the production capabilities of algae and algal products. Funded by $300,000 from Automation Alley’s seed fund, $127,000 from Virtual EM Inc., $110,000 from Rajant Corp. Revenue in 2013 was $1 million.

Retia Medical LLC East Lansing Year created: 2012 Top executive: Marc Zemel Retia is an early-stage medical device company that develops software and hardware for patient monitoring. The company received $7 million in early-stage funding from the Pritzker/Vlock Family Office.

XG Sciences Inc. Lansing Year created: 2007 Top executive: Philip Rose XG Sciences Inc., previously named 10View LLC, was formed to manufacture and sell commercial quantities of a material called xGnP Graphene Nanoplatelets. Revenue in 2013 was $4 million. It has received a $50,000 grant from the Michigan Economic Development Corp. and $1.1 million from the U.S. Department of Energy.

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Functional Fluidics Grosse Pointe Park Year created: 2014 Top executive: Patrick Hines Developing novel processes and methods to measure whole blood adhesion and thrombus formation in a high throughput, in vitro diagnostic assay Patrick Hines, founder of Functional based on a microflu- Fluidics idics platform. The assay will address the need for measuring thrombosis and adhesion formation in whole blood. The company projects 2014 revenue of $100,000.

Lumigen Southfield Year created: 1988 Founder: Paul Schaap Lumigen researches, develops, manufactures and markets novel chemiluminescent compounds for use in life science research and medical diagnostics. In 2006, Lumigen was sold to BeckmanCoulter for $185 million. (See story, Page 12)

Wayne State University Wayne State University

Advaita Plymouth Year created: 2010 Top executive: Sorin Draghici, Ph.D. Software development for the analysis, interpretation and prediction of genetic data. Advaita has a unique approach that allows its software to quickly identify the mechanisms that may be causing the condition being studied by researchers. Funded by numerous grants, including a $2.2 million award in 2011 from the National Institute of Health, followed by a $1.76 million Phase award in March.

Pinckney Year created: 2012 Top executive: Ruby Ghosh Opti O2 was established to provide the world’s most robust dissolved oxygen sensors for use in challenging environments. Funded by grants, including a 2013 Department of Energy grant for $225,000.

(lighter and stronger than traditional high strength steel) for applications in defense, off-highway, tooling and automotive industries. The Detroit Innovate Fund has invested $250,000, and the company has also received a number of grants.

Detroit Materials No Permanent Space Yet Year created: 2014 Top executive: Pedro Guillen The commercialization of novel highstrength, low-alloy steels and cast irons

Meditrina Ann Arbor Year created: 2006 Top executive: Thomas Collet Developing and commercializing innovative therapies (aromatase inhibitors) that treat women’s reproductive system disorders with an initial focus on endometriosis. Received grant funding in the amount of $3.8 million in 2006 and $200,000 in 2008 from the 21st Century Job Fund Award.

NanoScience Engineering Corp. West Bloomfield Township Year created: 2005 Top executive: David Burnett Manufacturing advanced nano-scale materials to enhance the physical properties of polymers in the automotive and packaging industries. WINTER 2014

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Received a Small Business Innovation Research Grant of nearly $100,000 from the National Science Foundation in 2005.

Endres Machining Innovations

NextCat

Houghton

Detroit Year created: 2010 Top executive: Steven Salley Chemical catalysts for use in biodiesel production that enable producers to use a wide variety of inexpensive feedstocks (waste vegetable oil, animal fats, residual corn oil) and convert them into biodiesel. In 2010 the company received $250,000 in seed funding from the Michigan PreSeed Capital Fund. It also was awarded $250,000 from Automation Alley in 2011 and $500,000 from the National Science Foundation in 2011.

RetroSense Ann Arbor Year created: 2011 Top executive: Sean Ainsworth Gene therapy treatment to restore vision in patients suffering from blindness due to retinitis pigmentosa and advanced dry Sean Ainsworth, age-related macular founder and CEO of degeneration. RetroSense The company was invested in through a venture capital round of $2.4 million, led by a San Diego firm, Nerveda LLC.

Michigan Technological Michigan Technical University University

Aerophysics Inc. Allouez, Mich. Year created: 2009 Top executive: Brad King Aerophysics researches and develops novel technologies for homeland defense and space military applications. Revenue for 2013 was $500,000.

Aursos Inc. Kalamazoo Year created: 2007 Top executive: Kris Aalto Aursos is developing a superior implantable orthobiologic to address the rapidly growing multibillion-dollar bone graft substitute market for bone voids, non-union fractures and spinal fusions. Received federal grants through the Small Business Technology Transfer program in the amount of $1.4 million.

Year created: 2006 Top executive: William Endres EMI develops and commercializes new technologies in the cutting-tool industry, offering engineering and testing services to support a customer’s efforts to reduce cost, improve quality and reduce time to market. Revenue for 2013 was $500,000. (See story, Page 11)

Green Sand Inc. Honolulu Year created: 2008 Chief environmental officer: Rhonda Goyke Green Sand possesses a technology to recycle copper-laden mining stamp sand to produce roofing shingles. Copper is a desirable construction additive for its prevention of algae and mold growth. Received a $50,000 loan from Ann Arbor Spark.

Nano Innovations LLC Houghton Year created: 2011 Top executive: Yoke Khin Yap The company is developing technology related to synthesis and production of boron nitride nanomaterials, a thermally conductive and electrically insulative material used in electronics and heat sink materials. Funded by the NSF in the amount of $245,000 and Michigan Emerging Technology Funds in the amount of $25,000.

Upland Nanotech Hancock Year created: 2012 Top executive: Thomas Daunais Upland Nanotech developed a rapidsensing technology used for food pathogen detection and drug-level concentration that has the ability to yield results within 20 minutes. The company was a 2013 finalist in the Accelerate Michigan Innovation Competition.

Grand Valley Grand Valley State University State University

AquaGen Allendale Year created: 2010 Project leader: Ryan Thum

AquaGen services provide accurate genetic identification of the biotype of freshwater invasive species Eurasian Watermilfoil, enabling appropriate and effective treatment. It is still part of GVSU, not an independent business. Revenue for 2013 was roughly $75,000.

Fluition Allendale Year created: 2014 Top executive: Kathryn Christopher Fluition, a student- launched business, is in development of a variable “sit-stand-sit” assist device that aids and provides quantified feedback during patient rehabilitation. Funding includes $30,000 won through business plan competitions.

OrthoForge Grand Rapids Year created: 2013 Top executive: Brent Nowak, Ph.D. OrthoForge’s initial product will, in real time, monitor and stimulate bone growth from injuries suffered in trauma. This dual-functionality is a first-in-class. The company is funded through $2.3 million in grants and $150,000 in investments.

Western Michigan University Western Michigan University

CompTherapeutics Inc. Kalamazoo Year created: 2013 Top executive: C. Richard Spates Develops behavioral health software for use by health agencies, health professionals, and consumer end users to address psychological problems. The company is pre-revenue, funded by $80,000 in grants.

Micro Laser Assisted Machining Technologies LLC Kalamazoo Year created: 2014 Top executive: Deepak Ravindra Micro-LAM’s precise technology improves productivity and quality, minimizes waste and reduces tooling costs for such industries as optics, semiconductors, glass and metals, enabling companies to be more profitable. It is pre-revenue, funded by $1.1 million in grants. Page 19

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VC highs and lows Investment in Michigan sees fewer deals in 2014, but more dollars

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By Gary Anglebrandt ationally, the year in venture capital is wrapping up as a strong one. For Michigan — yes and no. The most recent MoneyTree compilation of U.S. venture capital investing data, released by PricewaterhouseCoopers LLP and the National Venture Capital Association, shows Michigan deal volume at its lowest point in three years. Dollars invested, however, show one of the best periods in recent history. The numbers, drawn from national surveys of venture capital firms, show Michigan with seven deals in the third quarter this year, the slowest since the fourth quarter of 2011 when the same number was reported. Total deal volume in Michigan came to 32 by the end of the third quarter 2014, compared to 74 for all of last year and on par with 2011’s total of 34. Michigan’s total dollars invested, however, showed $167 million invested through the third quarter, trouncing last year’s total of $111 million with an increase of 50 percent. The bulk of that, almost $115 million, came from the second quarter, Michigan’s best quarter by dollars invested since the first of 2000, when $143 million was invested. Venture capital at the national level also had its biggest quarter since 2000, pumping 13.5 billion into companies in the second quarter. That was the highest since the end of 2000, when the fourth quarter’s $22 billion was actually the lowest of any quarter that year. Those were very different times: 2000’s total was $105.1 billion, compared to $29.8 billion last year. This year is proving stronger, having already beaten last year’s total. Investors spent $33.1 billion through the third quarter. Deal volume, reaching 3,154 by the end of the third quarter, is on pace with recent years. A flurry of mega-deals north of $100 million have driven the national increase, and software continues to be the hot sector attracting deals, along with biotechnology and media and entertainment. The big national deal that pushed the second quarter so high was the $1.2 billion that investors poured into Uber Technologies Inc., the company behind the

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app-driven alternative to taxi cabs. That was the largest single deal since PricewaterhouseCoopers began tracking in 1995. “The second quarter was just off the charts. We don’t have quarters like that very often,” said Mark McCaffrey, global software industry leader for PricewaterhouseCoopers. “A lot of cash is coming into play, and valuations are reflecting the competitiveness of deals.” Private equity, corporate venture funds, mutual funds and hedge funds have jumped into venture investing to heat things up this year. Active IPO and M&A markets are encouraging investors as well, McCaffrey said. The third quarter continued the trend, recording 11 mega-deals. In that light, the Michigan situation looks a little troubling because Michigan’s strong second quarter was because of one large deal. This year’s 50-percent increase in dollars invested mostly came from the $59.5 million second-quarter investment in Plymouth Township-based biotechnology company ProNAi Therapeutics Inc., likely the largest investment round in state history. (See story on Page 22.) Vivo Capital of Palo Alto, Calif., led the expansion stage investment and was joined by 11 other firms, most of them based outside Michigan. The subsequent low number of deals in the third quarter matched its number of dollars invested, at just $14.5 million. “I’m a little surprised at how low the quarter came in,” McCaffrey said, reserving any speculation as to why it was low until the year wraps up. “If it’s still down, it’ll be interesting for the region going into 2015” and an indicator that cash is going somewhere else. But “one quarter doesn’t tell the tale,” he said. Jack Ahrens, general partner at TGap Ventures in Kalamazoo, said his firm made one new deal this year and was disappointed that it couldn’t find more companies to invest in, including ones they checked out in Michigan. “This year, especially on the west side of Michigan, has been a disappointment, frankly,” he said, but noted his firm specializes in medical device companies that faced new regulatory difficulties. Jeffrey Van Winkle, a Clark Hill PLC attorney who represents Michigan venturebacked companies, said it’s never easy for them to raise money, but this year has been a notch more difficult. “There’s a sense more money needed to be spent last year than this year,” Van Winkle said. A year like 2013, which had a high number of deals at a total of 74, “sucks up capacity,” he said. The previous year also was an active one, with almost $246 million invested through 52 deals in 2012. It’s not surprising for low periods to fol-

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The number of venture capital deals by end of the third quarter 2014

Number of deals for all of 2013

167million

Total invested through the third quarter of 2014

111million

2013 total

low high ones, as companies put the money they received to work, and firms’ reserves are down. Plus, for states like Michigan, whose VC industry has grown significantly but still remains a small player, there are only so many companies to invest in. “You could have $500 million that you’re willing to invest in Michigan and you’re still not going to invest it all in 2104,” he said. “The number of companies that are ideal candidates for venture capital money is just not there,” Van Winkle said. A longer timeframe is necessary when judging VC activity, investors say. Jim Adox, chairman of the Michigan Venture Capital Association and head of the Ann Arbor office for Madison, Wis.-based Venture Investors LLC, said the increase in VC firms has led to two-thirds more venture-backed companies in the state. Michigan had 16 VC firms based in the state in 2009; that number increased to 23 last year. Out-of-state firms have steadily been coming to Michigan; 10 had opened offices in the state as of the end of last year. New, smaller funds from firms like Huron River Ventures and Michigan Accelerator Fund are putting early investments into younger companies that set the stage for another cycle of larger investments, Adox said. That sets the stage for another healthy cycle in the coming years. One thing that could stifle that is a lack of new state-backed fund of funds, which were a “key catalyst” in the cycle that’s now at its end, he said. The $109 million Michigan 21st Century Investment Fund and $95 million Venture Michigan Fund I are fully committed, as is the $120 million Venture Michigan Fund II. Michigan’s venture capitalists point to these funds as accelerants that grew the industry by injecting capital and attracting

outside investors to the state’s VC dealings. The fund of funds is managed by Grosvenor Capital Management LP, a Chicago-based firm with $46 billion under management, previously owned by Credit Suisse. Those well-known names made it easier for Michigan venture capitalists to get outside investors to participate here. “It primes the pump. I can go out to investors and say, ‘I have $10 million of my $100 million goal already. Do you want to come in? I’ve been vetted by Grosvenor, they’ve checked me out,’ ”Adox said. “Now, there’s no new fund. If that goes on, we’re going to see a noticeable drop in activity.” The MVCA surveyed state venturebacked companies last year, and they reported a total need of $260 million in the coming years. The association asked state VC firms how much they had reserved for these companies, and the number came to $109 million. “Some (companies) might not deserve it, but I can easily say the gap is $75 million. That’s a real need for real companies that should get the money,” Adox said. According to the two most recent annual reports from the Michigan Venture Capital Association, Michigan’s fund of funds provided 13 to 14 percent of the capital in Michigan’s latest venture funds. (Those figures include money from one privatelysourced fund, the Renaissance Venture Capital Fund.) There is talk at the state level about launching some type of new fund of funds. The plan is to “put something in front of” the Michigan Strategic Fund’s board, preferably next year, and then issue a request for proposals, said Paula Sorrell, vice president of entrepreneurship, innovation and venture capital at Michigan Economic Development Corp. But nothing is ready and there is no set timeline. “I wish I had an answer for that,” Sorrell said. Coming up with new sources isn’t going to be easy. The 21st Century fund had tobacco settlement money as its source. The Venture Michigan funds used bank debt. “I’m pessimistic that we’re going to see a replenishment before we see some of the money come back to the existing funds,” Van Winkle said. There are pros and cons to having a big fund of funds, said Ahrens. “I’m on the fence. I’d rather see some non-government entity get involved. Whether it’s a bunch of corporations getting together like with Renaissance, venture capital should be separated from the state.” “But,” he added. “If no one steps up, it should be the state.” Page 21

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Deal Briefs enture capital and M&A activity has kept deal-makers busy across Michigan. The following deals were reported previously in editions of Crain’s Detroit Business and MiBiz.

VC Investments ProNAi closes on state’s largest VC funding round Plymouth Township-based ProNAi Therapeutics Inc., a maker of cancer drugs, closed in April on what is believed to be the largest single round of venture capital funding in state history, a Series D round of $59.5 million. The previous record is believed to have been set by Ann Arbor-based QuatRx Pharmaceuticals Co., which raised a round of $44 million in 2007. No official database of venture capital funding exists. ProNAi is expected to be gearing up for an initial public offering later this year. The round was led by Vivo Capital of Palo Alto, Calif., one of nine new investors in the company. The oversubscribed round included previous investors Milwaukee-based Capital Midwest Fund, Apjohn Ventures of

Kalamazoo, the Amherst Fund of Ann Arbor and the Grand Angels of Holland. In January, ProNAi raised a VC round of $12.5 million. At the time, the target of $30 million was easily surpassed.

Grand River Aseptic Manufacturing raises $9.8M A $9.8 million investment that included money from a pension fund for Michigan public employees is allowing Grand River Aseptic Manufacturing Inc. to fund its expansion. The capital infusion — led by the Municipal Employees’ Retirement System — enables the Grand Rapids-based company to prepare for future growth with expanded facilities, new equipment and additional staff, said President Tom Ross. Grand River Aseptic could double revenues in 2014 and would likely do it again in 2015, Ross said. The investment was announced in June. Grand River Aseptic produces sterilized injectable drugs under contract for pharmaceutical companies and has primarily focused on producing small batches of drugs used in clinical trials. With the new contracts, the company is moving into commercial production as a contract manufacturer.

Plymouth Ventures tops goal, closes fund at $61M Ann Arbor-based Plymouth Ventures finished raising its third and largest fund in July, surpassing its original target of $60 million and closing the fund at $61 million. The venture capital firm, which targets growth-stage companies in the Midwest, has more than $100 million under management. Since 2003, the firm has invested in 39 companies out of its first two funds.

Grand Angels invest in trio of companies in West Michigan In September, Holland-based Grand Angels said it invested in three West Michigan companies: Ablative Solutions in Kalamazoo, Tetra Discovery Partners in Grand Rapids, and Altus Brands in Grawn, near Traverse City. Ablative is working on a new treatment for severe hypertension using catheters that allow physicians to deactivate renal nerves. The Grand Angels investment enabled the company to reach its Series B goal of $12.5 million. Tetra is developing a treatment for Alzheimer’s disease. Altus Brands helps develop companies in the hunting, shooting and outdoors markets. Grand Angels did not disclose the amount of each investment, although combined, the group’s members have put $2 million into eight companies in 2014. The organization has a goal of investing $2.3 million in 10 companies during the year.

Vestaron raises $10M in C round for venom biotech

LON HORWEDEL

Mina Sooch helped found Apjohn Ventures LLC and led its investment in ProNAi Therapeutics, where she is now CEO.

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Vestaron Corp. in Kalamazoo, a developer of biopesticides based on spider venom, raised $10 million in Series C preferred stock financing in August. Chicago-based Cultivian Sandbox Ventures, which specializes in funding food and agricultural companies, led the group of investors that also included the Southwest Michigan First Life Science Venture Fund, Open Prairie Ventures, Michigan Accelerator Fund I, and Pangaea Ventures. WINTER 2014

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The funding will help Vestaron commercialize its first product, which received U.S. Food and Drug Administration approval in February.

ley Executive Search; and Dr. Frank Saltiel, medical director of cardiology and an interventional cardiologist at Borgess Health.

Startup LevelEleven raises $2M in VC funding

Plex Systems closes on $50M in financing for software production

Detroit-based LevelEleven, a spinoff from Pleasant Ridge-based Internet marketing firm HelloWorld, announced in August that it raised $2 million in new venture capital funding, primarily from current investors. Among the new investors in LevelEleven, a sales motivation software company in the Detroit Venture Partners portfolio, are the Dallas Angel Network and the Florida-based Tamiami Angel Fund. The funding is in the form of a convertible note, which converts into equity once Series A funding is secured. Founder and CEO Bob Marsh said he expects LevelEleven to secure Series A funding within the next year. DVP was the lead on this latest round of funding.

Plex Systems Inc. closed on $50 million in new financing to accelerate sales and marketing of its cloud-based manufacturing software. The funding was led by institutional and hedge funds managed by T. Rowe Price Associates Inc., the company said in a July news release. Troy-based Plex previously received $36.5 million in funding from Palo Alto, Calif.-based venture capital firm Accel Partners and San Francisco-based private equity firm Francisco Partners Management LLC.

Kalamazoo VC fund raises $2M toward goal A new Kalamazoo-based venture capital fund closed on its first fundraising phase in July, although organizers had hoped they would be closer to their $10 million goal. The Novus Biotechnology Fund I continued to seek additional investors after closing on $2 million committed from about 20 investors, an amount that’s less than co-managing partner Kevin McLeod expected to have nine months after starting the process. “The capital raise is a lot slower than we’d like,” McLeod said. “We have to be much more aggressive and proactive in the approach.” Novus Biotechnology Fund I invests in startup companies that are commercializing new medical devices or technologies. Formed last fall, the fund has primarily targeted individual physicians who may want to invest in medical innovations in the earliest stages of development and who can participate in the due diligence to vet the ideas’ market viability. General partners include McLeod, the managing director of the Michigan Medical Device Accelerator in Kalamazoo; Greg Schultz, former executive director and CEO of the Kalamazoo-based Borgess Heart Center for Excellence and the present managing director at Schultz & Row-

The new $3.8 billion Beaumont Health consists of eight hospitals with 3,337 beds, 153 outpatient sites, more than 33,000 employees and about 3,500 volunteers. There are also more than 5,000 physicians that belong to multiple physician organizations and medical staffs.

Renaissance VC invests $4M in Plymouth Venture III The Renaissance Venture Capital Fund, the Ann Arbor-based fund created by Business Leaders for Michigan, announced in April that it has invested $4 million in Plymouth Venture Partners III. PVP III is the latest and largest fund of Ann Arbor-based Plymouth Management Co., the venture capital firm founded by the dean of Michigan’s VCs, Ian Bund. PVP III has a target of $60 million. That investment follows a recent commitment in PVP III of $15 million from the state’s $120 million Venture Michigan Fund II, managed by Southfield-based Grosvenor Capital Management LP. PVP I was $23 million and PVP II $41 million.

M&A deals Three major health systems merge in Southeast Michigan Three of Southeast Michigan’s major health systems announced in September a merger of the systems. The transaction was between Royal Oakbased Beaumont Health System, Dearborn-based Oakwood Healthcare Inc. and Farmington Hills-based Botsford Health Care.

Gene Michalski, CEO of the newly formed entity Beaumont Health

Talmer Bancorp to acquire two banks for $13.4M Troy-based Talmer Bancorp Inc. (Nasdaq: TLMR) announced in August that it has agreed to acquire First of Huron Corp. of Bad Axe and its wholly owned subsidiary, Signature Bank, in a deal valued at about $13.4 million. Under the terms of the agreement, each holder of outstanding shares of common stock of First of Huron Corp. will receive $25 per common share. The deal, which requires approval from state and federal regulators, is expected to close in the fourth quarter this year or the first quarter next. First of Huron had about $228 million of assets as of June 30. Talmer had assets of about $5.6 billion.

Michigan community banks cash in on M&A Chemical Financial Corp.’s recently proposed $26 million acquisition of Coldwater-based Monarch Community Bank is See Page 25 Page 23

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From Page 23 the latest community bank deal in a Michigan market that has seen consolidation activity pick up in 2014. Midland-based Chemical Financial cut the deal with Monarch, which has five offices in southern Michigan and assets of $177 million, just days after closing on a $121 million acquisition of Northwestern Bancorp Inc. in Traverse City. Northwestern has 25 offices in 11 locations in northwestern Michigan. Chemical Financial has repeatedly signaled an interest in using acquisitions to grow, as has Grand Rapids-based Mercantile Bank Corp., which closed on a $151.5 million merger with Alma-based Firstbank Corp. this summer, making it one of the largest banks based in Michigan. Out-of-state banks are also signaling their interest in the Michigan market with acquisitions of homegrown community banks. Evansville, Ind.-based Old National Bancorp bought Ann Arbor-based United Bancorp Inc. for $173 million in January. In July, Old National announced it would acquire Grand Rapids-based Founders Financial Corp., the holding company for Founders Bank & Trust, for $88.2 million. The Founders acquisition is expected to close by year end.

Perrigo expands with purchase of OTC producer Perrigo Co. plc plans to significantly expand its presence in Europe with the $4.5 billion acquisition of Omega Pharma NV, a Belgian-based producer of over-the-counter medications. Omega, the fifth-largest player in Europe’s $30 billion OTC, makes about 2,000 products, ranging from cold and cough medicines, skin care and pain relievers. Omega generated sales of $1.6 billion for the fiscal year that ended Sept. 30. Perrigo (NYSE: PRGO) expects the deal to close in the first quarter of 2015, pending regulatory approvals. The Omega Pharma acquisition comes after the $8.6 billion deal that closed last December for Elan Corp. of Dublin, Ireland. The deal resulted in the domiciling of a new corporation in Ireland and provided Perrigo with a base to grow into the European market.

Unique Fabricating files for IPO, looks to raise $15M Unique Fabricating Inc. plans to go public. The Auburn Hills-based supplier of die-cut plastic and foam components filed a WINTER 2014

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registration statement for an initial public offering in November with the U.S. Securities and Exchange Commission. Unique plans to raise between $14.93 million to $17.25 million in the IPO by selling 1.9 million shares at a price range of $8 per share to $10 per share. The pricing indicates the supplier has a market cap of roughly $81 million. Unique will be traded on the New York Stock Exchange under the symbol UFAB. No timeline has been set for the offering.

Plymouth-based Metaldyne files for IPO Metaldyne Performance Group Inc. filed with U.S. regulators in August for an initial public offering. Plymouth Township-based Metaldyne Performance expects to raise $150 million in the IPO, according to documents filed with the U.S. Securities and Exchange Commission. Its stock will be listed under the symbol MPG, and all shares in the offering would be sold by the selling stockholders. The filing did not include a timeline for when the company would go public.

son City, Tenn., in September for $245.2 million in cash, $25 million in stock and the assumption of $29.8 million in debt. A $250 million (annual revenues) supplier of components for fuel systems, engines, transmissions, power steering and electric motors, Autocam employs more than 2,100 people at 15 plants in the U.S., Europe, South America and Asia. Autocam Founder and CEO John Kennedy became a “significant shareholder” of NN Inc. (Nasdaq: NNBR) and was named to the company’s board of directors in September. Autocam made headlines last year when it challenged the Affordable Care Act in court. Kennedy has an ongoing lawsuit before the Supreme Court over a section of the ACA that requires employers to provide birth control coverage, which he opposes on religious grounds. He told MiBiz that he planned to drop Autocam Corp. from the lawsuit after the sale of the company, but would proceed with the suit through his closely held Autocam Medical business, which was not included in the NN transaction.

Snowplow maker to be acquired by Toro for $227M Iron Mountain-based Northern Star Industries Inc. announced in late October that it plans to sell off its BOSS snow and ice management business to Bloomington, Minn.-based The Toro Co. (NYSE: TTC), according to a statement. Toro said it expects to pay $227 million for the closely held Michigan business in a deal that’s expected to close in the first quarter of the company’s 2015 fiscal year, pending closing conditions and regulatory approvals. BOSS designs, manufactures and sells snowplows, salt and sand spreaders for light- and medium-duty trucks, as well as ATVs. The Michigan company anticipated 2014 sales would be around $125 million. “As a privately-held business in a smaller community, it is essential to us that BOSS transition to a company that not only is well-positioned to take us to the next level but also shares our commitment to innovation, customers, employees and the communities in which we live and work,” BOSS President David Brule II said in a statement.

Auto supplier Autocam bought for $300M Grand Rapids-based automotive components supplier Autocam Corp. was acquired by publicly traded NN Inc. of John-

John Kennedy

Platinum Equity sells boat business Four years after it bought the assets of bankrupt recreational and fishing boat maker Genmar, private equity firm Platinum Equity moved to exit the business. In June, Platinum Equity sold Cadillac-based Rec Boat Holdings to Beneteau Group, a French maker of sailing and motorboats. Rec Boat Holdings manufactures Four Winns, Glastron, Wellcraft and Scarab boats. The deal with Beneteau did not include Platinum Equity’s fishing boat business, Flippin, Ark.-based Fishing Boat Holdings, maker of the Ranger, Triton and Stratos boat brands. See Page 27 Page 25 FALL 2006

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From Page 25 Platinum Equity reportedly hired an investment banking firm to sell off the fishing boat assets for up to $250 million, according to a September report in PEHub. Platinum Equity founder and Michigan native Tom Gores has other holdings in the state including the Detroit Pistons, Palace Sports & Entertainment, Active Aero and Chassix.

Herman Miller acquires Designs Within Reach In a move that opens a broader consumer distribution network for the company, Herman Miller Inc. acquired a majority share of a Stamford, Conn.-based marketer and seller of furniture, lighting and accessories. Zeeland-based Herman Miller (Nasdaq: MLHR) paid an estimated $154 million in cash for an 84 percent stake in for Design Within Reach Inc., which sells modern furniture through 38 retail locations in the U.S. and Canada, a print catalog and ecommerce. The 16-year-old Design Within Reach had revenues of $218 million in 2013 and is the largest and fastest-growing retailer of Herman Miller’s furniture designs.

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calade Inc. of Evansville, Ind. Martin Yale manufactures table-top trimmers and office machines, paper punches, catalog racks and reference systems, ergonomic computer management accessories and folders and letter openers. LV2 Equity Partners focuses on acquiring niche manufacturers, value-added distributors, and specialty service companies in the Midwest.

Other news Texas VC firm opens branch in Ann Arbor Houston-based venture capital firm Mercury Fund raised $100 million for its newest fund and announced plans in November to open an office in Ann Arbor. It also recruited Adrian Fortino, formerly a vice president at Invest Detroit, to run the office. Mercury looked hard at opening an office in Chicago but chose Ann Arbor because “there’s so much development talent in Michigan.”

Gift from entrepreneur to boost Wayne State tech transfer

West Michigan PE firms active in acquisition market Two private equity firms with operations in Grand Rapids closed on acquisitions in recent months. Grand Rapids-based private equity firm Blackford Capital Associates Inc. has acquired its fourth Michigan company via its Michigan Prosperity Fund: Fentonbased Burgaflex North America Inc. The company is a manufacturer of coolant and hose systems for the heavy truck, agricultural and off-road markets. Terms were not disclosed. Mercantile Bank Corp. and Capitala Finance Corp. provided financing for the transaction. The Michigan Prosperity fund, created in 2012, invests specifically in Michigan manufacturers, with its portfolio reaching from Grand Haven to the metropolitan Detroit area. Blackford Capital’s portfolio also includes Grand Rapids-based Custom Profile Inc., Mopec Inc. in Southeast Michigan and Grand Haven-based Grand Transformers Inc. LV2 Equity Partners LLC, a private equity group with offices in Grand Rapids, Midland and Lansing, acquired the print finishing business of Wabash, Ind.-based Martin Yale Industries Inc. from Es-

based investors launched a new crowdfunding portal in June. Loquidity.com — short for “local liquidity” — plans to promote potential real estate deals in Michigan and around the Midwest, said co-founder and CEO Jesse Clem, a real estate investor in West Michigan for the last seven years. The portal’s first listing was for a multifamily complex in Grand Rapids. Loquidity sought accredited investors to participate in a $3.4 million deal, with $1.4 million coming directly from the backers of the portal. Loquidity plans to feature primarily deals involving multi-family housing, Clem said. That will allow it to tap into what’s expected to be an active sector for construction through 2015, as forecasted by the Federal Reserve Bank of Kansas City. The multi-family housing sector has been particularly active in the Grand Rapids area in recent years, particularly for projects that involve low-income housing because of the availability of key incentives, including the Low-Income Housing Tax Credit. Developers have poured hundreds of millions of dollars into projects in and around downtown Grand Rapids in the last three years, as reported by MiBiz.

Adrian Fortino, formerly a vice president at Invest Detroit, will run the new Mercury Fund office in Ann Arbor.

GR crowdfunding portal eyes multifamily housing Frustrated with traditional real estate investment models, a pair of Grand Rapids-

A $25 million gift was announced in October for a new institute to create startup companies in Wayne State University’s College of Engineering. The donation comes from James Anderson, founder of Detroit-based Urban Science Applications Inc., and his wife, Patricia. The James and Patricia Anderson Engineering Ventures Institute will be intended to encourage faculty and students to think of commercial applications for new technologies and provide mentors to teach best practices in research innovation, technology transfer and commercialization. Anderson got his undergraduate degree in civil engineering from WSU in 1966 and his master’s degree in 1970. He was an instructor in the College of Engineering in 1967 as he began developing models and computer mapping techniques that led him to form Urban Science, a global automotive retail consulting firm with more than 850 employees in 19 offices around the world. Employees at Urban Science will serve as mentors and coaches. “We started at Urban Science with $1,000 and a $500 map, and we’ll be over $200 million (in revenue) next year,” he said. “We had to learn it the hard way. Maybe we can make it a little easier for them.” Page 27

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Startups & pitches Statewide competitions bring out the best in creative new companies ichigan’s infrastructure for startups is alive and well as pitch competitions continue across the state. The formats vary, but the idea is clear: Pitch your idea to an audience or judging panel, and a winner is chosen. A few competitions and winners from this year are listed below:

Accelerate Michigan Innovation Competition: A grand prize of $500,000 was given to SkySpecs LLC, an Ann Arbor-based maker of drone aircraft to inspect bridges, wind turbines, buildings and other infrastructure. The award was given in November, as part of the fifth annual Accelerate Michigan Innovation event. Ann Arbor-based Cribspot.com, a startup that helps college students find places to live while helping mom-and-pop owners manage their rental properties, won $100,000 as runner-up. Other prize winners: 䡲 The Next Energy Alternative Energy Prize: Solartonic LLC, Ann Arbor, a maker of off-grid lighting systems — $25,000 䡲 Information technology: Ornicept, Ann Arbor, with products to manage natural resource data — $25,000 䡲 Advanced materials: Akervall, Saline, maker of mouthguards and other protective products — $25,000 䡲 Products and services: SurClean, Wixom, which offers laserbased technology for removing paint and other coatings from multiple surfaces — $25,000 䡲 Life sciences: FreeStride, Ann Arbor, a veterinary pharmaceutical company — $25,000 䡲 Medical devices: Ann Arbor-based AlertWatch LLC, which makes real-time patient-monitoring tools for hospitals — $25,000 䡲 Advanced transportation: Inventev, Detroit, which provides mobile power generation for truck fleets to run tools and accessories at job sites — $25,000 䡲 Advanced manufacturing: BEET Analytics Technology, which makes software to reduce factory downtime and improve maintenance scheduling — $25,000 䡲 People’s choice award, based on a vote of the audience for the second straight year: TurtleCell — $10,000

Rise of the rest Stik.com, a social media startup that moved from San Francisco to Detroit, took home the top prize in June during the pitch competition as part of AOL founder Steve Case’s Rise of the Rest tour stop in Detroit. Stik.com allows friends on Facebook to make recommendations to one another on attorneys, doctors, dentists, real estate agents and other professional services. In awarding the $100,000 prize, Case said Stik was a company that is unique to Detroit — but could be started almost anywhere.

Detroit Homecoming Detroit-based startup Ginkgotree was crowned the winner of a pitch contest at the Detroit Homecoming event in September. Page 28 FALL 2006

ROBERT CHASE

Looking for a way to inspect bridges, buildings or other infrastructure? SkySpecs LLC, an Ann Arbor-maker of drone aircraft, won the grand price of $100,000 at the fifth annual Accelerate Michigan Innovation event in November.

The event, hosted by Crain’s, included a pitch competition with four Detroit-based startups. The winner was picked after the audience — prominent business executives with Detroit ties who came to Detroit to reconnect and invest in their hometown — picked Ginkgotree in a popular vote. The company allows educators to create online collections of course materials for students.

Startup weekend Out of 33 business pitches, the Startup Weekend event in Detroit crowned a winner after a weekend of pitches in November. Top honors went to Magic Book, an augmented reality app for children’s books that makes characters and scenes come to life. Second place went to Gathrd, a mobile app that creates opportunities for event and conference attendees to meet up in real life. Third place went to MySwimPal, a mobile app that allows users to receive custom swim workouts from coaches. The three teams will represent Detroit in the 2014 Global Startup Battle, which was to begin Nov. 26. In the virtual event, they will be up against teams from more than 250 cities around the world. WINTER 2014

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