07 May Biotech officials praise focus of new venture fund
Milwaukee, Wis. – Ordinarily, the news that Wisconsin, which is struggling to gain traction in the venture capital game, is losing one of its key venture capital firms would be greeted with dismay, but Mason Wells‘ decision to spin off its venture capital business is being greeted as a positive sign for the state’s technology industry.
The private equity firm, which has managed more than $500 million in capital through its two fund families, Mason Wells Buyout Fund and Mason Wells Venture Funds, says it will reposition its business to focus on buyouts. The venture capital spin off, to be called Broadwell Ventures, will be run by Dan Broderick, who served as managing director for Mason Wells Venture Funds.
Broderick is working to transition $35 to $40 million in funds already committed to Mason Wells Biomedical Fund II. The new fund will make investments in early-stage medical device, biotechnology, and pharmaceutical companies in Wisconsin and the Midwest, and Broderick likes the regional possibilities.
“It’s an exciting time for early-stage investing in the life sciences in the Midwest,” Broderick said. “I’m totally excited about that.”
The creation of a specific venture capital fund was welcome news to Jim Leonhart, executive vice president of the Wisconsin Biotechnology and Medical Device Association.
“I think it’s a very good thing because part of the mission is to provide a large focus to biotechnology investments,” Leonhart said. “I think Mason Wells recognized there are real opportunities in the biotechnology industry and they can focus on it better.”
Jim Prekop, CEO of TeraMedica, a Milwaukee-based medical software company that is part of the Mason Wells portfolio, said Mason Wells made a smart business decision, and noted that John Byrnes, executive managing director of Mason Wells, said separating the buyout and venture capital businesses is the best thing for both.
“Having a dedicated company run by Dan [Broderick] for specific, targeted investments has to be a good thing,” said Prekop, who said his business will not be impacted by the spin off. “As John Byrnes pointed out, there will be no confusion about what Dan Broderick will be doing.”
Another positive is Broadwell Venture’s interest in syndicated deals. To a greater extent than Mason Wells Venture Funds, which sometimes was the sole investor in its deals, Broadwell Ventures will participate in syndicated deals with other venture capital groups.
Leonhart welcomed the team approach, noting Broderick’s extensive contacts regionally and nationally. Broderick, a member of the board of the National Venture Capital Association, is the founder of Midwest Healthcare Investors, a network of 60 venture capital firms.
John Neis, founding partner of Venture Investors, said syndicated deals are the most common type of venture deal structure. Neis said most of the companies seeking funds need tens of million of dollars to reach their business goals, and there are very few individual venture funds that can do that or can offer the diverse business expertise that a syndicate can.
Mason Wells will continue to manage the portfolio companies in its first biomedical fund, which was established in 2000. They include Wisconsin companies Delatanoid Pharmaceuticals, Madison; OpGen, Inc., Madison; ZyStor Therapeutics, Milwaukee; and TeraMedica.
OpGen, a Madison-based DNA analysis company, and Zystor, a Milwaukee-based developer of enzyme replacement therapies, are trying to put together subsequent funding rounds.
Byrnes said the separation of the buyout and venture businesses would not impact those plans, and the recent sale of NameProtect generated proceeds that can be recycled into the existing portfolio.
Citing the maturity of companies like Epic, McKesson, and GE Healthcare, he also said the venture capital window has closed to some extent on biomedical information technology, a focus of Mason Wells’ first biomedical fund. Most of today’s start-up deal flow is in the areas of genetics, pharmaceuticals, and medical devices, which is where Broderick is going to position the new fund.
“We don’t see the opportunities in [medical] software that we did 10 years ago,” Byrnes said.
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