Small companies seek cash
6:01 PM 11/01/03
Judy Newman Business reporter

Bioscience meets bankroll at the Wisconsin Life Sciences & Venture Conference in Madison this week. <

Informally, it's known as the venture fair, where budding biotechnology business chiefs face a roomful of potential investors and industry colleagues, and make a pitch for money. <

This year's conference - the 20th - will be held Monday through Wednesday at Monona Terrace, and it features more companies from a wider area than ever before. <

Their technology includes miniature laboratory tools, drugs under development to fight cancer and treat Alzheimer's disease and software that can connect medical imaging devices and physician desktops. <

And the show comes at a time when funds for those types of ventures are starting to loosen up, experts say. <

Twenty biotechnology companies will make formal presentations - nearly twice as many as usual - and 13 others will have exhibit space. Of the 33 businesses featured at the event, 20 are from Wisconsin; the rest are mainly from other Midwestern states, but some are coming from as far as St. Louis, Mo.; Louisville, Ky.; and Wayne, N.J. <

"In many respects, this is one of the most exciting venture fairs to date," said John Neis, senior partner with Venture Investors in Madison and a conference steering committee member. <

The bigger pool of businesses shows there are more "quality companies" to showcase, Neis said, and they may attract a wider range of potential investors. "The better the group of companies presenting, the more likely investors will come here," he said. <

More than 50 companies applied to participate, said Tom Still, president of the Wisconsin Technology Council, which is producing the conference along with the Wisconsin Biotechnology Association and the Wisconsin Innovation Network Foundation. <

Among the applicants was APT Therapeutics of St. Louis, which was chosen to be one of the 20 presenting companies. APT is working on several drugs based on technology that involves changing the shape of proteins to dissolve blood clots. The drugs are aimed at people who suffer strokes, as well as those with blood clots in areas from the lungs to the legs, said Eric Leire, president and chief executive officer. <

APT is involved in animal tests on three products and hopes to begin human clinical trials in 2006, Leire said. The company has received a first round of funding and wants to raise another $8 million so it can move ahead with testing and research. <

Leire heard about Madison's venture fair from several of last year's presenting companies as well as from investor groups in the St. Louis area. <

"It's certainly famous. A lot of people knew about it," Leire said. "I hope there will be top-tier venture capitalists that will attend." <

While the registration list was not complete last week, Still said there has been "strong interest" from venture capital companies out-of-state, as well as in Wisconsin. "Firms from throughout the Upper Midwest and a couple of coasts plan to come," he said. <

ConjuGon, a Madison company that grew out of UW-Madison research, also is hoping its presentation will result in a funding round that will let it proceed to clinical trials in 2006. ConjuGon is about to begin animal tests on its technology, which is a "fundamentally new way to kill bacteria," said chief operating officer Sal Braico. <

"We use good bacteria to kill bad bacteria," Braico said. Using research by UW microbiologists Marcin Filutowicz and Richard Burgess, certain types of bacteria can carry special pieces of DNA and transfer them to the harmful bacteria. <

"It's kind of a Trojan horse," Braico said. "We will really pass some genes that will kill them." ConjuGon plans to make a series of products that may target any of a range of bacteria, from the E. coli that causes food poisoning to the type tied to ulcers. The company, with four employees, has received about $900,000 in seed capital and loans and hopes to raise another $3 million to $4 million to develop its first product. <

Another presenting company with roots in UW-Madison research is Virent Energy Systems. Using sugars from crops like corn, Virent says it can produce hydrogen for use in fuel cells. Those fuel cells might replace batteries in your laptop computer or cellular phone; they might be used in cars or they could provide power for your home or community some day, said Randy Cortright, chief executive officer and chief technical officer. <

Virent has six employees and $2.24 million in government funding and hopes to land another infusion of cash. "We're looking for money right now so that we can build a prototype that can fit into a suitcase" to cart around for demonstrations, said Cortright, who developed the technology with Jim Dumesic, both chemical engineers. <

"The projected time for the fuel cell market to start taking off is next year," Cortright said. "We're looking at having our device far enough along that fuel cell companies are interested, starting next year." <

Venture capital funding is a risky business. It involves putting early-stage, or seed, money into promising ideas to start to prepare them for the marketplace or giving them a larger amount of financing to help them grow. For biotechnology companies, in particular, it can take years before the first product is ready for government approval. Considered a long shot, the payoff can be a big one if the company is successful. <

For the first three quarters of this year, nationwide, venture capitalists invested $12.8 billion into budding companies, according to the MoneyTree Survey by PricewaterhouseCoopers, Thomson Venture Economics and the National Venture Capital Association. <

That's substantially below last year's pace, when investment totaled $21.3 billion for the year, and it is a sharp drop from the heyday in 2000, when venture firms poured $106.2 billion into businesses. <

But figures have held steady this year at about $4 billion in investment per quarter. It's a "realistic balance between entrepreneurial enthusiasm and venture capital risk," said Tracy Lefteroff, global managing partner of venture capital for PricewaterhouseCoopers, in a written statement. <

In Wisconsin, venture investment totaled $37.5 million for the first three quarters of this year compared to $51.5 million for all of 2002, according to the survey. <

It hasn't been difficult to raise the $300,000 to $500,000 it takes to get a company started, but coming up with $1 million or $2 million to "make things operational - that is hard to find," said Terry Sivesind, manager of Wisconsin Investment Partners, an angel investor group with 21 members from the Madison and Milwaukee areas. Angel investors are generally wealthy individuals. <

Most of the companies seeking funds in Wisconsin are early-stage, said Venture Investors' Neis. "We just haven't had a lot of capital in this state," he said. "It's really prevented a lot of those companies from breaking out and getting to the next stage." <

In addition to venture firms and angel funds, the Wisconsin Alumni Research Foundation, or WARF, took equity positions in five Madison startup companies last year: ConjuGon, Virent, Helix Diagnostics, Platypus Technologies and Scarab Genomics. So far this year, WARF has taken equity in Novascan, a Milwaukee company. <

Investors today are looking for companies to be more business-oriented, said Michael Falk, WARF's licensing manager and patent counsel. "There's a lot more focus on getting a product to market and a lot more focus on being lean," he said. <

The promise of an additional $90 million from the state Investment Board and calls for even more capital from the state may give Wisconsin companies a boost. On the national scene, meanwhile, more companies are filing for initial public stock offerings than a year ago. <

"I think we have worked out most of the painful period that followed the post-March 2001 market collapse," when funds were hard to muster and companies had to scale back their operations and vision, Neis said. Now, deals are in the wind again and "people are comfortable that the worst is over." <

Venture fair presentations will be made on Tuesday; each of the 20 companies chosen will have 12 minutes to explain its business. Tom Loftus, a former Wisconsin legislator and former U.S. ambassador to Norway, will be the keynote speaker Tuesday. He is a special assistant to the director-general of the World Health Organization. <

Gov. Jim Doyle will give the keynote address Wednesday. <