July 11, 2005 »»» $10 Million Seed Fund About to Take Off - Venture Fund Will Invest in Early-Stage Life Sciences Companies Across the State. A group of state and local leaders active in the venture-capital, life-sciences and economic-development industries quietly has been soliciting investments for a locally based venture fund to provide seed capital for Kentucky and Louisville-area life-sciences companies. The effort is being led by George Emont, a partner with Triathlon Medical Ventures LLC. Hospital HealthCare Services Inc. and the Louisville Presbyterian Theological Seminary, according to a previous Business First report. Emont said he cannot publicly discuss his efforts to raise investments for the Kentucky Seed Capital Fund because of U.S. Securities and Exchange Commission rules related to soliciting investments. But he said the fund is expected to initially raise about $3 million for investments in health care-related businesses in Louisville and Kentucky. Eventually, organizers hope to raise more than $10 million to fund initial and follow-on investments in local companies, Emont said. He added that he expects to soon receive the first funds from investors and make the fund's first investments within a few months. The fund will be managed by Emont and Steve Gailar, president and CEO of MetaCyte Business Lab. MetaCyte is a business incubator that is part of the Louisville Medical Center Development Corp. The LMCDC is a public-private partnership created to support life-sciences businesses. The organization operates three facilities in downtown Louisville that house life-science and information-technology startups. Gailar confirmed that fund organizers are close to making an announcement but directed questions about the fund to Emont. U of L and state are largest investors Currently, the two largest investors in the developing seed fund are the University of Louisville Foundation and the state of Kentucky -- through Commonwealth Seed Capital LLC, said Emont. Each institution has committed $1 million to the seed fund. Other commitments have been made by the James Graham Brown Foundation Inc., Jewish Hospital HealthCare Services and Baptist Healthcare System, said Emont. But he declined to disclose the amount of the commitments from the other investors. He added that about 10 to 15 individual investors also will participate in the Kentucky Seed Capital Fund. He also declined to identify those investors but said most are from the Louisville area and Kentucky. Craig Greenburg, an attorney with the Louisville office of Frost Brown Todd LLC who also serves as general manager of Commonwealth Seed Capital, said state economic development officials became interested in the Kentucky Seed Capital Fund because its goals fit well with those of the state's fund. "The investment strategy of the Kentucky Seed Capital Fund furthers the mission of "the state's fund, he said. "George's fund will provide seed capital primarily, if not exclusively, for Kentucky-based companies. "We recognize that one of Kentucky's largest new economy strengths is in the life sciences," Greenburg added. "And funding one of these initiatives that funds companies with high-growth potential is an important part of our mission." An individual investors in the seed fund is Kent Oyler. Oyler, a local entrepreneur who has formed several local companies and serves as Louisville Metro Mayor Jerry Abramson's special assistant for entrepreneurship, said he has been involved in promoting the need for venture and seed capital because he believes it helps the community. "I think this is going to be one of the most important initiatives in terms of venture capital in the community," said Oyler. "In 20 years, the economic vibrancy of the community will reflect what we are doing now" to support startup companies. Life-sciences businesses need funds University of Louisville President James Ramsey said he hopes the fund will help with the university's goal of increasing commercialization of its research. An institution under House Bill 1," said Ramsey, referring to a 1997 state law that set a goal for the university to become "a nationally recognized metropolitan research university." As part of that legislation, the state created the Research Challenge Trust Fund, more commonly known as "Bucks for Brains." The program has helped U of L recruit more than 45 professors and researchers. Organizers of the seed fund hope to use the capital raised for the fund to invest in some of the early-stage and startup companies created by those researchers. The fund also will invest in companies from other parts of the state and parts of Southern Indiana. "A lot of things are happening in Louisville in the life-sciences field, and very, very key to that is having the research," said Ramsey, adding that U of L has about three or four researchers who could use money from the seed fund to form companies. Emont said seed capital "is needed both for recruiting and retention" of local researchers and the companies they create. Through his work with Triathlon, he has identified 10 to 15 life-sciences-related companies across the state that might be candidates for seed capital, he said. Those companies include biotechnology and medical device companies as well as businesses that provide services to the health care industry. Most of the companies are too early in their development to be eligible for investments by Triathlon. But the seed fund is expected to provide "a pipeline of investment opportunities" for venture firms that invest at later stages such as Triathlon or Louisville-based Chrysalis Ventures LLC, he said. The seed fund will look for investments in about a dozen of those companies or other companies that develop or come forward during the next few years. Emont and Gailar will look to invest in companies "that have shown some proof of concept in the lab" and have "some basic understanding of what the business plan will look like," said Emont. The fund, which will make initial investments of $50,000 to $200,000, also will reserve funds for follow-on investments. Fund might boost economic development Emont said he already has had several inquiries from health-related companies in Nashville and other areas that would consider relocating to Kentucky if they could receive capital from the fund. He declined to disclose any of those companies. Mark Crane, executive director of The Enterprise Corp., said the idea for the seed fund stemmed from a task force created last year to study entrepreneurship in the Louisville area. That task force, which included representatives of local and state governments as well as private organizations and businesses, suggested that one of the community's greatest needs is generating investment capital for early-stage companies. The Enterprise Corp. supports fast-growth, entrepreneurial companies in the region and is a subsidiary of Greater Louisville Inc., the metro chamber of commerce. Emont said the need for seed capital is one that is common among communities, especially since many venture funds have become too large to make relatively small investments to fund startup companies. "When you have $100 million or $200 million to invest, you typically can't afford to make a $100,000 investment or even a $1 million investment," said Emont. "It basically takes the same amount of work" whether it is a large or small investment. Crane said he is happy that Emont is close to raising enough capital to launch the seed fund and begin investing in companies. "What is great is, it is not a matter of if -- it is a matter of how soon and how big." Back to NEWS HEADLINES