Indiana Future Fund distributes investments – 4 selected venture capital firms will back life sciences efforts

The $73 million Indiana Future Fund announced its first investments Friday.

Yet there was a decidedly un-Hoosier flavor to the four venture capital firms that were chosen.

By:
Bill Theobald
Indianapolis Star News

http://www.nasvf.org/web/allpress.nsf/pages/8753

These firms in turn will dole out the money to companies in the coveted life sciences sector.

The major financial players in each of the four firms are based in other states — California, North Carolina and Michigan.

Whether that has any effect on the ultimate goal of the fund — to promote creation of businesses in Indiana that are on the cutting edge of biotechnology — is open to debate.

Chuck Schalliol, CEO of BioCrossroads, the collaborative life sciences effort in Central Indiana, said each of the four has an Indiana connection. Indeed, REI is a joint venture between Rose-Hulman Ventures in Terre Haute and EDF Ventures, based in Ann Arbor, Mich.

Schalliol said the fund manager, Credit Suisse First Boston, made the choices based on criteria provided by BioCrossroads.

One of those goals, which are not contractual, is that 60 percent of the money be invested in life sciences initiatives and 60 percent stay in Indiana, Schalliol said.

But one Indianapolis-based venture capital firm that was not chosen for this fund-to-fund investment finds the lack of a strong Indiana presence notable.

"I think it’s significant that the Indiana Future Fund did not deem any of the firms based here in Indiana, that know this market, to merit funding," said Kent Hawryluk, partner of Twilight Venture Partners.

Twilight has many Indiana connections and has invested in four Indiana-based companies. At the same time, Hawryluk was a founding general partner of a venture capital fund affiliated with The Jordan, Edmiston Group Inc., based in New York City.

Hawryluk said he is "not a bit angry" and his investors are moving on, having already committed $5 million and now looking for firms in which to invest another $10 million.

Jeffrey Sohl, director of the Center for Venture Research at the University of New Hampshire, pointed out that these fund-to-fund transactions and fund-to-company transactions, are just that — business deals where the people involved want to make money.

He said BioCrossroads officials and those who oversee the Indiana Future Fund retain leverage over where the money ultimately is invested.

The Future Fund includes investments by Indiana’s public pension funds; Indiana, Purdue, Ball State and Indiana State universities; the Indiana University Foundation; Eli Lilly and Co.; Anthem Blue Cross and Blue Shield; American United Life Insurance Co.; and Guidant Corp.

The conundrum of putting together venture capital in Indiana is that there are relatively few firms and little venture capital investment in the state.

In the United States, $18.2 billion in venture capital was invested last year in 2,715 companies, according to a study by PricewaterhouseCoopers. California led the nation, by far, with $7.7 billion in venture capital invested in 1,016 deals. Indiana is lumped with "other" in the study, which totaled $9.4 million.

Schalliol declined to disclose the amounts each venture firm received, and said that some of the $73 million remains to be invested.

"Our strong desire is that 100 percent (of the money) be used in Indiana," he said.

4 chosen to invest in Indiana’s future
The Indiana Future Fund has announced it has invested in the following venture capital firms:
REI, a joint venture between Rose-Hulman Ventures, which has about $9 million in venture capital, and EDF Ventures, an Ann Arbor, Mich.-based firm with Indianapolis offices. It manages $117 million spread over three funds.

Pearl Street Venture Funds, a joint venture between Indianapolis advisory and management firm Barnard Associates and Coastview Capital, Los Angeles-based venture capital firm with $72 million under management.

A.M. Pappas & Associates, based in Research Triangle Park, N.C., with offices in Indiana. A.M. Pappas manages $150 million.

Burrill & Co., a San Francisco-based life sciences merchant bank with offices in Indiana. Burrill has $500 million under management.
Source: BioCrossroads, Star research.