A Medical Device Daily
Robert LaPenta has reported the formation of L-1 Investment Partners (Stamford, Connecticut), a private investment management firm specializing in the biometrics industry.
Biometrics refers to the emerging field of technology devoted to identification of individuals using biological traits, such as those based on retinal or iris scanning, fingerprints or face recognition.
L-1 will acquire or make controlling investments in public and private companies. It will then add what it said is “strategic value” by providing working capital and management oversight as well as utilizing its established relationships in the Department of Defense, Transportation Security Administration and the financial community.
“We see biometrics as an emerging sector with tremendous growth potential,” said LaPenta, chairman and CEO of L-1. “The technology is coming of age at a time when spending on higher security is a priority for just about every sector of government including municipalities, as well as the rest of the economy.”
He said that market research firms following the biometrics market are projecting annual growth rates in excess of 50% for the next several years, reaching a potential $4.5 billion for the industry by 2009.
A spokesperson for L-1 told Medical Device Daily that the firm’s acquisition targets are companies that may just need more capital, or in other cases, better management.
“I would say they are looking for the companies that have the potential to show tremendous value, they’re looking for those up-and-comers . . . that need more capital,” the spokesperson said.
According to LaPenta, timing is optimal. “Today the industry consists of hundreds of small entrepreneurial companies, typically undercapitalized and undermanaged. Our goal is to acquire well-positioned companies, then provide capital and management to build them into world-class companies that grow with the expanding global use of biometrics.”
BioCrossroads (Indianapolis), Indiana’s life sciences initiative, reported the formation of Indiana Seed Fund I, a seed-stage pre-venture capital fund designed to promote business formation and growth in the state’s life sciences sector.
The $4 million seed fund, which is return-driven, will provide working capital in the range of $50,000-$500,000 to what are deemed “promising” Indiana life sciences companies at the preliminary stages of operation.
Since its inception, BioCrossroads has focused on expanding Indiana’s life sciences sector by encouraging entrepreneurial development, and has identified access to capital as a key priority.
Along with the Indiana Seed Fund, BioCrossroads led the formation of the Indiana Future Fund, a $73 million “fund of funds” that has engaged a local and national network of venture firms to make early stage life sciences investments in the state.
The Indiana Seed Fund was formed to help narrow the gap between the discovery of an idea and actual venture capital funding and to prepare companies for venture investments through vehicles like the Indiana Future Fund I.
“Indiana has a critical mass of research capacity and intellectual property, from both our world-class universities and our corporate R&D strength,” said David Johnson, BioCrossroads CEO. “But turning these assets into new and lasting business opportunities requires funding at every stage of the entrepreneurial lifecycle. With the Indiana Future Fund and Indiana Seed Fund, we’re moving toward making the right kind of venture capital available to emerging life sciences companies all along the way. We want these businesses to form, grow and stay in Indiana.”
The Indiana Seed Fund is led and funded in part by BioCrossroads, with additional financial support from the Indiana Finance Authority. Allocations of capital will be made by an investment committee that includes outside investment professionals with significant scientific and financial expertise. Additionally, the fund will be assisted by an advisory committee consisting of BioCrossroads’ university and corporate stakeholders and representatives of venture capital firms prepared to evaluate submissions, the technologies and related market opportunities.
According to August Watanabe, chairman of the Bio-Crossroads board of directors, a dedicated seed fund for Indiana entrepreneurs is a significant advantage in today’s venture capital environment.
“Seed funding is scarce in today’s market; according to recent estimates, it accounts for just 2% of all venture deals,” said Watanabe. “As a traditionally underserved venture market, Indiana needs an infusion of seed funding to ‘prime the pump’ for future investment opportunities. The Indiana Seed Fund couldn’t come at a better time.”
Although seed-stage seed funding carries the greatest risk of any form of venture investment, the Indiana Seed Fund – like the Indiana Future Fund – will make investments with an expectation of market returns.
“Indiana is taking a unique approach to expanding access to capital, a market-driven approach,” said Johnson. “While other states are establishing more conventional economic development funds for early investments, we’re confident the best way to make our investments count and grow our life sciences economy is by letting the marketplace pick winners.”
Proposals will be accepted initially through Aug. 31. The Indiana Seed Fund anticipates making investments over about a two- to three-year time period, but the final investment period will depend on the quantity and quality of the submissions received.
In other financing activity:
• XLR Medical (Point Roberts, Washington) reported that it has received notice that it will not be receiving $4.7 million in financing as previously disclosed in March (Medical Device Daily, March 18, 2005).
At that time, the company reported that it had negotiated a $4.7 million convertible note financing with an investor based in New York. The company had reached a non-binding letter of intent with the investor that was subject to completion of a formal private placement agreement.
XLR had expected to use the proceeds of the financing to complete the acquisition of a roughly 51% interest in Exelar Medical (Chicago), to repay corporate debt and for general corporate purposes. Exelar Medical is developing cancer treatment technology using magnetic fields to control and focus the X-ray and electron beams used in external beam radiation. The technology is aimed at permitting an increase in the dosage of radiation to cancerous cells while decreasing the radiation exposure of healthy cells and the potential side effects.
XLR said that due to circumstances outside of its control, the investor has now provided notice that it will not be providing the company with any part of the expected financing. XLR said it intends to proceed with completion of the private placement of 8 million units at 40 cents per unit approved by the directors in September 2004 and will seek other alternative sources of financing.
The company also reported that it has now filed its annual report on Form 10-KSB for the year ended Jan. 31 and expects that the “e” will be removed from its trading symbol shortly.