Plenty ventured, plenty to gain
(News-Gazette, The (Champaign-Urbana, IL) (KRT) Via Thomson Dialog NewsEdge) Feb. 19--CHAMPAIGN -- An audit of IllinoisVentures shows that as of midyear 2005, most of its investments were concentrated in 10 companies.
IllinoisVentures, a private company formed by the University of Illinois to help start-up companies, had $2.35 million in investments as of June 30, according to an audit performed for the Illinois auditor general.
Of those investments, about $1.23 million were in the form of common or preferred stock in the fledgling companies. The remainder were in the form of debt instruments that can be converted to stock if and when IllinoisVentures chooses.
The biggest investments were:
--$381,056 in preferred stock of Mobitrac, a Chicago-based company developing software to help improve fleet productivity for trucking companies.
--$316,066 in advances to ZelleRx, a Chicago-based biopharmaceutical firm developing cancer treatment products.
--$225,000 in preferred stock of Advanced Diamond Technologies, a Champaign-based company developing protective coatings made of ultrananocrystalline diamond.
--$175,000 in preferred stock of Renew Power, which is developing formic acid-powered fuel cells. The company, now known as Tekion and based in Canada, has an office in Champaign.
--$150,000 in preferred stock and $1,066 in common stock of RiverGlass, a company developing data-mining tools for criminal justice and financial analysis. It too has an office in Champaign.
--$134,687 in preferred stock of Nanodisc, a biological sciences company that has developed sophisticated technology that can be used in drug discovery. The technology was developed at the Urbana-Champaign campus.
--$117,330 in advances to iCyt Mission Technology, a Champaign-based company that specializes in advanced cell sorting and measurement.
--$111,871 in advances to NanoSi, a venture that pioneered applications for silicon nanoparticles. The technology was developed at the Urbana-Champaign campus.
--$109,500 in preferred stock of INI Power, which is developing laminar-flow fuel cells that run on methanol. Once based in Champaign, the company has since moved to Cary, N.C.
--$100,756 in advances to pSi-tech, which is developing flexible circuitry for use in flat panel displays and other applications. The technology was developed at the Urbana-Champaign campus.
Those 10 investments accounted for slightly more than $1.8 million, and another $407,000 in smaller investments were spread among 12 other companies.
IllinoisVentures also invested $67,028 in the Illinois Emerging Technology Fund, a private fund it manages.
That fund, which accepts investments from venture capital firms, institutional investors, qualified plans and high net-worth individuals, now stands at just under $30 million.
John Banta, the Chicago-based managing director of IllinoisVentures, said Thursday his group has made about $1 million in additional investments since the end of the audit period. That boosts his group's total investments to about $3.5 million.
Since IllinoisVentures was launched in 2002, it has looked at about 500 projects and done "developmental work" on about 30 of them, he said.
"Of those, we've had 11 that bubbled all the way through to the private fund," Banta said. "We've closed on eight (investments), and three are in progress."
Additionally, Banta said, IllinoisVentures has been "able to leverage third-party investors and grant sources of funding" resulting in $65 million to $70 million in investments in companies supported by IllinoisVentures.
Since the audit period ended, Banta said IllinoisVentures itself has made "multiple six-figure" investments in three companies: DzymeTech, which uses biosensor technology to detect lead and other heavy metals. The technology was developed in chemistry Professor Yi Lu's lab on the Urbana-Champaign campus.
pSi-tech, the flexible circuitry company working to commercialize technology developed in UI Professor John Rogers' materials science lab at Urbana-Champaign.
Transplan, a medical device company that's working to extend the viability of harvested hearts before transplantation. The venture is a collaboration between the UI College of Veterinary Medicine in Urbana and cardiac specialists at the Chicago campus and the University of Chicago.
"There are a spate of others about to take place. I hesitate to describe them until we get them closed," Banta said. "At least three others are on the verge of closing."
Several companies have received multiple rounds of funding from IllinoisVentures.
"We probably have more money invested in Tekion than anything else the fuel cell business that used to be called Renew (Power)," Banta said.
Other businesses that have enjoyed sizable overall investments from IllinoisVentures include: iCyt, Mobitrac, RiverGlass, Nanodisc and Nextumi, a company that analyzes computer users' behavior and the choices they make. Tekion has been particularly adept at raising money from outside investors, Banta said.
In return for those early stage investments, IllinoisVentures gets a say in how the companies are run.
"We have a very active role at the early stage," Banta said, noting that IllinoisVentures sometimes provides interim management until permanent managers have been hired.
"Then we tend to maintain active board involvement in an advisory role," he said. "Typically, we maintain board representation for the life of the business."
Banta said IllinoisVentures hasn't had a return on investment to date.
"Not just yet," he said. "As is the case with most seed-stage investment, several years of development go through before you have exits on these."
That said, several of the companies are "at revenue or beyond," he said, pointing to both RiverGlass and Mobitrac and noting that "iCyt is having tremendous revenue growth."
Still, not all companies that got IllinoisVentures support panned out.
"We make our investments on a merit basis, but we recognize at the earliest stages, if we're not experiencing some failures, we're not trying hard enough," Banta said. "We try to force failure early."
Among cases that didn't work out for IllinoisVentures: PRZM, a business that involved software applications for managing construction projects. IllinoisVentures did product development and early business development for the venture, "but ultimately determined there was not enough demand for the project," Banta said. It stemmed from technology developed at the Urbana-Champaign campus.
NanoSi, the venture looking for applications for silicon nanoparticles that could be produced uniformly and at high volumes.
Starthis, a business at the Chicago campus that developed manufacturing automation software. IllinoisVentures provided early support, but concluded that the company should go in a different direction from the way the principals wanted to take it. The principals continued on wth their work.
Banta said IllinoisVentures didn't take a loss on Starthis, and in each of the other cases, the loss was "modest less than $100,000."
"The projects we've invested larger amounts of money in, we've not yet experienced a loss," he said.
Although IllinoisVentures was formed in part to help nurture companies rooted in technologies developed at the UI, not all companies getting assistance ended up staying in Illinois.
INI Power, for instance, moved its operations to North Carolina after receiving a large outside investment. Despite the move, IllinoisVentures continued to retain its investment in INI.
With regard to the Illinois Emerging Technology Fund, Banta said IllinoisVentures has a 1 percent stake in the fund, and the IllinoisVentures management team has another 1 percent stake in it.
IllinoisVentures is overseen by a board of managers, and board members also participate as investors in the fund. That lifts total investment in the fund by IllinoisVentures-related parties to more than 5 percent.
Banta said since the fund is private, he would not go into "immense detail" about its investments. But he said its investments include several companies affiliated with the Urbana-Champaign campus, including Tekion, RiverGlass, Nextumi, Nanodisc and iCyt.
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