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S.A. gets medical venture fund
August 5, 2009

By David Saleh Rauf - Express-News

medical fundLeaders of San Antonio's biomedical sector say they've long been missing one element to help the industry maintain momentum and spur future growth: a solid source of capital that startup companies could potentially tap into. They've got it now.

A group of medical and business professionals with strong ties to San Antonio's biomedical industry have formed the first venture capital fund focused exclusively on investing in the city's leading economic sector.

“From the perspective of a number of small startup companies in our sector, this is key,” said Ann Stevens, president of BioMed SA, an organization that promotes and markets San Antonio's bioscience sector. “Many of them have to travel to the East or West Coast to seek funding, and sometimes investors want the companies to move.”

Based in San Antonio, the Targeted Technology Fund I, LP is focused primarily on biomedical investments in the Alamo City and South Texas, but also will look into companies in Colorado, Georgia and Alabama. The fund's three managing directors are based in three of those four states.

Alan Dean, the fund's brainchild and a former director of the University of Texas Health Science Center's Office of Technology Ventures, is based in Alabama. Christopher Banas, an industry veteran who has co-founded several San Antonio-based medical device startup companies, is in Colorado. And Dr. Paul Castella, who is co-founder and CEO of drug development company ViroXis, lives and works in San Antonio.

Collectively, the three not only bring decades of clinical and business experience to the table.

The three say they now plan to capitalize and spur innovation in San Antonio's booming biomedical sector, which is estimated to contribute about $16 billion annually to the local economy. A combination of the Alamo City's rising status as a center for military medicine, rapid expansion at UTHSC and the University of Texas at San Antonio's push to become a top-tier research institution make San Antonio's biomedical sector the natural choice to invest in, they said.

“There's a tremendous potential to generate intellectual property, but there is no dedicated venture capital fund that would address the need of startup companies,” Castella said. “There's an unserved need and, obviously, an opportunity.”

The managing directors declined to disclose how much the fund is worth. Earlier this month, the fund announced its first business enterprise with a nearly $800,000 investment in San Antonio-based medical device maker Vidacare Corp. The fund primarily is targeting medical device makers, which provide a less capital-intensive investment and a quicker exit.

It plans to announce a second investment in the coming months, and currently is reviewing six companies for future investments, Dean said. Three of those are from San Antonio.

“We expect most of our opportunities to come from San Antonio,” Dean said.
But analysts caution that while San Antonio's fund is led by three players with the know-how and the right connections, the majority of investments made by venture capital firms turn out to be failures.

“The venture capital model is a shotgun approach,” said Frost & Sullivan analyst Charlie Wheelan. “You know you're going to lose money on most investments, so you count on that one golden star to carry you forward.”
Additionally, Wheelan says the fund could face an issue in San Antonio when scouting for startup companies with talented managerial staffs.

“They're bringing the money, the startups are bringing the ideas, but what's missing from that is the talent,” he said. “Who is going to come in and run these companies and build them up successfully?”

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