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Venture Capital News

Midwest Will Be Next Biotech Hotbed According to Burrill & Company

"The Midwest's biotechnology parts are greater than its whole right now," said G. Steven Burrill, CEO of Burrill & Company, a San Francisco based global leader in life sciences whose principal activities are in Venture Capital, Merchant Banking and Media. "The Midwest is not the first place people think of when considering centers of biotechnology excellence (most of the biotech activity is concentrated on the East and West coasts) but it's really more of an awareness issue than it is a fact issue," said Burrill.

"The Midwest is broadly very involved in the life sciences industry -- medical devices, diagnostics, biopharmaceuticals, agricultural technology and industrial biotechnology all thrive. The region is home to literally hundreds of life sciences companies ... and medical devices in particular is one of its fastest growing sectors," Burrill added.

"While it is difficult to get an accurate picture of the true biotechnology industry in the Midwest because every state classifies life science companies in different ways, there is plenty of ongoing activity:

"The Midwest has the ability to build on its existing strengths especially in the areas of agricultural biotech and in the convergence of the medical device, diagnostic and therapeutic companies. It is clear that the predicted record attendance of over 25,000 registrants that will be attending BIO 2006 in Chicago in April will be pleasantly surprised at the wealth of opportunity that the region does have," Burrill noted.

"The event will also have a catalytic effect on the Midwest 'parts' helping bind the industry into a cohesive whole. But the availability of venture capital is a necessary component for the Midwest to become a biotechnology powerhouse," added Burrill.

"Growing a regional center of excellence in biotechnology that will be internationally competitive requires commitment, collaboration of research institutions (e.g. the Big 10 universities), venture capitalists and the financial community, big pharma, diagnostic, device and healthcare focused companies, politicians that provide a stable and supportive tax, financial and regulatory environment, and a long-term perspective. The Midwest is well positioned in all these areas, with its large, world-class companies in both medicine and agriculture, top-tier research institutions generating a steady stream of innovation, and a culture that's beginning to encourage development of exciting new biotechnology companies," Burrill concluded.

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Venture Capitalists Eyeing Microsoft License Program

Inrix Inc. was one of hundreds of U.S. startup companies to receive venture-capital funding this year, and the US$6.1 million it raised was a relatively small amount.

What sets Inrix apart is that its traffic-information software is based on technology licensed from industry giant Microsoft Corp. Inrix was the first startup to take part in a new Microsoft effort to make money off some of the more obscure fruits of its $6 billion research-and-development program. The effort is called Microsoft IP Ventures, which makes available to entrepreneurs and venture capitalists various technologies developed by Microsoft researchers, some of which Microsoft has no current plans to use in its own products.

Under its agreement, Inrix pays a revenue-based royalty to Microsoft in exchange for exclusive use of traffic-analysis software that was in development at Microsoft for about three years, according to Inrix Chief Executive Bryan Mistele.

Among other technologies Microsoft is seeking to license are biometric identification cards and software that converts your photo into a cartoon image.

So far, Inrix is the only licensing deal to be announced under Microsoft IP Ventures, which started in May.

Mistele started Inrix in Microsoft's hometown of Redmond, Wash., last year after a 10-year career at Microsoft, where he was most recently general manager of the mobile-services business unit.

He says the Microsoft license program has ``accelerated our development plan by several years.''

What's more, it made it easier for Inrix to raise $6.1 million in VC funding this spring in a round led by August Capital and Venrock Associates, both of Menlo Park, Calif.

IP Ventures is part of a broader strategy shift at Microsoft, and one that could serve VCs as a source of startup ideas.

In the past, the software maker was relatively stingy with sharing its intellectual property. But in late 2003 it began to widen access to its vast portfolio of patents, partly in response to increasing market demand.

Much of the increased licensing activity has been to mid- to large-sized companies who want to develop products that work with Microsoft software.

It also decided to design a program aimed at startups who might build their core product or service around a technology developed by Microsoft, says David Kaefer, director of business development in Microsoft's licensing group.

In many cases, the technologies were developed by Microsoft Research, its computer-science R&D organization with 700 software engineers and researchers in six laboratories around the world. IP Ventures lists nearly 20 technologies available for license.

One might wonder: if these technologies are so good, why isn't Microsoft keeping them for its own products?

Kaefer says Microsoft isn't interested in commercializing them -- for now -- because they don't have the potential to generate nearly as much revenue as Microsoft's core products, such as Office software or XBox gaming products.

So instead of letting a patent collect dust, Microsoft wants to ``pass that off to a new company who's looking to take it the last mile,'' Kaefer says.

In some deals, Microsoft may retain rights to make its own product based on the licensed technology, he says.

Microsoft plans to strike royalty deals, or possibly acquire equity in the startups to which it licenses the technologies, Kaefer says. Mistele says Inrix's deal didn't include giving equity to Microsoft. Kaefer declined to comment on specific terms.

In Inrix's case, Mistele says he initially set out to build a service that gathered traffic-flow data from global-positioning-system devices mounted in trucks traveling around the country.

About four or five months after he left Microsoft last year, he says, he learned the company had been developing software designed to predict traffic conditions in various cities, using data such as scheduled events that may worsen traffic congestion. Inrix plans to market the traffic software to Web portals, government agencies, trucking-fleet operators and auto makers for use in car-navigation systems, Mistele says.

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Shop.com Secures $25 Million From Oak Investment Partners

Representatives of SHOP .COM, a destination online marketplace where people conveniently shop for thousands of trusted brands using a single account, announced the company closed its first ever venture funding through a $25 million round of financing led by Oak Investment Partners. SHOP .COM will utilize the capital infusion to support the company's aggressive marketing and customer service initiatives aimed at further accelerating the over 1,000% growth in traffic it demonstrated in 2004.

With more than 25 years of investment experience, Oak Investment Partners is a growth-oriented private equity firm with a total of $5.8 billion in committed capital. Pagemill Partners LLC (formerly Inveraray Partners) managed the financing for SHOP .COM .

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Modulus Video Secures $10 Million in Funding From Thomas Weisel Venture Partners & Trinity Ventures

Representatives of Modulus Video, Inc., an emerging leader in the market for MPEG-4 AVC video compression systems that enable delivery of standard and high definition video over satellite, cable, terrestrial and IPTV networks, announced that the company has closed its Series B round of venture funding for US$10 million led by Thomas Weisel Venture Partners (TWVP) of Palo Alto, California, with participation from Trinity Ventures of Menlo Park, California.

In announcing the funding, Modulus Video Chairman and CEO Bob Wilson said, "This substantial investment from Thomas Weisel Venture Partners and our existing venture investor Trinity Ventures is strong validation of Modulus Video’s efforts in developing MPEG-4 AVC systems. Over the last year it has become clear that the MPEG-4 AVC advanced compression format is the overwhelming choice from existing TV distribution services like direct to home satellite services to the new IPTV networks being deployed by telecommunications companies around the world. Modulus Video has taken the lead in developing MPEG-4 AVC video compression systems to deliver both high quality low bit rate standard definition systems and the must-have services such as HDTV while working with world class partners to ensure a successful, end-to-end rollout."

Wilson also announced that Mangesh Pimpalkhare, a Venture Partner of Thomas Weisel Venture Partners, has joined the Modulus Video Board of Directors. He joined TWVP in 2001 and currently focuses on investments in communications, storage and semiconductor companies. While at TWVP, Mangesh has been involved with the firm's investments in Bay Microsystems, Reactrix, Santur Corporation, Senforce, Siliquent Technologies, and W5 Networks.

 

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Identity Engines Secures $8.7 Million In Series A Financing

Representatives of Identity Engines, Inc announced the company completed an US$8.7 million Series A round of financing from Horizon Ventures and Lightspeed Venture Partners. The funds will be used for product development and to grow the sales and marketing organization. Doug Tsui of Horizon and Carl Showalter of Lightspeed have joined Identity Engine’s board of directors.

Identity Engines was founded in 2004 to address the growing identity gap between network access control and user directories. Identity Engines’ appliance products provide enterprise-grade authentication and authorization services for distributed enterprise networks. By leveraging investment in both existing and new network equipment, Identity Engines provides a comprehensive, cost-effective and scalable way to ensure tight identity-based controls that significantly improves enterprise security and compliance.

Identity Engines is led by CEO Richard Bush, a successful Silicon Valley veteran with more than 30 years of experience in the communications, storage and security fields.

In addition to Bush, the Identity Engines founding team includes top engineering and marketing talent from Oracle Corporation, Spirent Communications, Redback Networks, Cisco Systems, Sun Microsystems and RSA Security, and has a proven track record of bringing innovative, award-winning products to market.

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