The University of Michigan seems to be an exception to the hard-luck stories on attracting VC funding. The acquisition of Ann Arbor-based HandyLab, Inc. by Becton Dickinson marks the second successful exit for a UM spinoff in the past 12 months. Although financial terms for the HandyLab deal were not released, the company has 62 employees who will remain in Michigan under the new ownership. The deal is expected to close by the end of first quarter 2010. “There are a lot of good companies being built in Michigan,” says Jan Garfinkle, founder and managing director of Arboretum Ventures, a VC backer and 10% stakeholder in HandyLab. “These entrepreneurs are having successful exits and they’ll go start other companies igniting more entrepreneurial energy in the state.”

Another UM start-up, HealthMedia, Inc., was acquired in October 2008 by Johnson & Johnson in a deal valued at more than $100 million. That transaction provided investors with a nearly 10-fold return. “We’re seeing a good trend of start-ups invested in by local VC firms that reached a successful exit and kept employees here in Michigan,” says LeAnn Auer, executive director of the Michigan Venture Capital Association. J&J also maintained HealthMedia’s Ann Arbor location, where the company employs 150. Southeast Michigan-based VC firms predominantly backed both companies, with HandyLab raising $19.2 million during the summer of 2008 and more than $46 million since the beginning of the decade.

Three other life science start-ups growing inside UM labs are preparing for the funding process, according to Jim O’Connell, associate director of new business formation at UM’s TTO. Life Magnetics, which has created a rapid bacteria detection technology, has received $500,000 in gap funding. Flex Dex LLC, which is developing an intuitive laparoscopic surgical tool, is in earlier stages but organizing for potential financing. A third, unnamed company also is preparing for its first round of Series A financing. Thomas Zurbuchen, director of UM’s Center for Entrepreneurship, says the HandyLab and HealthMedia exits signify that southeast Michigan start-ups are worthy of VC investment. “These deals will turn some heads,” he says. “I definitely think successes like this will attract dollars.”

Source: Crain’s Detroit Business

Posted November 4th, 2009 under Tech Transfer

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