Austin-based Emergent Technologies Inc. will announce today that it has raised a $27.1 million venture capital fund to create biotechnology startups in Texas.
A number of high-profile Austin business executives invested in the fund, which will be used to commercialize technology developed in the University of Texas System.
"There is so much science sitting in the UT system, when you look across the 15 campuses, it's pretty much limitless," ETI founder Thomas Harlan said. "We'll provide a key step in converting that laboratory science into useful products and services."
The biotech industry has attracted record venture investments nationwide over the past two years. But Austin, which has no medical school and only a small population of biotech companies, has been mostly on the sidelines.
"Any time we get a new venture capital fund that's focused on seed funding, it's a cause for celebration in Austin," economic development consultant Angelos Angelou said. "Any time we get a fund that focuses on biotechnology investments, it calls for a double celebration."
Harlan said he thinks ETI will help jump-start Austin's nascent biotech industry.
"If you produce some successes, it stimulates interest by other entrepreneurs. They create companies, which draw more venture capital," he said. "The talent pool begins to stay in Austin because there's now a place for them after they get their Ph.D.s or undergraduate degrees."
ETI has invested in three previous venture funds, which focused on licensing technology from the University of Oklahoma, Texas Tech University and Texas Tech School of Pharmacy. It has created 14 companies, all but one of which are in operation.
The new fund was raised from institutional investors and business executives, including Austin attorney Pike Powers, retired Microsoft Corp. executive Mike Maples Sr., former Dell Inc. executive Tom Meredith, and San Antonio billionaire Red McCombs.
McCombs said he hopes the fund will increase the commercialization of faculty research.
"I've been looking for an opportunity to help fill the gap between the vast amounts of research funding going into university systems and the limited commercial success of the resulting technologies," he said. "The people with Emergent Technologies have the best answer I've seen, and that's why I participated."
ETI chose to focus on UT because it has transformed its technology transfer culture, Harlan said.
Once considered a national underperformer in commercialization for a major research school, UT has spent the past few years cultivating closer ties with investment companies.
It has begun working as a kind of marriage broker between researchers and investors and has created a searchable online database of its patent holdings.
"The UT System has begun to embrace technology transfer and evolved a friendly attitude toward outside deal people," Harlan said. "There's now a real inward pressure to translate this stuff into products, and we want to be part of that."
ETI hopes to commercialize as many as 30 technology applications in the next several years. It can do that many deals because it makes relatively small investments in each one. It then finds partners, such as large pharmaceutical companies, who provide additional funding. For every $1 million that ETI invests in a startup, its partners add an average of $12 million, the firm said.
ETI relies on a team of scientists to scout out technology within universities and other institutions. It uses three criteria to make its picks—intellectual property, large revenue potential and multiple market potential.
Once a technology is approved by the ETI team, it is licensed from the university. ETI then forms a company that owns the license, and the company begins developing and presenting itself to potential partners.
ETI already has invested in two projects at UT-Austin: Mimetic Solutions LLC, which develops drugs with "smart chemistry" that can recognize a specific biologic marker, and Beacon Sciences LLC, whose biochemistry research is being applied to medical diagnostics, environmental testing and biodefense.
Judging from the UT system's 117 U.S. patents and more than 600 invention disclosures last year alone, ETI will be busy, said David Lee, president of ETI's new fund.
"Our industry partners—the Johnson & Johnsons—just don't have the time to visit every campus in the UT system," Lee said. "Our job is to go find the technology and bring it to them."
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