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New $30M VC fund aims to get medical devices to market

BY Sunday, May 23, 2021 05:20pm

GRAND RAPIDS — A venture capital firm that invests in medical device technologies wants to raise $30 million for a new fund to support portfolio companies progressing with commercializing their innovations.

Grand Rapids-based Genesis Innovation Group LLC’s Cultivate(MD) Capital Accelerator Fund GP LLC has so far raised $7.75 million from 44 investors toward a $30 million goal, according to a May 5 regulatory filing with the U.S. Securities and Exchange Commission.

The fund’s formation follows a prior $10 million capital seed fund that Genesis Innovation Group created to make early stage investments in medical device startups.

“We started the seed fund a number of years ago and made a number of very early stage investments,” said Genesis Innovation Group CEO Rob Ball. “Many of them have just matured at this point where a majority of the portfolio now has regulatory clearance and will be getting to the stages of commercialization.’’

That maturity brings about a need for additional capital in their life cycle with a fund that has a later-stage focus and a “little different” risk-reward profile for investors, Ball said.

Cultivate(MD) Capital Accelerator Fund has already provided capital to three portfolio companies backed by the prior seed fund, Ball said. Among the companies are Grand Rapids-based startup Happe Spine LLC, which is developing and commercializing a porous, bioactive material for orthopedic implants, and Shoulder Innovations Inc., which developed a shoulder replacement system and last fall raised $21.6 million in a Series C capital round involving 24 investors.

Shoulder Innovations’ implant lasts longer and has fewer components, resulting in less time in an operating room for surgery and reduced the cost, as well as lengthening the periods of time before implants need to be replaced. The implant system has already been used in thousands of surgeries at hundreds of hospitals in the U.S., Ball said.

The most mature of Genesis Innovations’ portfolio companies, Shoulder Innovations this month signed a deal with Genesis Software Innovations that uses artificial intelligence so orthopedic surgeons can better plan surgical procedures. The U.S. Food and Drug Administration recently granted clearance to the Preview 3D Shoulder Arthroplasty Planning Software.

In raising funds for Cultivate(MD) Capital Accelerator Fund, Genesis Innovation Group has been approaching a network of industry professionals, as well as high net worth individuals and family offices nationally, Ball said.

The accelerator fund started fundraising in the middle of the first quarter and intends to close by Sept. 30. A “large number” of investors in the earlier seed capital fund have invested in the accelerator fund.

“We’re doing really well,” Ball said. “It’s a nice market.”

Genesis Innovations’ prior seed fund invested in 11 startups and plans to close soon on a 12th investment, Ball said. The companies backed by the fund were able to leverage the investments to collectively attract about $75 million in capital from direct investments from individual investors, plus debt, he said.

The need for further investment for venture capital-backed startups to continue commercialization toward the marketplace and the available funding has consistently been a wide gap.

In Michigan alone, venture capital firms have $431 million available for follow-on investments in portfolio companies. The 165 Michigan-based startups backed in the last two years require a collective $1.2 billion in additional capital in the next two years to grow, according to the recent 2021 Michigan Venture Capital Association Research Report.

Eleven venture firms in Michigan are presently seeking to raise a combined $446 million. 

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