Affinity Capital Management in Minneapolis and Cincinnati’s Triathlon Medical Ventures suspended their push to raise a $10 million, early-stage seed fund in Minnesota.
“We’re not shutting it down, we’re putting it on pause until we can figure out what to do,” Triathlon managing partner John Rice told MedCity News.
Northern Lights Seed Capital, which has been trying to raise money since the beginning of this year, attracted some individual investors but failed to win over deeper-pocketed institutional firms, Rice said.
Affinity and Triathlon will decide Northern Lights’ fate in the fall, he said.
Rice, who declined to disclose how much the venture was able to raise, said institutional investors are not getting the returns they want from life science companies or are still waiting to on exits from their current portfolios.
Across the country, early-stage money has dried up as a weak economy and lackluster demand for initial public offerings forced venture firms to focus on keeping alive more advanced, experienced companies that are generating sales from real products. Early-stage investments last year fell 13 percent, to $4.6 billion, from 2008, according to the MoneyTree report.
The demise of Northern Lights will be a bitter blow to Minnesota, which has struggled to attract early-stage venture capital.
Minnesota start-ups, mostly medical device firms, raised $255.5 million in 2009, down a whopping 40 percent from the previous year’s $426.5 million, according to the MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Assn., which uses data from Thomson Reuters. Nationally, investments in medical devices, the lifeblood of Minnesota’s economy, dropped 27 percent to $2.5 billion.
Northern Lights was hoping to target start-ups in biotechnology, medical devices, healthcare and diagnostics. The fund was also interested in platform technology that can apply animal science to human health.