A pair of Maryland firms are standing up a new joint venture to bring capital to medtech innovators developing new products at the earliest stages.
The MDC-Verte Impact Fund recently launched to provide the capital from friends-and-family through seed rounds, which can help companies move from idea-stage to institutional venture funding.
It convenes two entities taking unique approaches to funding startups. MDC Studio works to build startups out of downtown Baltimore’s Maryland Development Center. And the Verte OZ Fund is a College Park-based fund that invests in companies located in Opportunity Zones, which are federally designated “distressed” areas where policymakers designed are making certain tax incentives available to spur economic development.
At the five-year-old MDC Studio, which is located in the Wilkens-Robins building on West Pratt Street, engineers works with clinicians and researchers from institutions like the University of Maryland School of Medicine, Johns Hopkins and the VA. They build prototypes and provide early technical development support. If the 10-member MDC team sees progress, the team then helps to secure funding and offers business development resources to set up a company to commercialize the product.
“It’s a startup studio,” said CEO Dr. Gil Blankenship. “We take an idea, turn it into a company, grow the company and send the company out into the world.”
It’s so far launched seven companies that received $13 million in funding through grants from programs like the U.S. Small Business Innovation Research program and National Science Foundation. Among them are Baltimore companies that are part of a vanguard of startups formed out of local institutions such as NextStep Robotics, which recently “graduated” to a new space in the University of Maryland BioPark. In August, the studio spun out Sonosa Medical, a company developing wearable devices to diagnose and treat obstructive sleep apnea. Previously funded by DARPA, the two-year-old company is now led by MDC Studio Partner Dr. Stephen Restaino.
Now, the MDC-Verte Impact Fund is looking to help companies keep growing. It’s an investment fund that will offer funding to companies as they go out into the world and get prepared for another stage of funding. Even after companies launch, the long development cycles for medical technology companies can mean they aren’t yet at the stage for institutional funding. So a bridge is needed, the leaders said.
The fund won’t be restricted to MDC Studio companies, but Verte OZ Fund CEO Dr. Leonard Mills said the studio can be a key place to identify companies, and expects multiple investments will come from it.
“We’re looking at it as a pipeline,” Dr. Mills said. He called the fund a “significant investment” for the firm, but did not disclose the size.
When they are near graduation or have already graduated, the fund can begin a longer-term relationship that could last through several rounds of financing.
“We look for companies and partnerships that we can have that relationship with over time,” said Dr. Mills, who will lead the fund alongside tech and commercialization pro Dr. Deborah Hemingway and MDC Partner Dr. Jonathan Pearl.
It’s an example of Opportunity Zone investment that goes to early-stage companies. When the federal program was launched in 2018, much of the attention went to provisions that allow for real estate investment. But it can also fuel startups that are headquartered in Opportunity Zones, such as those that are designated in Baltimore City. Maryland also offers additional incentives for Opportunity Zone investors, as well as biotech tax credits. These help to further grow investment in companies that can in turn provide local jobs.
The Verte OZ Fund invested in Johns Hopkins spinout Galen Robotics in 2019 as the surgical robotics company moved its headquarters to Pigtown’s 1100 Wicomico. Working with MDC, Dr. Mills hopes to invest in more local companies, and funding to the city.
“We hope to attract more Baltimore-oriented investment through this, as well,” he said.-30-