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By DON DODSON Copyright 2005 The News-Gazette CHAMPAIGN – Managers of a private-equity fund associated with the University of Illinois got a boost in March when state Treasurer Judy Baar Topinka announced the state would make a multimillion-dollar investment in the fund. The Illinois Emerging Technologies Fund puts its dollars into promising technology startups, many associated with the UI and other universities around the state. The fund is overseen by many of the same people who call the shots for IllinoisVentures, the UI office that provides start-up services for new businesses on campus. So far, the fund has invested between $3 million and $4 million in six companies, said John Banta, the fund's managing principal and chief executive officer of IllinoisVentures. The six investments include: – Renew Power, which is developing fuel cells powered by formic acid. – Nanodisc, which is developing new drug-delivery technologies. – Mobitrac, a Chicago-based fleet management software business that helps companies manage fleets of trucks. – Chromatin, a company that uses gene-stacking technology in developing crops. – RiverGlass, a data-mining business that sifts through huge amounts of data. It was formerly known as Moire. – Nextumi, an advanced search-engine business built on algorithm research. "Our initial investments tend to be increments of less than a million dollars, and then we continue to support the investments thereafter," Banta said. "Generally, we're the lead investor in the early stages." In addition to the $3 million to $4 million the private-equity fund has invested in those six businesses, Banta said IllinoisVentures has invested $3 million in public money in about two dozen start-up businesses. Altogether, those investments have "leveraged $33 million in third-party investments and a little over $7 million in federal grants," he said. David Goldberg, the chief scientist for Nextumi, said the fund's investment and IllinoisVentures' assistance helped Nextumi get off the ground. "The funding has enabled us to build our proof-of-concept model, do initial market research and prepare us to really go to market," he said. "Without it, we might have had to seek sources outside Illinois. If that had been the case, the company might have been located elsewhere," said Goldberg, a professor of general engineering at the UI. "The presence of Illinois funds helps companies with Illinois roots to stay in Illinois," he added. The private-equity fund decisions are made by the five private-sector members of the IllinoisVentures board of managers. They are: – James L. Foght, co-founder of Vector Securities. – Michael Tokarz, managing member of the Tokarz Group and formerly a general partner with Kohlberg Kravis Roberts & Co. – Warren Holtsberg, founder of Motorola Ventures. – Bill Tai, a partner in Charles River Ventures. – Jim Tyree, chairman and chief executive officer of Mesirow Financial. Their involvement isn't strictly passive. "Board members have made substantial investment in the fund," Banta said. The public-sector members of the IllinoisVentures board include UI trustees Larry Eppley and Ken Schmidt and the UI's two vice chancellors of research, Eric Gislason at the Chicago campus and Charles Zukowski at the Urbana-Champaign campus. Banta said the Illinois Emerging Technologies Fund doesn't specify a target return-on-investment. But since start-up companies generally carry a higher risk than other investments, they're expected to achieve a higher return. Banta said a five-year investment was originally suggested for the fund, but he thinks the payback will come sooner. "I don't think it will be anywhere close to that long," he said. "It will probably be somewhere in the neighborhood of 2 1/2 to 3 1/2 years." "Venture fund structures expect five-year investment periods and 10-year return periods," he added. "We anticipate a shorter time frame in both respects." Foght, the board's chairman, said he's pleased with how much of the $25 million fund has been invested after nine months. "I think it will all get invested in another year-and-a-half, or two years at the most," he said. "My vision and John's is that we'll be looking at an additional fund in the not-too-distant future. This is the first of a number of funds." "There's a lack of significant venture capital in this area, compared with the East Coast and West Coast," he added. "This is an attempt to start building a venture capital system." Banta said fund investors include institutions and individuals, both from Illinois and out-of-state. The fund can't have more than 100 investors, he added. Banta estimated that IllinoisVentures has invested in at least 20 or 25 businesses, mostly in their formative stages. Those companies range from Advanced Diamond Technologies, which is exploring protective coatings made of ultrananocrystalline diamond, to ZelleRx, a biopharmaceutical firm developing cancer treatment products. |
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