Tag: Targeted Technology Fund

By LAURA LOREK
Reporter with Silicon Hills News

Entrepreneurs in the life sciences industry in San Antonio for years complained about the lack of venture capital.

In 2008, Paul Castella and Alan Dean, cofounders and senior managing partners of Targeted Technology, a venture capital firm based in San Antonio, decided to do something about that.

“The quality of innovation we have here in San Antonio is really meaningful,” Castella said.

To help fund ideas, Castella and Dean created the first $11.2 million Targeted Technology Fund and invested in 12 companies. Since then, four of those companies have been sold. Its first investment, Vidacare sold to Teleflex for $262.5 million in 2013. Early investors made 4.2 times a return on their investment, Dean said.

ENTrigue Surgical sold to ArthroCare for $42 million in 2013. More recently, in June, an Australian company, TFS Corp. bought ViroXis Corp. and Santalis Pharmaceuticals for a combined cash and stock deal initially worth $45.3 million.

“It was a very small fund,” Castella said. “We started it during the financial meltdown of 2008. We had our first close in 2009. We ended up with 12 companies in that portfolio and we’ve sold a third of them. All of the other investments are viable and potentially exit able.”

Targeted Technology also has investments in Birmingham, Alabama, because Dean moved there in 2006 to serve as managing partner of Greer Capital Advisors, a venture capital fund. He now splits his time between his two houses in San Antonio and Birmingham.

“It gives us a bigger geographic reach and both communities have a lot of activity in this area and they are underserved by venture funds,” Dean said.

Previously, Dean served as director of technology transfer at the University of Texas Health Science Center at San Antonio. Castella shared office space with Dean at the university where Castella worked on his startup, CardioSpectra, founded in 2005. He served as co-founder and president. The company sold in 2007 to Volcano Corp. for $63 million.

Both Castella and Dean have extensive experience in the biotechnology and medical technology industry. They play “a critical role in growing and nurturing our local innovation ecosystem,” said Ann Stevens, president of BioMed SA.

“The founders are life science entrepreneurs themselves and understand firsthand how the scarcity of local venture funding and the necessity for San Antonio entrepreneurs to raise money elsewhere was holding our life science sector back,” Stevens said.

In 2014, Targeted Technology launched its second fund with $42 million in venture capital. Many of the same investors from the first fund also participated in the second one, Dean said. It has made investments in nine companies so far and a few more currently undergoing due diligence that the company declined to disclose.

“We could certainly spend a lot more money than we have,” Castella said. “The second fund is $42 million and it’s all accounted for now. It only took us two years to spend $42 million. We could easily spend double that.”

Recently, Targeted Technology worked to attract German-based Cytocentrics Bioscience’s international headquarters to San Antonio. The company makes a medical device called a CytoPatch Machine. Its patch clamping technology evaluates drug interactions with human cells and analyzes data. The company has pledged to create 300 jobs and invest $15 million locally in the next eight years.

“The importance of Targeted Technology to the local ecosystem cannot be overstated,” Stevens said.

Targeted Technology invested in biotech serial entrepreneur Fred Dinger’s latest venture, Aerin Medical, an ear, nose and throat device company. The company is in the process of moving from California to Austin, where Dinger lives.

“Obviously we’re very keen on investing with Fred,” Castella said.

Dinger founded Osteobiologics, which sold to Smith and Nephew, then C2M Medical, which sold to Tornier and ENTrigue Surgical, which sold to ArthoCare.

Gabriele Niederauer, an executive who has worked with Dinger on a number of his startups, now serves as CEO of Bluegrass Vascular Technologies, another company in Targeted Technology’s portfolio, which moved from Kentucky to San Antonio.

“That’s what happens when you have a critical mass of biotech and life science companies – people move to another company,” Castella said. “A company gets bought and you still have trained skilled people and they tend to gravitate to entrepreneurial activities. “

Targeted Technology plans a third fund in a few years.

“Our next fund we would like it to be much larger because the opportunities are here and they’re growing,” Dean said.

“It creates its own momentum,” Castella said. “We support ideas that originate here. But truthfully most of what we’ve done is bring ideas in. That’s a function of having a venture fund this stage, which is fairly rare. A small amount of money can attract in significant opportunities.”

Targeted Technology has brought companies in from Kentucky, Canada, California, Ohio, Houston, Birmingham and Australia.

“If you have a team that’s capable of working deals and has a focus not just on investing but all of the ancillary functions necessary to support a company it’s a good mechanism for attracting opportunities,” Castella said.

Targeted Technology’s longest investment is in Bio2 Medical, creators of the Angel Catheter to protect critically ill patients from Pulmonary Embolism. Its average investment is about five years, Castella said.

“A lot of the companies we invest in have very significant technology in the sense that they have the potential to radically improve healthcare,” Castella said. “Vidacare was a life saving device that changed EMS. Bio2 is a device that will have a huge impact on hospital patient outcomes. Bluegrass is focused on vein access and Cytocentrics will open up a whole new avenue of drug research.”

Even though Targeted Technology is in South Texas the area is not shortchanged for transformational technologies, Castella said.

“In San Antonio, it’s been more of an organic, grinding path to get things going,” Dean said. “But it starts building on itself.”

Targeted Technology is also working to create a biotech accelerator and incubator in San Antonio. Birmingham has Innovation Depot, founded eight years ago, which has more than 100 companies today, Dean said.

“San Antonio could benefit from a similar program,” Castella said. “We are willing to work to help develop one of those here.”

A group from San Antonio visited the Innovation Depot in Birmingham recently to learn from the activity there.

Targeted Technology, with eight employees, has eight companies working out of its office in the Stone Oak area. They are all fund investments and they are focused on changing the world, Dean said.

“We want to make money for our investors but we really, really appreciate that we’re in the space where we save lives or improve lives with our technology,” Dean said. “This is more than just a job.”