New NH business start-up fund will aid high-tech firms
MANCHESTER — Borealis Ventures and N.H. Business Finance Authority are partnering on the new Borealis Granite Fund, backed by $4.5 million in federal funds, and are committed to raising privately $25.5 million in funds to spur new high-tech firms.
“We're excited about doing this jointly,” BFA Executive Director Jack Donovan said.
A key to the set up is that investment decisions will be made by the private sector through Borealis Granite Fund.
“We've got a group of three partners who know the state. They have a lot of experience on the ground here,” Donovan said. “It's got the Advisory Board set up which I think is going to be very effective in terms of finding deals.
“It's a private market solution. We're backstopping the deal through an innovative guarantee mechanism, but it's largely going to be driven by private capital,” he said.
Borealis Granite Fund is led by Borealis Ventures Managing Directors Jesse Devitte, Phil Ferneau and Matt Rightmire.
Borealis Ventures, co-founded by Devitte and Ferneau, has a 10-year track record of backing successful high-tech startups like Newforma in Manchester, Adimab in Lebanon, and Bar Harbor BioTechnology in Maine. Borealis Ventures has raised more than $50 million and invested in 23 companies.
“We live here, we care about these companies, we're measured everywhere we go by the success of these companies or not, and so it means a lot to us,” Devitte said.
“When you're investing in New Hampshire companies from out of state and you're just sending checks instead of being here on the ground, that's not the same dynamic,” he said.
“That being said, we're great partners for venture firms from outside the state too, who can make investments here because they can't be here and we can, which is the benefit of being able to leverage this capital and that's the type of partnership that can make success,” Devitte said.
“We care ultimately about this mission on a statewide basis,” Devitte said.
Mark Prestipino, Entrepreneur-in-Residence at Borealis Ventures, said, “For me this is like-minded individuals getting together in an innovative way, partnering with the state, to make a difference.”
The unique partnership between Borealis Ventures and the BFA was made possible by passage last year of House Bill 605, sponsored by Rep. Marilinda Garcia, R-Salem, and Sen. Nancy Stiles, R-Concord, among others.
The law, which took effect, Sept. 11, 2011, authorizes the BFA to guarantee the principal of investments in qualified venture capital funds and to invest directly in qualified venture capital funds that agree to invest the principal in New Hampshire within 60 months.
The $4.5 million in federal funds were part of $13 million made available by the U.S. Treasury through the State Small Business Credit Initiative included in the the 2010 Small Business Jobs Act.
“It was actually an effort that Sen. Shaheen championed,” Donovan said. Sen. Jeanne Shaheen, D-N.H., is a member of the Senate Small Business Committee.
The new partnership has unique features. “We're going to be a special limited partner in the fund,” Donovan said. “We're going to take out our money after the other private investors; that's kind of an inducement for the other private investors to come in.”
“We expect the thing to be successful, and we're all going to make money,” he said.
Rather than taking profits from the venture as a traditional private equity venture might, Donovan said, the state hopes to recycle any profits and repaid capital back into similar efforts.
“(We're) hoping we can replicate this with more funds,” he said.
Rightmire, one of the fund's managing directors, said, “We fundamentally believe that there is a tremendous opportunity to build more technology-infused companies like Newforma and like Nanocomp in New Hampshire, and the gap that has existed for us as observed over the last 10 years is just the fact that capital has been a constraint. There's no avoiding that.
“In our mind, this is a great opportunity to begin to address that constraint and as a consequence, I think, really provide some meaningful fuel to that entrepreneurial ecosystem,” Rightmire said.
Devitte said there are real consequences to a lack of startup capital.
“A lot of times unfortunately without feeling like the capital fuel is available to them, (entrepreneurs) won't pursue their idea, won't launch their company,” he said.
“There are latent opportunities yet to be tapped,” he said, “and we know it by talking to people, anecdotally for certain.”
An early Borealis investment, Avedro, moved to Waltham, Mass., from Lebanon to be closer to its new lead investors, Ferneau said. Borealis provided seed funding for the medical device company, which grew out of Dartmouth's Thayer School of Engineering. “We were unable to bring additional capital up to Hanover back in 2003,” Ferneau said.
“It's understandable why investors based in Boston would prefer to have the companies be based in Boston,” he said.
“What we have found is if you put down deep enough roots here in New Hampshire, the New Hampshire advantage can keep a company there,” Ferneau said. “But it helps when you have enough capital and resources to keep that company here, like Newforma.”
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