Medical Device Daily Executive Editor

Medical device firms, by a slim margin, were the leaders in healthcare startup funding in the Midwest during 2006, according to the latest report from BioEnterprise (Cleveland, Ohio). And the funding for these healthcare startups in 2006 set the record over previous years.

Device firm startups raised $356 million in 2006, or 45% of a total of $792 million, recorded by the BioEnterprise report.

Biopharmaceutical companies were only slightly behind, with $349 million raised, 44% of the total.

And healthcare software and services startup firms raised $349 million, 11% of the total.

The $792 million raised in 2006 was a 25% increase over 2005, according to BioEnterprise’s “Midwest Health Care Venture Investment Report,” which called that “a significant jump that outpaces national industry growth.”

Baiju Shah, president of BioEnterprise, called 2006 “the breakout year for the Midwest as a whole: a record amount of financing across 135 separate companies, a number of successful public offerings, and several significant exits through acquisitions.”

He added: “Venture capitalists are increasingly finding rewarding investment opportunities in the Midwest, and we expect the momentum built in 2006 will continue into 2007 and beyond.”

According to the BioEnterprise report, Minnesota, the Midwest’s traditional leader in healthcare ventures, led all states with 22 startups, attracting $233.9 million in investments in 2006.

A number of Minnesota medical device companies raised more than $20 million each last year, including Anulex (Minneapolis), Atritech (Plymouth) Cardiovascular Systems (St. Paul), CVRx (Maple Grove), Disc Dynamics, (Eden Prairie) and Enteromedics (St. Paul).

Following Minnesota was Michigan with $135.5 million raised by 11 companies. Several Michigan biotechnology startups attracted significant investment, including NanoBio (Ann Arbor) and Cerenis Therapeutics (Ann Arbor).

Ohio finished third in the Midwest with $113.9 million raised by 39 companies, including many seed and early-stage financings.

The report aggregates venture investment in 10 Midwest states and Western Pennsylvania.

Following these leaders were Illinois ($101.6 million), Western Pennsylvania ($54.4 million), Kentucky ($51.4 million), Missouri ($39.2 million), Indiana ($37.2 million), and Wisconsin ($25.2 million).

States with no reported financings included Iowa, Kansas, and West Virginia.

The report also reports financings in terms of Midwest cities.

Minneapolis-St. Paul and Chicago were the leaders, followed by Detroit-Ann Arbor, Cleveland, and Pittsburgh. (See table, this page, for complete listing.)

“The region is reaping the benefits of a number of programs that have been put in place to stimulate healthcare venture activity,” said Shah. “The region has always been rich in research and industry assets. That rich base is now translating into a growing stream of high quality health care start-ups due to progressive policies and programs such as state investments in research institutions, creation of new capital sources, and professional technology development groups.”

BioEnterprise is a business formation, recruitment and acceleration effort designed to support the growth of bioscience companies, providing management counsel and support services to healthcare companies.

BioEnterprise’s partners are Case Western Reserve University, The Cleveland Clinic Foundation, University Hospitals Health System, and Summa Health System.

Additional technology partners include the NASA Glenn Research Center, Cleveland State University, NorTech, and Omeris.

BioEnterprise says that with these partnerships it has created, recruited and accelerated more than 50 countries in four years.