Affinity/Triathlon hit ‘pause’ button on $10M early stage fund

Affinity Capital Management in Minneapolis and Triathlon Medical Ventures in Cincinnati have suspended efforts to raise a $10 million early stage seed fund in Minnesota.

“We’re not shutting it down, we’re putting it on pause until we can figure out what to do,” Triathlon managing partner John Rice told MedCity News.

Northern Lights Seed Capital, which has been trying to raise money since the beginning of this year, has attracted some individual investors but has failed to win over deeper-pocketed institutional firms, Rice said.

Affinity and Triathlon will decide Northern Lights’ fate in the fall, he said.

Rice, who declined to disclose how much the venture was able to raise, said institutional investors are not getting the returns they want from lifescience companies or are still waiting to see exits from their current portfolios.

Across the country, early stage money has dried up as the weak economy and lackluster demand for initial public offerings forced venture firms to focus on keeping alive more advanced, experienced companies that are generating sales from real products. Early stage investments last year fell 13 percent to $4.6 billion from 2008, according to the MoneyTree report by PricewaterhouseCoopers and the National Venture Capital Association.

The demise of Northern Lights would be a bitter blow to Minnesota, which has struggled to attract early stage venture capital.

Minnesota startups, mostly medical device firms, raised $255.5 million in 2009, down a whopping 40 percent from the previous year of $426.5 million, according to the MoneyTree Report, which is based on data from Thomson Reuters. Nationally, investments in medical devices — the lifeblood of Minnesota’s economy — dropped 27 percent to $2.5 billion.

Northern Lights was hoping to target startups in biotechnology, medical devices, healthcare and diagnostics. The fund also was interested in platform technologies that could apply animal science to human health.

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