With less than four weeks left in the year, Minnesota has awarded about 38 percent of the $11-million worth of angel investor tax credits available for 2010.
Since launching the program in July, the state has granted about $4 million in tax credits to investors who funded startups ranging from solar energy to drugs to cancer treatments and diabetes, according to figures released this week by the Department of Employment and Economic Development (DEED).
In February, the state enacted a historic five-year, $60 million angel tax credit designed to encourage investors to fund promising high-tech startups.
That investors would grab more than a third of the inaugural pool in less than six months seems impressive. But the real test is whether the law pushed investors to write checks they normally wouldn’t have. Or to put it another way, did the state award credits to previous bench warmers or to angels who already were going to play?
Too early to tell, but there are some encouraging signs. Investors put $1.1 million into Minnesota drug companies (a rarity in a medical device-obsessed state) that had struggled to win financing.
IGF Oncology, based in Birchwood, Minnesota, received $1 million, prompting the state to award $250,000 in tax credits to its backers. The company is developing a drug that attacks the insulin receptors found on cancer cells, thereby avoiding healthy cells.
The state also reported Exsulin Corp., based in Burnsville, Minnesota, attracted $100,000 from angels, who, in turn, received $25,000. That’s still far short of the $2 million CEO Lisa Jansen said she needs to fund clinical trials for a drug that can treat Type 2 diabetes by regenerating insulin-producing cells in the pancreas. One hundred thousand dollars is better than nothing, but whether the investment prevents Exsulin from moving to the coasts, as Jansen had previously warned, is an open question.
What’s surprising — and maybe a little disappointing — is the relative lack of medical device firms to receive angel backing. Of the 19 companies listed by the state as of Nov. 8, only three seem to be pure medical devices.
Medspira in Minneapolis, which sells imaging and surgical devices created by the Mayo Clinic, attracted $500,000 from investors. OrthoCor Medical Inc., a Minneapolis startup developing a device to treat knee pain, received $605,000. Phraxis Inc., a St. Paul-based company developing vascular technology for dialysis, squeezed out $11,700.
Instead, the lion’s share of angel cash went to software and clean energy companies, including MCC Solar ($1.4 million) and Mcgyan Biodisel ($1.2 million).
Another positive sign: the state is certifying new angel groups like M360 Investments, Wildwood Investors, Ninety-Seven Twenty-Three and Omphalos Venture Partners, founded by founder and former Virtual Radiologic CEO Sean Casey.
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