Midwest VC firm Allos Ventures has $40 million in tow and is looking to use it to back a handful of emerging technology companies in the region.
Allos’ recently closed second fund will follow the path of its first by targeting early-stage companies in high-growth sectors, namely software and technology-enabled business services, specialty healthcare providers, later-stage medical devices and diagnostics, and advanced manufacturing, since that’s where the fund’s directors have the most experience.
Those directors are Don Aquilano, John McIlwraith and Dov Rosenberg, all principles from Cincinnati VC firm Blue Chip Venture Co. They spun off and created their own firm in 2010 to specialize in early-stage investments in companies that have raised seed money from friends and family or angels and are ready for their first round of institutional capital.
Companies they’ll consider are ones with a validated product or service that are generating revenue but are still a year or so from profitability. In terms of location, Allos likes its portfolio companies to be within driving distance of its offices in Cincinnati and Indianapolis – so, generally somewhere between Chicago, Nashville, St. Louis and Pittsburgh. Allos also likes to lead or co-lead rounds between $3 million and $6 million, with initial investments of about $2 million.
Although the team won’t invest in pharmaceutical or biotech companies, McIlwraith said health technology is one big area of interest. “We absolutely focus on healthcare IT, and what we would call technology-enabled business services,” he said. “That’s a horizontal, but one of those verticals within it would be business services in healthcare space.”
With its $11 million first fund, the team invested in four companies, including Cincinnati-based AssureRx Health, a bioinformatics company that develops tests to help doctors pick the right psychiatric drugs for patients based on their genes.
And although medical devices aren’t a likely fit to meet the firm’s investment criteria, they aren’t an automatic no. “If it’s a medical device, it would have to be a fairly unusual combination of late-stage, low capital need and low-risk,” McIlwraith said.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
As part of Blue Chip, McIlwraith has invested in a number of health-focused companies including Medhost (sold to HealthTech Holdings in 2010), Renal Solutions (bought by Fresenius Medical Care in 2007) and Endocyte.
Other companies in Allos’ portfolio include BidPal, which builds technology to help non-profits run their events and fundraisers; IT infrastructure company Scale Computing; and WebLink International, which makes web-based software for professional associations and their members.
[Cincinnati photo from Flickr user savrae]
