Aug. 7–A local biotechnology consultant and entrepreneur, Eric Button, is starting a $20 million venture-capital fund to put money into medical-diagnostic companies.

Button, the president and managing partner of BioEmerge Partners, wants to raise an initial round of money by the first quarter of 2004 and have all $20 million secured by the end of that year, he said yesterday. A large medical-diagnostic company, which Button would not name, wants to invest $5 million in the new BioEmerge Diagnostics Capital Fund.

Abbott Laboratories Inc., based near Chicago, is an example of a medical-diagnostic company, having developed blood tests to screen for hepatitis, HIV and other diseases.

“Historically, venture capitalists have not invested heavily in the medical diagnostic arena, but that is starting to open up with advent of new genetic technologies and discoveries,” Button said. “There are many untapped opportunities in diagnostics.”

Money is starting to flow into the once-parched venture-capital pools, especially for life-science companies, Button said. Investors had been wary of backing anything after the dot-com bubble burst.

“The biotechnology industry is showing very significant signs of life again, the first couple of public offerings are being planned right now and the biotech stock indices are going up again,” he said. “There’s a lot of venture capital in biotech that’s been sitting on the sidelines, but I think with the opening of the IPO door, that we’ll see some of that money.”

The BioEmerge fund will be one of the largest based in the Triad. The other, Academy Venture Funds, is near $30 million. The fund has invested in Winston-Salem biotechnology companies Targacept Inc., Kucera Pharmaceutical Co. and Pilot Therapeutics Inc.

Pilot is now in South Carolina.

Two smaller Triad funds, the Piedmont Angel Network and the Inception Micro Angel Fund LLC, have formed as ways to give seed-stage money to young technology companies. The micro fund, which will offer small amounts of money to help companies get off the ground, has not made any investments yet.

Button has offered to be the micro fund’s co-director. The other director is Tim Janke, a regional director for the Small Business and Technology Development Center.

Many Triad start-ups say that the local funds are not enough. They say they must go outside of the region or even North Carolina to get money. Some companies, such as Kucera and biotechnology company Algaen Corp., have obtained federal grants to help pay for research.

High-growth companies that aren’t technology companies are having additional trouble finding money, officials say. Wake Forest University’s Babcock Demon Incubator houses technology and non-technology businesses, and the Triad Entrepreneurial Initiative’s annual business-plan competition is open to most start-up companies that have high-growth potential.

A top complaint of companies that are a part of either initiative is the lack of money in the area.

“The venture funds and the angel funds in this area tend to be more focused on the technology,” Janke said. “So, technically, I think there still could be a gap in investment capital for other companies. For start-ups, I think it’s still hard if you’re not life-science or technical.”

Paul Briggs, the director of the Wake Forest incubator, said that new funds broaden the investment scope.

“I think any time you can generate a different fund with a different governing body, you broaden the base of the companies that can survive,” he said.

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(c) 2003, Winston-Salem Journal. Distributed by Knight Ridder/Tribune Business News.

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