Local firms pitch at Angel Capital Summit

DENVER – Innovation oozed throughout the Colorado Convention Center last month when the annual Angel Capital Summit featured presentations by six Northern Colorado companies. Actually landing financing might take a bit more inventiveness.

It’s no secret that capital financing has gone south with traditional financial markets. According to a venture capital report from PricewaterhouseCoopers, third-quarter venture financing came in at $4.8 billion, down significantly from $7.1 billion during the same time last year. In Colorado, venture funding for the third quarter totaled $50 million compared to $201 million last year.

Even if financing was not abundant at the Nov. 17 capital summit, companies looking for it were. For the 2009 event, organizers tapped into 50 investor and other partner groups – universities, incubators, Meetup groups and others – up from 22 groups in 2008, explained David O’Brien, CEO of Boulder-based Business Catapult and head of the selection committee.

“We reach out to people who are interacting with entrepreneurs,” he said.

In all, 190 companies and organizations applied to present at the summit, but only 40 were selected.

“For the 40 companies that presented, it’s not about someone pulling out a checkbook that day,” he said. “That almost never happens.”

O’Brien said that of all companies seeking financing, maybe 2 percent actually get it. The Angel Capital Summit, he said, is more about making the initial connections, developing relationships and getting advice.

Throughout each step of the three-phase application process, the companies receive feedback. O’Brien said many of the startup firms aren’t well versed on fully discussing elements investors will be looking for, such as sales plans, executive experience, research and development and financial information. Summit organizers pose questions about value, exit, return on investment, and the like.

“It’s meant to get the companies thinking like investors,” O’Brien said.

The Rocky Mountain Innovation Initiative was one of the organizations involved in getting companies prescreened and prepared to present. Mark Forsyth, executive director of RMI2, said he noticed a decline in the number of investors at the event but was impressed with the quality of companies presenting.

“In past years, we had companies that didn’t understand how far along they needed to be to present to this level of investors,” he said. “I think we had a great group of companies this year.”

The Northern Colorado companies that presented ranged from an online database to advanced engine technology:

St. Renatus LLC

Bioscience firm St. Renatus has already been successful in raising capital. In the past 14 months, the firm has raised $8 million. The funding so far has come from fewer than 100 private investors, primarily health care professionals and successful business people.

The company is developing a dental anesthetic that is inhaled rather than injected. The drug has been in use for many years by otolaryngologists for nasal work. St. Renatus is currently finishing its Phase 2 clinical trials, in which the company must prove its nasal mist is a successful equivalent to the oral injectable it seeks to replace. The firm is preparing now to enter Phase 3 clinical trials that test the drug in a larger demographic.

“It’s the last step for approval,´ said St. Renatus CEO Steve Merrick. “It’s now in fast-track mode.

 St. Renatus could have its Phase 3 trials complete in under two months. The Phase 3 trial for Kovacaine Mist will cover 300 to 400 patients. Founder Mark Kollar explained that because the active ingredient in the nasal mist has already been in use, its Phase 3 trial will require fewer patients. Some new drugs can require as many as 5,000 patients. If all goes well, the Phase 3 trials will begin in the spring.

The company is in the process of raising its Series C financing. Merrick said the funds will be used to get its manufacturing process in place and validated and for further research and development. The company has had interest from all over the United States, including from large investment banks. However, St. Rentaus would rather retain more control of the future of the company and continue to work with private investors.

Van Dyne SuperTurbo Inc.

The company, spun off from Woodward Governor Co. this year, combines supercharger and turbocharger technologies with waste heat capture to increase engine efficiency by about 35 percent. The technology will allow smaller engines to perform at the same level as higher horsepower engines.

The company is already working with a couple of vehicle manufacturers and is in the process of conducting reliability tests. The company is moving quickly, predicting profitability by 2013.

VanDyne SuperTurbo is seeking to raise $1.6 million for its angel round to add to $900,000 already secured. The technology has more than four years of research and development invested in it as a part of Woodward. VanDyne has applied for various grants, including five Small Business Innovation Research grants.

Hydraulic Hybrid Systems LLC

Hydraulic Hybrid Systems LLC is a subsidiary of Loveland-based Lightning Hybrids. The company was founded in 2008 to develop a 100-mile-per-gallon hybrid racecar. Lightning was showing off its prototype at the Denver Auto Show in early 2009 when the idea for Hydraulic Hybrid Systems solidified.

“At the car show, we were asked time and time again when we would have a retrofit (of the technology),´ said Bonnie Trowbridge, vice president of marketing and business development for Lightning.

She explained that people were especially interested in the hydraulic pump, which stores energy during braking for use in acceleration. The company is now building the retrofits for the small to medium-sized fleet truck market. A heavy-duty retrofit is slated for 2012.

The company is looking to raise $1.5 million to finalize the retrofit prototype for five vehicle platforms, get third-party performance and mileage verification and Environmental Protection Agency certification.

GenGreen Digital Media

Founder Charisse McAuliffe got the idea for her green business database out of necessity.

“I was trying to find a local solar panel installer to come put panels on my house in Fort Collins,” she said.

McAuliffe launched the GenGreen database in 2008 and now has more than 65,000 companies catalogued. It is available on both Web and mobile platforms and uses its own criteria to certify the green companies it lists.

“Our database is now the largest of its kind in North America,” she said.

GenGreen drives revenue from corporate offerings such as marketing campaigns, premium listings and digital coupons. In 2008, the company raised $750,000. It recently completed a merger with Canadian development firm 3rd Whale. GenGreen is looking to raise $500,000.

Panda Bicycles

Panda Bicycles sold out of its first production run of 25 bamboo bikes in about a month, at $1,200 each. The company was founded early this year by a group of graduates from Colorado State University’s Global Social and Sustainable Enterprise.

“There’s tremendous energy around what we’re doing,´ said Jacob Castillo, co-founder of Panda.

The company is producing single-speed and three-speed commuter bikes made out of bamboo and a proprietary steel joint system. It will be featured on the Discovery Channel show “How It’s Made” in the spring. The company uses “iron” bamboo from the Yucatan Peninsula for the frame for a sturdy yet light bike.

Panda is looking to raise $400,000 in exchange for a 20 percent stake in the company. The founders anticipate a six-year exit by competitor acquisition or employee buyout.

Shonaquip

Technically, Shonaquip isn’t a Northern Colorado company or a startup, but CSU GSSE graduate Lucinda Kerschensteiner has been consulting with founder Shona McDonald part-time to expand the company and launch a related nonprofit subsidiary.

Shonaquip was started in 1992 in South Africa by McDonald, an artist. Nine years earlier, she had given birth to her daughter, Shelley, who has cerebral palsy. McDonald was told that she should give the severely disabled girl up to a home and have another child. Instead, she designed her own motorized wheelchair, a mobility aid taken for granted in most of the developed world, to meet Shelley’s special needs.

The company is looking for $500,000 to work on design and reduce manufacturing costs for its customized assistive devices in the next year. Following that, Shonaquip will seek $1.5 million to expand beyond South Africa to four additional countries.

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