Technology and Small Business

Six firms land $6.1M from state tech fund: 21st Century program issues its first grants since 2004; local companies Semafore, Cadent among recipients

February 27, 2006

The state launched the fund in 1999 to invest in new technologies and appropriated $137 million during the first five years of the program. The state awarded no money in 2005, partly because none was available the first half of the year. The administration took the second six months to get acquainted with the fund.

Kidd left his job as vice president of the Indiana Venture Center in October to join IEDC. The veteran small-business consultant since has helped reshape the program and its focus. The biggest difference going forward is that state investments will target second-stage companies developing products rather than those conducting initial research.

State funds will help "top off the gas tank" to get them ready for the market, where they might attract interest from venture capitalists, Kidd said.

David Millard, chairman of Indianapolis-based Barnes & Thornburg LLP's Entrepreneurial Services Group, concurred with the change in philosophy.

"While I don't think they're abandoning the earliest-stage companies or the universities, they're certainly looking downstream to companies that are further along," Millard said. "In moving that direction, they get companies that are candidates for venture-capital funding, and that's huge."

Academic projects previously held the inside track for funding, as much of the money went to universities that could lend their resources to create new products. But IEDC listened to the pleas of independent entrepreneurs who complained they couldn't get attention without university affiliation.

While the five companies receiving funding have university ties, the IEDC wants the enterprises, instead of the institutions, to control the money.

The $730,000 Candent Technologies received will help further the small-engine technology it is developing for the U.S. Army.

Manny Papandreas, Cadent's vice president of engineering, declined to divulge specifics of what he described as classified information but said the grant will allow the company to hire more people. Candent currently has four employees.

"The 21st Century Fund has been a huge influence in moving our program forward," Papandreas said. "We're trying to pay them back by buying a lot of hardware in the state. We want to grow our business in Indiana."

Candent twice has received support from the 21st Century Fund, which for the company acts as a match for the federal Small Business Innovation Research program. The state matched a $64,000 grant the company received during the first phase of the SBIR program and is now matching the money Candent got in this phase.

The latest round of funding gives Candent another year of life, said Papandreas, who left GM's Allison Gas Turbine-now Rolls-Royce-jet engine plant on the west side to launch the company in 2001.

The money comes at a critical time, too, for Indianapolis-based Semafore Pharmaceuticals.

Semafore is developing a drug to fight various types of cancers by interrupting the signal many cancer cells need to grow, and is moving toward the clinical stages this year.

Semafore will use much of the $2.2 million -the most of the six companies supported this time by the fund-to finance that effort.

"The real crucial step is the one we're at now," said Ron Henriksen, an investor who came aboard last year as CEO. "I think the people at the 21st Century Fund really understood that."

Semafore was founded in 2000 by Joe Garlich, president and chief science officer, from the research of Dr. Donald Durban at Indiana University Medical School.

Henriksen expects to generate additional interest from John Hopkins School of Medicine, Emory University and Dana Farber Cancer Institute.

Before the latest round of funding, the state had not considered proposals since March 2004. Moving forward, the aim is to reduce turnaround time. Previously, the 21st Century Fund considered applications only during a designated timetable.

Over a half-decade, that meant just six opportunities for applications to solicit funding. Kidd has begun a rolling application process he thinks will provide flexibility to consider projects quickly, whenever they arise.

Another significant change involves the selection process. The 21st Century Fund previously required a formal scientific review of every new project by a team of peer experts around the nation.

The new process includes a review of the application by the IEDC's 12 board members. An entrepreneur's committee consisting of four of those directors ultimately approves the grant.

The committee reviewed roughly 30 applications before settling on the initial six. The IEDC is set to release another round of funds in March, Kidd said.

One caveat tied to the funding is that beneficiaries must return the money if they leave the state.

Said Kidd: "Not one company has had a problem with that."
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