Is Indiana coming out of venture capital swoon?

Carmel-based Dormir LLC’s announcement July 29 of $12 million in venture financing was the second local life sciences
deal announced in July.

It could suggest a turnaround from a woeful second-quarter performance, when Indiana life
sciences firms announced zero venture capital deals, according to BioEnterprise, a Cleveland-based life sciences development
group that tracks such funding.

Indiana missed out on an above-average quarter for the Midwest, where 34 companies
announced venture deals. Though better than the national average, the number was down from 51 in the same quarter last year.
And total capital raised around the Midwest fell in the second quarter nearly 19 percent, to $247 million.

Life
sciences venture capitalists and business executives say venture capitalists are still skittish.

“There’s
a lot of money out there, but they’re sitting on it waiting to see,” said Tim Miller, CEO of Dormir, which operates
sleep-study centers and sleep-equipment stores around the country.

Dormir was able to raise the money it wanted,
but Miller said each of his three investors insisted on doing their own thorough due diligence. That stretched a four-month
process to 10 months.

Dormir plans to use its newfound cash to make six to 10 acquisitions this year. A change
in reimbursement by the federal Medicare program has sent many centers into the red, making them prime targets to buy, he
said. Dormir bought two Florida sleep-center operators earlier this year.

Indiana-based life sciences venture capitalists
say it has been difficult to raise follow-on rounds of capital since the financial meltdown of September 2008 and the ensuing
stock market plunge.

Earlier this month, Indianapolis-based NICO Corp. announced that it raised $10 million in
a second round of fundraising. It’s goal is $10 million.

But in the first six months of the year, four Indiana
firms attracted a paltry total of $8.9 million. In the same period last year, two companies raised $41.3 million.

It could reflect a lack of life sciences deal flow in Indiana, or that some of the funds raised in the wake of the creation
of BioCrossroads and the Indiana Future Fund have run out of money.

“It might be a little of each,”
said Ron Henriksen, chief investment officer for the life sciences venture firm Twilight Venture Partners, which invested
all its money and is in “harvest” mode right now. At the same time, he added, he hasn’t heard of many companies
being in a position to raise more money.

Nationally, all venture investments have fallen by more than 50 percent,
to levels not seen since 1997, according to the National Venture Capital Association.

“The [Midwest’s]
companies are currently faring better than their national peers,” said Baiju R. Shah, CEO of BioEnterprise. “However,
the venture funding environment remains very challenging for Midwest health care startups.”