Four years ago, attorney Greg Maurer decided he wanted to try his hand at venture capital. So he began calling everyone he knew in Indianapolis for help.
It took several years. But eventually, Maurer attracted a team of experienced venture managers to his side. He also assembled two expert boards: one filled with scientists to help analyze the technical side of new business plans, and another composed of veteran investors to consider their market potential.
Maurer, 31, is the son of IBJ Corp. co-owner Michael S. Maurer. He dubbed his fund "Heron Capital" because he liked the ring of the name. Rather than approach pen- sion funds or universities, Greg Maurer tapped wealthy individuals to underwrite it. And his strategy paid off. By February 2007, Maurer had raised $25 million. Since then, Heron has been speculating on promising life sciences startups.
"I spent a lot of time building those networks up before jumping in," Maurer said. "Like most businesses, the people you do business with, that's the most important quality of any deal. And the better you can get to know people, the better off you are."
Networking remains the cornerstone of Heron Capital's approach. The venture firm has now made investments in four life sciences startups. It gained the opportunity to join each of the deals due to connections to other venture capital companies here and around the nation. Maurer said Heron aims to invest $2 million to $3 million in each of the companies in its portfolio.
Heron has significant ties to CID Capital, Indiana's largest venture firm. Maurer's co-managing director, Kevin Etzkorn , 37, was formerly a principal there. CID has also been a partner in two of Heron's investments. Both were a part of the syndicate that invested in St. Louis-based AirXpanders, a startup that's attempting to develop a medical tool used in reconstructive surgery.
"Walking into the deal, there was a rapport and relationship there," Etzkorn said. "One thing you'll see as a theme through all of our investments, we partner with all our investments. We really use a syndication strategy."
Heron and CID also co-invested in Cambridge, Mass.-based Atlantis Components Inc., a company that produces customized abutments used in dental implants. That deal has already paid off for Heron. In October, Atlantis was acquired by medical technology company Astra Tech AB, a subsidiary of Sweden's AstraZeneca, for $71 million.
"The company got interest from a number of potential strategic partners," Etzkorn said.
Maurer and Etzkorn declined to disclose Heron's return on the sale.
Heron found its other two deals via venture syndicate partners as well. It has invested in Rockville, Md.-based BioSet, a startup that's attempting to produce a bone-growth factor that would be used in lumbar fusion applications. Heron's portfolio also includes an investment in Houston-based IDEV, a startup that's attempting to develop coronary stents that would be used in the human periphery, unlike traditional stents made for the heart or brain.
Indiana's flourishing life sciences sector was one of the reasons Maurer organized Heron. Although the firm hasn't invested in any local companies, Maurer said, that doesn't mean it won't.
"We're going to do eight to 12 deals in a period of five years. Now we've done four, and we have many more to go," Maurer said. "Within that portfolio of eight to 12 deals, I'm confident that there will be one or more Indiana companies."
And Etzkorn emphasized that Heron is working hard on its local pipeline.
"We're aware of and talking [to] and working with a number of really promising Indiana companies that, while right now we might not feel it's an appropriate time-or the company may not be raising money-we're building relationships that ultimately we think could result in a transaction sometime down the road," Etzkorn said. "And those are sometimes almost better, because it tends to build a rapport. You get to know a team, know what their strengths and weaknesses are."
Life sciences hot
Heron Capital isn't alone in its focus on the life sciences market. Kevin S. Taylor, head of research for the Arlington, Va.-based National Venture Capital Association, said life sciences are becoming a larger part of the venture capital market. Life sciences now account for about 30 percent of venture investing, compared with 10 percent historically.
But that doesn't mean just any firm can put out a shingle and call itself a life sciences specialist, Taylor said.
"Investors have gotten very savvy regarding these asset classes in general," he said. "They insist on investing only in venture funds they perceive will be top quartile."
Although it's only a few years old, Heron is fast establishing a credible venture capital record. Douglas Bailey, managing director of Stamford, Conn.-based American Bailey Ventures LLC, was an Atlantis Components investor. He also ran Atlantis from 2004 to 2007 as its CEO. He said he'd gladly work with Heron again.
"A lot of it is just personal chemistry with people. On top of that, thinking about a new investor's time horizon. Does he have enough patience, willingness to hold over time and develop potential that's attractive to a strategic buyer?" Bailey said.