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Future fund's seeds fed from out of state

Gary Gigot is the founder of the Gigot Center for Entrepreneurial Studies at the Mendoza College of Business

by Chuck Bowen, Star correspondent
Publication: Indianapolis Star

October 16, 2007

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Since its launch four years ago, the Indiana Future Fund has invested in early stage lifesciences
companies, helping them find their footing and grow with a million-dollar bankroll.

That investment has attracted venture capital firms from across the country and the world, and helped convince them to put their money into Indiana companies.

So far, $20 million from Future Fund venture firms has leveraged another $73 million in out-of-
state funding, according to Michael Arpey, managing director of customized fund investment group for Credit Suisse, the group that manages the fund.

"What IFF is doing is putting a big magnifying glass on Indiana," Arpey said.

Without the fund, he said, many out-of-state venture capital firms "might have flown over
Indiana. When they do stop and look, they like it, and that's the point."

The fund, launched in 2003 by Indianapolis-based BioCrossroads, works like this: Institutional investors (university foundations, big life-sciences companies and state pension funds) put in $73 million. That money was made available to six venture capital firms, which then invested it in life-sciences companies, nine of which are in Indiana.

"Prior to there being an Indiana Future Fund, there was nobody to pursue those types of
opportunities," said David Johnson, president and chief executive of BioCrossroads. "There
wasn't anywhere to go. Not in the life sciences."

Johnson said that the fund's $73 million may sound like a lot, but it isn't enough -- on its own -- to do much good for many companies, let alone a statewide industry.

"We wanted to have venture firms who came from outside, hoping they would bring partners
in," he said. "Those investors wouldn't have made those investments if we hadn't had investors in Indiana funding them first."

One of those investments is West Lafayette-based Endocyte. The targeted therapeutic company has received $9 million from Future Fund venture firms, and CEO and President Ron Ellis said the money has helped -- both for his company and for the state.

Ellis said one of the Future Fund venture firms that invested in Endocyte -- Burrill & Co., based in San Francisco -- has been the lead investor in Endocyte's last two rounds of funding.

"IFF investors have helped significantly in bringing in additional (money). It speaks well to the companies they chose as VCs," he said. "If you choose bad ones, no one will come in with them."

Endocyte has raised $80 million from venture capital since it was founded in 1996, and it hasn't always been easy. Ellis credits the Indiana Future Fund with opening doors for earlystage companies, and cites the fund as an example of the state's commitment to the lifesciences industry.

"It's night and day from '96. I couldn't get an institutional VC to invest in Indiana in those days," he said. "We didn't get the time of day."

Gary Gigot, a partner at Seattle- based Frazier Technology Ventures and founder of the Gigot Center of Entrepreneurial Studies at the University of Notre Dame, said things like the Indiana Future Fund have helped the industry grow away from the coasts.

"We're starting to see pockets of success in the Midwest," Gigot said.

He said more talented people want to live in the region; governments have committed their
support; and today's business environment lends itself to setting up in the heartland.

"It's sort of the democratization of opportunity the Internet affords," he said. "You can build
companies anywhere. You don't have to be in the major tech centers."

So far, Johnson said, about half of the Indiana Future Fund's money has been drawn down and invested. The rest has been committed, but not handed over.

The entire fund likely will be gone in 18 months, he said, and discussions are under way to
start another.

"It'll run out, and we'll do it again," Johnson said, "which we'd be happy to do."

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