Accuitive Joins Innovation Fund

Since its 1999 inception, medical device incubator The Innovation Factory has helped fund select startups via an affiliate agreement with The Carlyle Group, Versant Ventures and Schroder Ventures Life Sciences. The strategy has been for the three VC firms to co-invest on Series A and Series B rounds at set valuations (read: below market value), and then to open up Series C deals to outside investors.

For example, LipoSonix Inc., a Bothell, Wash.-based medical device company focused on the non-invasive removal of unwanted body fat, was founded by The Innovation Factory four years ago, and has raised two rounds of VC funding from the above investors, including a $9.9 million Series B deal at a post-money valuation of approximately $20 million. The company now is out raising a Series C up round, and so far has received interest from more than 30 venture firms.

To extend its industry expertise and financial flexibility, The Innovation Factory recently agreed to expand its VC trio into a quartet. The new member is Accuitive Medical Ventures, which is in the midst of raising an inaugural fund targeted at between $50 million and $75 million.

The Duluth, Ga.-based firm held a $25 million first close from Grove Street Advisors (on behalf of the California Public Employees’ Retirement System and AlpInvest Partners), and more recently secured $7.5 million from The Duke Endowment and another $2.5 million from Brooke Private Equity Management. Duke also has committed to invest an additional $2.5 million, while Brooke has indicated a desire to purchase an undetermined percentage of the final close.

Accuitive will provide 10% of all Series A and Series B deals for Innovation Factory startups, with The Carlyle Group, Versant Ventures and Schroder Ventures Life Sciences each taking a 30% stake. All firms are encouraged to invest pro rata during follow-on deals, and Accuitive recently provided some Series B-1 funding for LipoSonix.

“We see this as the next evolution of the VC structure,” says Michael Partsch, a managing director with Accuitive and a former associate with Versant. “Seventy percent of our deals will be co-investing with the [Innovation Factory consortium], and a lot of the rest will come from our strong connections with entrepreneurial groups and repeat entrepreneurs.”

Partsch is one of three members of the Accuitive investment team that is not also employed by The Innovation Factory. The other two are managing director John Deedrick (formerly of The Mayo Clinic’s VC arm) and Gerard van Hamel Platerink.

Tom Weldon, chairman of The Innovation Factory, also serves as chairman and managing director of Accuitive. Charlie Larson, Innovation Factory CEO, and Steve Waite, Innovation Factory president and COO, will both serve as Accuitive managing directors on a part-time basis.