Two-dozen investors are hoping to make a big impact on the biotech environment in Northeast Ohio through the Cleveland Life Sciences Accelerator Fund, a $2.7 million venture capital fund that closed Aug. 5.
Led by founder Mark Chance, former vice dean of research for the school of medicine at Case Western Reserve University in Cleveland, and with partners Dr. Beno Michel, Edward Hemmelgarn and Robert Hurwitz, the venture fund aims to put Cleveland on the map as a place for entrepreneurs in biotech and life sciences to start companies and keep them in the area, according to the funders.
“I had been impressed when I was at the medical school of how many technologies we had, how many patents,” Chance told the Cleveland Jewish News Sept. 12. “Case is 20th in the world in patenting, if you believe that.”
Chance said he reviewed technologies that were accelerated into companies with assistance from Case Western Reserve University in the past five years. Those companies received $300 million in dilutive venture capital to start up. Most of them left town.
“Boston, Seattle, New York, San Diego, a little bit in Cleveland – only 10% of the total income,” he said, referring to the opportunity for investment. “So I did the math: $300 million, 10%, that’s $30 million over six years. Wow. That’s $5 million a year. If you had a little bit of money in town, you could make a difference.”
Put simply, as it appears in the investors’ pitch deck, “Since 2015, CWRU-accelerated companies have raised tenfold more capital nationally than they could acquire regionally due to local risk aversion.”
Chance, a Moreland Hills resident, said he met with Michel over breakfast at the Original Pancake House in Woodmere in June 2021 and began to talk about his idea to start an accelerator or venture fund aimed at biotech. At that breakfast, the two decided to see if other investors might be interested in joining a small group that could provide seed money for new businesses in that field.
Chance said he initially thought the idea was “far-fetched.”
“So he challenged me,” Chance said of Michel. “Let’s see how many breakfasts it takes to get to a million dollars literally. We started calling our friends and people we knew.”
Michel told the CJN Sept. 12 that his interest was motivated out of frustration as he watched scientists from Case Western Reserve University start companies in Cleveland.
“And then these companies leave Cleveland to go to Boston, Minneapolis, Seattle, San Francisco,” Michel said. “I’ve always found that given the intellectual capital in Cleveland, between Case Western Reserve, UH, Cleveland Clinic, VA and Metro, that Cleveland should be like a mecca for scientists to want to form companies in Cleveland, and that this should be a major medical company center in the area of diagnostics, medical devices, bioinformatics, biotech and pharmaceuticals.”
Michel said it is not.
“There is the perception that Cleveland is risk averse,” said Michel, who lives in Beachwood and Palm Beach Gardens, Fla., and belongs to Anshe Chesed Fairmount Temple in Beachwood.
He was recruited to Case Western Reserve University in 1968 and served as the director of the division of dermatology at University Hospitals until 1977, then moved to private practice.
Michel and Chance did some “soft circling,” meaning that they got initial commitments for funds from investors.
“We got to a million dollars by Labor Day,” Chance said, adding that many of the investors were faculty members at Case Western Reserve University. “They believe in Cleveland. They believe in the mission of entrepreneurship and company formation. And I dare say they like the job I did at the university accelerating companies. They think I can do the scientific diligence or a good portion of it.”
Also performing scientific diligence is Michel. Hemmelgarn, a Case Western Reserve University alumnus, is performing business diligence along with Hurwitz, who founded OfficeMax, both of whom are expected to play major roles in the fund. Hemmelgarn offered to have his company, Shaker Investments, keep the books for the fund in a cost-saving measure, Chance said.
On Dec. 1, 2021, Chance left Case Western Reserve University’s administration to form the venture fund. He remains distinguished university professor in the department of nutrition.
In January, Chance said, the fund began collecting money for investments.
“If there are five or 10 companies coming out of the university a year in health care and there are other companies in town, I feel I have a fertile field to look for promising seedlings and give them attention and have them grow,” Chance said.
When the fund closed Aug. 5, it was oversubscribed by 25%. The model is to invest $250,000 to $300,000 in a basket of approximately 10 companies over 18 months.
In addition, new investors who want to join will have the opportunity in “sidecar” offerings. They will be shown one company at a time for potential investment, Chance said, with a second basket also contemplated in summer 2023.
Cleveland Life Sciences Accelerator Fund has identified several companies for initial investment and has already invested in two:
• Hemex Health in Portland, Ore., a diagnostics company with licensed technologies discovered at Case Western Reserve University. Its business model makes diagnostics like sickle cell and malaria testing available in low resource settings such as India and Africa, promising to transform healthcare delivery in those lower income settings, according to a news release provided to the CJN.
• careMESH of Washington, D.C., a digital health-IT company with CWRU alumnus, Peter Tippett as CEO. Tippett developed Norton anti-virus software for computers. He has a vision to connect hospitals and other providers safely and efficiently, transforming the way health care data and records are shared to enhance care, the release said.
In addition, the fund plans to invest in Luminary Therapeutics in Minneapolis, a cell therapy company developing treatments for blood cancers. Its “novel BAFF-CAR-T product invented by CWRU faculty at University Hospitals Cleveland, has been approved for clinical trials for multiple myeloma at UH and for B-cell lymphoma at the Cleveland Clinic, as local clinicians are very excited about the company and the potential for blood cancer cures from its lead product. Further, the cells for the clinical trials will be manufactured at CWRU’s own National Center for Regenerative Medicine, showcasing Cleveland and Ohio’s national leadership in this space,” according to the release.
In addition, the fund is about to invest in TEVARD Biosciences in Boston, “a pre-clinical stage gene therapy company, (that) was formed in part based on technology developed at the Case Western Reserve University School of Medicine. The founders’ vision includes cures for a host of genetic epilepsies, where the developed platform will then be directed at hundreds if not thousands of other genetically based diseases that damage the brain, liver, heart, muscles and other organs. The science team is extraordinary,” the release stated, adding that the team is led by Dr. Harvey Lodish.
“Every company has a tie to Case Western Reserve,” Michel said, adding some research will be conducted in Cleveland.
Michel said as he contemplates the future of biotech in Cleveland, he has one ask.
“We need visionary business and political leadership to join us,” he said. “Join our vision for making Cleveland into a major drug company center for diagnostics, medical devices, bioinformatics, biotech and pharmaceuticals.”
Hurwitz, a Pepper Pike resident, is a member of Park Synagogue in Cleveland Heights and Pepper Pike.
Full story: New biotech venture fund invests in Cleveland’s future | Local News | clevelandjewishnews.com
