Durham life sciences venture capital firm reaches investment fund goal

Jan. 07, 2013 @ 06:10 PM

Hatteras Venture Partners, a Durham-based life sciences investment firm, reached its $125 million fundraising goal for its fourth investment fund with the support of a federal capital investment program.

In addition to $88 million raised from private investors, the Durham firm is planning to reach its target for the fund using U.S. Small Business Administration-guaranteed loans.

The firm was the first to have an investment fund licensed as part of the agency’s Early Stage Innovation Funds program, part of President Obama’s Startup America initiative.

There is up to $1 billion in U.S. SBA-guaranteed loans available through the program, according to a news release from the agency. Investment funds like Hatteras’s can receive up to $50 million to match their privately raised capital. At least half of the investment funds in the licensed funds must be invested in early-stage small businesses.

The program is aimed at solving a problem said to be experienced by high-growth, early-stage companies, according to the agency’s release. Those companies can experience a gap in the availability of funding between $1 and $4 million that’s referred to as the “Valley of Death,” the release states.

Since January 2006, less than 10 percent of all U.S. venture capital dollars went to seed funds investing at those levels, according to the release, and about 70 percent of that went to three states: California, Massachusetts and New York.

Dennis Byrne, a spokesman for the U.S. Small Business Administration, said in an email that 33 venture capital funds across the country applied for the program last year. Six received preliminary approval, he said. Of the six, Byrne said Hatteras’ fund was the first to close on funding, and to qualify.

Hatteras, founded in 2000, invests in early-stage and seed companies developing drugs, medical devices, diagnostic tools, as well as health care information technology and related human medicine products. The firm’s focus is on investing in the Southeast.

John Crumpler, a general manager of the firm and one of its two co-founders, said the U.S. SBA program allows the firm to have access to more capital so it can take advantage of a “huge opportunity” in North Carolina and in the Southeast.

“We really believe in this industry, we believe in this region, and the availability of capital,” Crumpler said. “It’s a tough time, because a lot of capital sits on the sidelines in uncertainty, but those of us who are investors know that’s the greatest time to be investing.”

The firm launched its fourth investment fund, Hatteras Venture Partners IV, in August 2011, according to its website.

The Durham firm said in a news release that as part of the final closing of the fourth fund, a subsidiary fund called HVP IV SBIC was set up.

That subsidiary fund was the first licensee of the SBA’s Early Stage Innovation Funds program, according to the release.

The firm is allocating a portion of the fund to seed-stage companies and projects in the field of human medicine and life sciences, according to its website. That allocation is known as Hatteras Discovery.

“We’ve always invested in discovery-type assets,” Crumpler said. “Hatteras Discovery is and was our way of organizing that process, and making that more systemized.”