Medical device start-up Kips Bay Medical Inc. raised $16.5 million Friday in the year's first initial public offering for a Minnesota company.

The latest project of serial entrepreneur Manny Villafaña, Plymouth-based Kips Bay has developed a mesh stent to support veins used in heart bypass surgery.

"It's taken a lot of hard work, but we got it done," Villafaña said on Friday afternoon. "Now we have the funds to get things rolling."

The company will use proceeds from the offering to pursue U.S. regulatory approval of its product, called eSVS Mesh. The money will also support tests to determine if there are other uses for the product, milestone payments for the underlying intellectual property and working capital.

Kips Bay priced the offering of 2.1 million shares at $8, the low end of its expected range of $8 to $10 a share. It had previously expected to offer more than 2.7 million shares and raise about $21.2 million, according to documents filed with the Securities and Exchange Commission.

Shares fell 7 cents in their first day of trading to close at $7.93.

Kips Bay's offering was the first IPO in the state since New Prague-based Electromed Inc. went public last August. Since 2009, only four Minnesota companies have gone public.

"The IPO market in health care has been quiet over the past two years," said Thomas Gunderson, an analyst with Piper Jaffray & Co., pointing to uncertainty surrounding health care reform, changes at the FDA, and government investigations of medical device companies. "But in the past couple weeks we've seen several IPOs in the health care space."

Gunderson said one reason Kips Bay was able to go public is the stature of Villafaña, its founder and chief executive. An alumnus of Medtronic Inc., he founded Cardiac Pacemakers Inc. in the 1970s. It later became Guidant Corp., now part of Boston Scientific Corp.

He then founded St. Jude Medical Inc. of Little Canada, and several other companies, including ATS Medical Inc. and CABG Medical Inc. CABG Medical went public in 2004, but it shut down two years later.

The Kips Bay product is available in Europe, but the company has not yet received approval from the Food and Drug Administration to begin clinical studies in the United States. That could come sometime in the first half of this year, the company said in securities filings.

One of the most commonly performed surgeries in the United States, bypass surgery uses healthy blood vessels, usually harvested from the legs, and connects them to arteries in the heart so that blood is bypassed around a diseased or blocked area. Typically, two to three grafts are used in each procedure.

But veins taken from the legs often collapse under the intense pressure of the heart. Kips Bay said studies show the failure rate of leg vein grafts can range from 6 percent to 30 percent a year after surgery and 60 percent 10 years later.

"The potential implications of this product, if the studies work out, are vast," said Dr. John Grehan, a heart surgeon with the United Heart @ Vascular Clinic in St. Paul, who has no ties to Kips Bay. "There is definitely a need."

Staff writer Patrick Kennedy contributed to this report. Janet Moore • 612-673-7752