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A veteran venture capital firm that invests in health care, software and Internet services start-ups will announce Wednesday that it has raised $300 million for a second fund and that up to half the proceeds likely will go to capital-hungry Minnesota companies.
"We believe there are compelling opportunities in Minnesota," said Michael Gorman, one of five managing directors of Split Rock Partners, which invests in the Midwest and California. "It's a plus to be here. We already have 16 portfolio companies in Minnesota."
Split Rock, which spun off from the former St. Paul Venture Capital in 2004, raised its inaugural $275 million in 2005. That was the first time it attracted investors other than the insurance company now known as the Travelers Companies.
In an interview Tuesday, Gorman and Dave Stassen, another managing director, said all "Fund 1" investors and a few new ones have signed on for "Fund 2."
"The positive response we received from our investors demonstrates strong support for Split Rock's team and investment strategy," Gorman said. Split Rock expects to invest the last of its $275 million in Fund 1.
Its portfolio companies include Atritech, Disc Dynamics, eBureau, Evalve, Gearworks, HireRight, LowerMyBills.com and Tornier.
News of the new fund was welcome at a time of uncertainty in capital markets.
"Dave Stassen is a renowned venture capitalist in the medical technology space and Minnesota is a world-class player in medtech," said Dan Carr, CEO of the Collaborative, an organization that supports Minnesota growth companies. "Michael Gorman has a similar legacy in technology investing in Minnesota and elsewhere. The fact that they have raised a larger fund in today's more-tenuous fundraising climate, and it's harder now than six months ago, is a tribute to them. They invest a lot in Minnesota. And they market Minnesota."
Split Rock is best known locally for some of its med-tech successes. In 2006, Split Rock partnered with Warburg Pincus of New York to acquire Tornier, a French medical products company.
The investors selected Doug Kohrs, a veteran Twin Cities med-tech executive, to succeed founder Alain Tornier as chief executive and move the headquarters from Paris to Minneapolis. Under Kohrs, Tonier, which had 2006 revenue of more than $100 million, has acquired other companies, expanded revenue and broadened its global reach.
Kohrs was an executive at Spine-Tech, a company headed by Stassen before it was sold for $595 million in 1998. Kohrs later served as CEO of American Medical Systems.
Split Rock, with offices in Eden Prairie and the Silicon Valley of California, also continues to manage a portfolio of investments for the insurance company.
Venture capital investing peaked nationally in 2000 amid the technology boom. In the first quarter of 2008, 10 Minnesota firms shared $60 million in venture financing, good for 17th place in the country, according to the MoneyTree Survey by PricewaterhouseCoopers and the National Venture Capital Association,. That was down from the first quarter of 2007.
Minnesota firms typically capture about 1.5 percent of all venture capital money invested nationally. But the state gets more than 6 percent of the funds invested in medical-device companies thanks to the legacy and offshoots of organizations such as Medtronic, St. Jude Medical and the University of Minnesota.
Neal St. Anthony • 612-673-7144 • nstanthony@startribune.com
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