Elk Run investor raising $1 billion

The main investor behind an ambitious bioscience center near Rochester says he will complete a $1 billion fund to back the project by the end of the year.

In an interview with the Star Tribune Thursday, San Francisco-based biotech investor Steven Burrill also said developer Tower Investments is close to securing millions of dollars in federal stimulus money to construct an interchange to connect Hwy. 52 to the Elk Run facility in Pine Island, Minn., just north of Rochester.

Burrill, CEO and founder of Burrill & Company, was in Minneapolis to court potential investors. He offered new details on the unique hybrid fund, which evenly divides its assets between real estate and venture capital.

"I don't think anybody has done this before," Burrill said.

The fund will spend roughly $500 million to purchase $20 million equity stakes in each of 15 to 25 companies that will move to the bioscience center, ranging from start-ups to publicly traded companies. The remaining $500 million will go toward the rest of Tower's real estate projects on Elk Run, including a health living center, offices, shops and residential homes.

So far, Burrill said, he received a commitment from one large investment firm he declined to name and is talking to local pension funds, wealthy families, foreign sovereign wealth funds and large corporations including Piper Jaffray, Cargill Inc., General Mills Inc., 3M Co, Medtronic Inc., and Boston Scientific Corp. Burrill hopes the corporations will either invest in the fund or spin out technologies into companies that will reside at Elk Run.

A $1 billion fund would significantly boost Minnesota's nascent biotech industry. The state, known for medical devices, has struggled to attract venture capital money for biotech and pharmaceutical companies, forcing some start-ups to move out of Minnesota. Such a sizable investment could jump-start the creation of new companies, cutting-edge technologies and high-paying jobs, experts say.

A spokesman for the Minnesota Department of Transportation said the state has yet to approve any stimulus money for the Hwy. 52 interchange.

A key part of Burrill's strategy is using the venture capital fund to fast-track Mayo discoveries into the commercial market by morphing Mayo intellectual property into the Elk Run firms with compatible technology.

"We think there will be enormous synergy between things in Mayo that we can accelerate the development around and build companies around," Burrill said.

The weak economy is both a blessing and a curse, he said. The lack of venture capital means Burrill's fund can grab companies on the cheap. But the same recession makes it hard to raise the money.

"There is not a lot of conviction by a lot of investors that VC works very well," Burrill said. "That small companies won't get the capital they need to grow. The public equity market will not be receptive. Some of the investors are skeptical. One of the challenges that you face in building companies is that it may cost you $100 million to build a company worth $50 million."

"It's a tough time to be a company, which makes this little thing that we are doing at Elk Run very, very attractive," he said. "When you have a large pool of money you can attract companies to Elk Run we would never have attracted in better times."