Incubator with six venture-backed spinouts seeks 2014 exit, unveils new sepsis spinout

theranovaTheraNova is a San Francisco-based sandbox incubator and capital technology developer for medical devices. With one exception, all the ideas for technology are internally generated, CEO Dr. Daniel Burnett said. That’s led to all its medical device companies spinning out, and, like tops, they’re still going.

In fact, Burnett said the company has just spun out its seventh startup, Consano Medical. It’s just been incorporated and has an emphasis on critical care monitoring.

“Consano is backed by angels and Theranova and is now raising a larger round from angels to develop its sepsis detection and treatment technology,” Burnett said in an e-mail.

The six venture-backed spinouts include:

  • Baronova, a startup trying for weight loss devices that are both non-surgical and non-pharma. The company closed a $27.3 million Series C round in February 2013, which was led by Boston Scientific (BSX) and Sante Ventures.
  • SequanaMedical (formerly Novashunt), a Swiss medtech company with a pump implant for patients with liver failure, allowing them to pass ascites through their urine. The company is backed by NeoMed Management, VI Partners, Biomed Invest, Capricorn Health Tech and Entrepreneurs Fund.
  • Velomedix, based in Menlo Park, Calif., uses an automated system to deliver mild therapeutic hypothermia to reduce acute myocardial infarction size in patients who have suffered heart attacks. It’s backed by Longitude Capital and Acadia Woods.
  • EMKinetics, a healthcare startup creating neuromodulation solutions for overactive bladder and migraine, is backed by Allergan.
  • Potrero Medical, a medical device company with next-generation urine monitoring tech, is venture-backed by Scientific Health Development Partners in Texas.
  • Channel MedSystems, based in the same building as TheraNova, is focused on cryoablation as a treatment for heavy menstrual bleeding. This platform technology in women’s health has a lot of buzz surrounding it. In the spring, it raised $9.7 million in a Series B round led by BSX. It’s this startup, Burnett said, that is “white hot.”

TheraNova currently incubates the following technologies:

A TheraNova-Channel Medsystems Android app that assesses menstrual bleeding (which it’s meeting about with the FDA this month; look out for an approval some time this year), a mechanical vibration treatment for osteoporosis prevention and a closed-loop blood glucose monitor infusion device (an artificial pancreas minus the glucagon).

TheraNova began essentially as an IP holding company back in 2003, dreamt up by two Mayo Clinic interns (Burnett and Dr. Shane Mangrum, now chief medical officer for the company).

“At that point you could get a company funded with a good idea and a patent or two,” Burnett said.

For Burnett, an MD who logged years as a general partner at MedVenture Associates before deciding he preferred making companies to funding them, operating this model of incubator works well.

“I’m certainly hypomanic so I could not be sitting down doing the same surgery day after day after day, so that’s what makes it perfect for me. I’m very happy doing what I’m doing right now,” Burnett said.

The founders and engineers at TheraNova come up with an idea that has clinical need and market appeal. “Then we do the testing we think necessary in order to get the company funded.” Finally, they seek out funding and build a team around the promising technologies. Those staff members are hired into TheraNova. “It almost always buds off, then most of those people go with the new entity. It’s the frustrating part for me,” he said.

Once a company’s spun out, TheraNova uses that capital to fund the medtech sitting on the back burners back at the HQ. The spinouts can pay a retainer to TheraNova for continued regular staff support. Either way, TheraNova retains its equity investment in the spinouts.

This is why Burnett is very excited about a goal he’s banking on this year: having one (or more) of the companies make a true exit. This is the CEO’s ambitious New Year’s resolution:

“To get an exit with one or more of the companies so we can better capitalize TheraNova and take more of these technologies on the back burners to the front burners. To increase our number of burners to work on more technologies at once.”

Confident of that exit, Burnett said TheraNova is looking to set up a satellite office in a city that already has some medical device infrastructure and is a direct flight from SFO. Though the company has considered both Sweden and Singapore, Burnett said the team would “dramatically prefer” a U.S. location.

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