Three longtime executives with deep ties to North Carolina have launched a new venture firm aimed at supporting early-stage companies in the life sciences.
Ed Field, Jimmy Melton and Dave Ousterout formed Cape Fear BioCapital, a venture firm based in the Research Triangle Park area that focuses on therapeutics companies looking for seed funding.
The firm emerged from stealth mode this month with a seed fund anchored by Moore Strategic Ventures, an investment firm led by Raleigh native Louis Bacon, founder and CEO of Moore Capital Management.
Cape Fear BioCapital's three general partners have long felt that the region lacks capital options, especially for early-stage companies, said Field, who has led multiple companies in raising millions of dollars in capital. While the state sees significant levels of annual funding from the National Institutions of Health to support basic research, the amount of venture capital being invested in the state lags far behind.
"We have always felt that the region could use additional capital," Field said. "The opportunity came up for us to get together a year ago when we were connected to Moore Strategic Ventures."
Cape Fear BioCapital did not disclose the size of this initial fund. However, a public filing in May shows the firm had raised $7.5 million from a single investor. The securities filing lists a total offering amount of $9.5 million.
The firm is focused on investing in early-stage companies, which is where Cape Fear BioCapital believes the most significant funding gap exists, Field said. This could mean supporting companies as they establish operations outside of a university setting or funding preclinical studies that de-risk assets and position the companies to be more attractive for future, larger investments from other firms.
The firm is currently in active due diligence on three companies and plans to complete its first investment by the end of this year. Field said the firm aims to complete eight investments over the next two years, with the firm's capital catalyzing seed investment rounds of between $1 million to $2 million that would include other investors.
Although it is in its early days, Cape Fear BioCapital is already planning a $100 million follow-on fund that would help further expand the pipeline of biopharmaceutical startups in North Carolina.
"If we’re successful, our hope is that we can double the output of therapeutics startups in this region," Field said. "And we hope to attract more capital to the region once these companies are more de-risked for other investors."
The venture has a narrow focus for its potential investments. The firm is looking at North Carolina-based therapeutics companies, rather than startups developing medical devices or digital health technology. The firm is interested in assets it believes could be ready for clinical trials in about three years. The firm is also interested in therapeutic areas such as oncology, obesity and autoimmune diseases.
This area of focus is based on where the firm's partners have expertise. For instance, Ousterout is a co-founder and former executive at Locus Biosciences., while Melton helped start the Duke Clinical Research Institute. With this experience, the firm plans to help early-stage companies not just financially, but with operations as well, Field said.
"We’re not career investors, we’re career operators," he said. "We think that with our connections ... we can help (early-stage companies) in a number of ways."
Moving forward, Cape Fear BioCapital is focused on building out its advisory groups and completing the firm's initial investments.
"I think bringing on key advisors is important, but at the end of the day, the proof is in the pudding with the portfolio," Field said. "When people see the investments, it will back up our investment thesis and what we’re trying to invest in."