Q&A: John Banta of IllinoisVENTURES

April 23, 2007

CHICAGO - “ The Illinois Venture Capital Association sat down with John Banta of IllinoisVENTURES to discuss its investment parameters and deal flow.

Illinois Venture Capital Association: Please compare IllinoisVENTURES to a traditional VC limited partnership fund.
John Banta:
We are similar in most respects other than to say about half of our work involves business originations. As such, our investment criterion and tactical activity are truly early stage in focus. We also deal with a lot of issues unique to research-derived investing.

Structurally, we have a public - œbucket-  of evergreen funds used primarily for seed-stage investment and a much larger private venture fund from which we lead or co-lead later rounds as projects progress through key milestones. The objective of both funds is to achieve ROI.

Our stakeholders (public and private) understand that economic development goals are critical effects that derive from real value creation and capital formation.

IVCA: How do you best assess investment opportunities from technologies invented at a campus or lab?
Though we respond to a Midwestern research base that is strong across all three general domains (IT, life sciences and physical sciences), we tend to look for technologies that offer solutions to specific societal problems on which we are focused.

The investment opportunity comes when you can find innovation (in the lab or otherwise) that offers real impact against those commercially significant problems. Even then, it is difficult to get to a definitive - œgreen light-  at the nascent stage. You have to be willing to spend a bit developmentally before you can determine whether a truly fundable opportunity exists.

IVCA: What is your process for building an executive team around such technologies?
We tend to want to involve domain-qualified leadership at the earliest possible point. It is by far the most important aspect of early stage business building and an area where we can add significant value. We have a preference for fully funded national searches with specific, domain-leading firms where we have a longstanding relationship.

IVCA: How has deal flow been over the last year?
We continue to be impressed with the depth and breadth of fundable activity in or related to the Midwest. It's really not a surprise given the magnitude of public and private research funding within 300 or 400 miles of where we sit.

Though we're often involved in companies with a presence across multiple geographies, we remain confident that we can produce strong return doing a majority of our investing in the Midwest. Longstanding emphasis on the increasingly active energy and advanced materials practice areas (due to the composition of the Illinois and Midwestern research base) has also worked to our benefit.

IVCA: Please describe the nature of your investments. How much does IllinoisVENTURES typically invest throughout the life of a company? What industries does the firm target?
We'll put $2.5 million to $3.5 million to work in a company over time usually working alone at the seed stage and with others at subsequent rounds. While these may or may not come from a university, a preponderance of our work is research derived.

Our specific practice areas tend to be clustered around the intersections of the major technical domains where people who don't normally collaborate are working together.

That's where really interesting innovation tends to occur. Examples of these kinds of projects include chemical engineers and synthetic biologists collaborating to develop platforms for production of advanced biofuels or optical engineers and microbiologists developing advanced cell analysis instrumentation.

IVCA: How do technology transfer practices at Illinois-based universities and research institutions differ from what is done in other regions?
In general, they don't. That represents an opportunity.

There are only a handful of institutions around the country that have been progressive in developing commerce-friendly licensing strategies that are easy to use and lead to increased activity. The degree to which Midwestern institutions can contribute to or even lead that kind of change will be wildly accretive to the region.

IVCA: How do you leverage organizations like the IVCA for networking and educational opportunities?
We've had a number of companies present at the Midwest Venture Summit events and are constantly engaging with fellow members in the course of our work.

IVCA: What do you do for fun when you're not making venture investments?
When I'm not nurturing portfolio companies or spending time with family, I can nearly always be found succumbing to my obsession with platform tennis, which I play throughout the year.