Slater receives second round of federal funding

PROVIDENCE – The U.S. Treasury Department has released $4.3 million, the second tranche of a $13.1 million State Small Business Credit Initiative grant awarded to Rhode Island four years ago, to support the Slater Technology Fund’s SSBCI program.
Back in 2011, the state received its first tranche of funding, which was given to its three SSBCI-approved programs, Slater, BetaSpring and the R.I. Small Business Loan Fund.
Slater was allocated approximately $9 million of the $13.1 million award, of which $1.9 million had been received prior to the most recent advance.
But additional funding was halted due to an audit by the Treasury Department, the results of which were released late last year.
The audit into Slater’s use of use of $1.87 million in business-investment grants found that the venture-capital nonprofit was negligent in using $350,000 of those funds, but that it was neither “intentional” nor “reckless.” Issues identified in the audit involved a failure to adequately match grant money with private capital in two Slater investments, plus some administrative noncompliance.
As a result of the audit findings, Rhode Island was invited to apply for the second of three installments awarded as part of the original grant.
Richard G. Horan, senior managing director at the Slater Technology Fund, welcomed the funding, and said it is coming at a good time, noting Gov. Gina M. Raimondo’s focus on the innovation economy.
Horan praised the work of Marcel Valois and his team at R.I. Commerce Corporation. He said Valois worked closely with Treasury, and forged the pathway toward resumption of funding.
Horan said Rhode Island was not the only state to undergo an audit, and said while it was a “long and extended and even arduous process,” the consequence of it was a “substantially improved understanding of rules, regulations, policies and procedures.”
The funding, restricted for use in direct investment only, allows Slater to focus on “seed and early-stage investment activities,” he said.
Companies in sectors ranging from life sciences and biomedical technology to software, Internet and energy technologies will be targeted, Horan said.
“It supports our efforts to develop early-stage ventures into investment-grade propositions that will attract private equity investors,” Horan said.
Slater relied largely on the recovery of capital and/or capital gains from two Slater-backed companies, medical robotics company Medrobotics Corp. and financial software company Andera, while it waited for the federal funding to resume, Horan said, adding that those companies brought in approximately $4 million.
Objectives of treasury’s SSBCI program include the support of ventures that involve co-investment of private capital alongside SSBCI funding and have reasonable expectation of generating 10X or more in additional investment from private investors over the life of the program.
Since inception, Slater has invested approximately $30 million in more than 100 R.I.-based ventures. The more successful of those ventures have gone on to raise in excess of $530 million in additional funding subsequent to Slater’s investment, according to information from Slater. 
Of the first tranche of $1.9 million that it received under the SSBCI grant, Slater invested $1.87 million in the following companies:

  • Mnemosyne Pharmaceuticals – a drug discovery venture focused on novel therapies for treating neuropsychiatric disorders. In February, 2012, Slater invested $500,000 in SSBCI funding alongside $2 million from Clal Biotech (formerly Access BridgeGapVentures). Subsequently, the company has raised additional equity capital in amount of $9.1 million, with Cambridge-based Atlas Venture as lead investor.
  • VoltServer – develops power distribution products based on the company’s patented Digital Electricity – markets include telecom, building energy and rooftop solar. In June 2012, Slater invested $250,000 in VoltServer, of which $170,000 was SSBCI-funded and $80,000 was funded out of Slater capital. Since this initial seed funding, Voltserver has received more than $5 million in Series A financing.
  • VCharge – a technology-enabled, competitive energy supplier and curtailment service provider in the United States and Europe. In June 2012, Slater invested $250,000 in SSBCI funding alongside private investors in a Series A financing. The company has raised $1.4 million of funding since its Series A equity round.
  • Lucidux – a developer of visualization technology for use in minimally invasive surgery. In June 2012, Slater invested $250,000, of which $200,000 was SSBCI-funded and $50,000 was funded out of Slater capital.
  • Mofuse – a developer of mobile Web solutions for small and medium businesses. In June 2012 and April 2013, Slater invested $250,000 in SSBCI funding alongside private investors in financings that raised in excess of $600,000. In 2014, Mofuse was acquired by The Search Agency, a global online marketing firm.
  • IlluminOss Medical – a medical device company developing novel orthopedic implants for fracture fixation. In September 2012, Slater invested $250,000 in SSBCI funding alongside $13.75 million from a syndicate of venture investors led by Tekla Capital Management (formerly H&Q Life Sciences) and Life Science Partners. Subsequently, the company has raised additional equity capital in amount of $13 million.
  • Tivorsan Pharmaceuticals – a biopharmaceutical venture developing a recombinant biologic for treating Duchenne’s Muscular Dystrophy. In March 2013, Slater invested $250,000 in SSBCI funding alongside other private investors in financing that raised additional equity in the amount of $2.4 million.  

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