CitareTx Investment Partners

Medical devices that can reach patients through the FDA's 510(k) clearance route are the main interest of this Houston fund. It was formed in 2008 by two general partners and sits roughly midway between downtown Houston and Galveston Island, with the large medical center complex and the space center both nearby.

What the fund looks for

Its investing centers on Class II medical devices, where the pre-market notification process can be used to win regulatory clearance and start selling. The partners say they stay opportunistic and will consider other investments when particular criteria are met, such as a strategic partner with defined exit milestones. Their own expertise covers cardiovascular care, interventional cardiology and radiology, cardiac and vascular surgery, critical care, consumables, patient care and orthopedics, though they describe themselves as open to any target market, and they will look at opportunities smaller than a typical venture capital threshold. The stated motivation is to change clinical outcomes and improve patients' lives.

From first meeting to term sheet

After an initial review, the partners meet selected inventors, entrepreneurs or management teams for a formal presentation. If they want to go further, a detailed due diligence process follows, with preliminary terms discussed along the way so that expectations are clear. The partners then write an investment thesis, weigh their options, and either issue a term sheet or set up a new company or make a direct investment.

Building the company around the technology

The fund prefers to create a start-up around a nascent technology, though investing in an existing company is common. Either way it takes an active management role, including board seats and executive positions. Portfolio companies are usually housed with the fund so that shared incubation resources and people from sister companies can be used for design, development, testing, manufacture and sale. The partners believe shared resources speed product development and cut the time to market.

Investment and incubation services

• Obtaining intellectual property rights
• Seed capital, usually released in tranches, and follow-on capital later
• Setting product development plans, running pre-clinical testing, dealing with regulators, and completing verification and validation
• Creating scientific and business advisory boards
• Preparing business, financial and investment plans
• Securing institutional growth capital or an exit

The partners hold operating backgrounds, including chair and chief executive posts at medical robotics and device companies, and say they understand the demands on a start-up.

CitareTx Investment Partners is a venture fund founded in August 2008 by Jeffery Sheldon and E. J. Pederson, both general partners and managing directors. It is based in Houston, Texas, close to the Texas Medical Center and the NASA Johnson Space Center.

Services

• Seed investment: Seed capital invested, often in stages, either as cash or in exchange for services.
• Start-up creation: The team prefers to build a company around a new technology, though it will back existing firms.
• Management involvement: Board seats and executive roles in portfolio companies.
• Development services: Obtaining intellectual property, planning product development, pre-clinical testing, dealing with regulators and verification.

Who it serves

Inventors, entrepreneurs and management teams, mainly in Class II medical devices cleared through the United States Food and Drug Administration 510(k) route. Team experience covers cardiovascular, interventional radiology, cardiac and vascular surgery, critical care and orthopaedics.

Key facts

• Founded: 2008
• Based in: Houston, Texas
• Working model: Portfolio companies share space and resources with the fund