Kentucky Venture Capital Firm Chrysalis Is Banking On Texas Companies

from The Dallas Morning News – by Sheryl Jean

Dallas, TX (July 28, 2009)Chrysalis Ventures in Louisville, Ky., is jumping across state borders to invest more money in Texas.

The 16-year-old venture capital firm has made five investments nationally so far this year, at a time when many venture firms are making none. It focuses on health care and emerging technologies.

Venture capitalist investment in young Texas companies was cut in half in the second quarter to $73.2 million and 19 deals from a year earlier, according to Dow Jones VentureSource.

In the Dallas-Fort Worth area, investments fell by one-third, to $19.5 million.

Koleman Karleski, a Chrysalis managing partner, is in town to speak at the North Texas Enterprise Center’s medical technology conference today. He took time Tuesday to field some questions about his firm.

What drives you to keep investing?

We’re firm believers that innovation must continue. Last year, we sold HealthMedia, an Ann Arbor, Mich.-based online health counselor, to Johnson & Johnson for a hefty sum [an eighteenfold return on Chrysalis' investment], and we raised a $175 million fund. We have a lot of fresh capital to invest.

What are your Texas investments?

We invested in Chronicity Inc., a Dallas-based provider of health care services for chronic conditions, in 2006; MedServe, a Houston medical waste disposal company, in 2004; and TechSkills LLC, an Austin provider of postsecondary education and training, in 2003. In May, we sold MedServe to Stericycle in Illinois for $185 million.

How much did you invest in those companies?

I can’t say, but our typical investment tends to be $2 million to $5 million initially and up to $15 million in later rounds.

Why Chronicity?

Chronicity represents two trends in health care: enhancing productivity by lowering costs and helping consumers better manage their health care. It operates clinical centers around the country that help patients manage chronic health conditions.

Are you looking at any new Texas companies?

We have several Texas companies, including some in the Dallas area, under review. We want to invest more in Texas.

What is it about Texas?

Like the middle part of the country, we think Texas is underventured. Texas also is rich in assets in the core ingredients needed to build venture-backed companies: universities, many entrepreneurs, angel investors and economic development funding.

We’ve collected data that shows the South and the Midwest are in the upper half of return statistics for the past decade.

How might health care reform affect Chrysalis or your portfolio companies?

Your guess is as good as mine. Regardless of the outcome, we strongly believe that cost-cutting will be a focus of health care in the future, and we’ll continue to invest in companies that help manage costs or increase productivity.

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