The Kentucky Science and Technology Corporation (KSTC), an entrepreneurial non-profit that operates innovation programs, has transferred $14.8 million in investment returns from the Kentucky Enterprise Fund to the Cabinet for Economic Development.
The transfer, made at the cabinet’s request, brings new administration to a proven program that has helped dozens of technology businesses get established and grow in Kentucky.
Created in 2000 as part of the Kentucky Innovation Act, the Kentucky Enterprise Fund, under KSTC management, has invested in 135 promising startup companies, with a focus on life science, healthcare and information technology. The fund’s success stories thus far include MakeTime, a Lexington-based on-demand manufacturing platform acquired last year by industry leader Xometry; Bexion Pharmaceuticals, an award-winning cancer drug developer in Covington; Jacobs Automation in Erlanger, which created cutting-edge motion control technology for machines and was acquired by Rockwell in 2013; and Apellis Pharmaceuticals in Louisville, which has more than 100 employees and a market capitalization of $1.2 billion.
The Kentucky Enterprise Fund has invested $27 million of state money in Kentucky entrepreneurs, and those investments have had a total return of $20 million so far. Of that return, $5.2 million has been invested back into Kentucky companies, bringing total investments to $32 million. The remaining $14.8 million was returned to the State Treasurer in April. The fund still holds equity stakes in more than 60 companies and anticipates providing additional financial return to Kentucky taxpayers in the future.
The fund has played a key role as a “secondary investor,” encouraging Kentucky’s private investors to take the lead in funding new companies in the state. KSTC also has taken an active role with companies in which it invested, acting as a hands-on adviser, advocate and consultant.
Summit Biosciences, which specializes in nasal delivery of drugs, was started in Lexington a decade ago, at the height of the financial crisis. “Growth capital was very scarce,” said Greg Plucinski, Summit’s chief operating officer.
“KSTC’s investment in our business and their help in identifying additional investors and sources of capital were crucial to initiating operations. Since 2009, we have created over 100 full-time, high-paying jobs and have infused millions of dollars of taxes and spending in the Commonwealth.” — Greg Plucinski, COO Summit Biosciences
“KSTC’s investment in our business and their help in identifying additional investors and sources of capital were crucial to initiating operations. Since 2009, we have created over 100 full-time, high-paying jobs and have infused millions of dollars of taxes and spending in the Commonwealth.”
The Kentucky Enterprise Fund’s investment in Bexion Pharmaceuticals a decade ago was vital to its creation. Since then, the company has raised more than $40 million in private funding. “We would not be treating cancer patients in our clinical trials today — including patients enrolled at the University of Kentucky hospital — without the willingness of KSTC to make their seed investments” Bexion CEO Ray Takigiku said.
In addition to creating jobs, follow-on investment and wealth, the Kentucky Enterprise Fund has helped improve Kentucky’s technology and entrepreneurial ecosystems. That means more and smarter entrepreneurs and investors, who, even if they don’t succeed with their initial companies, can learn lessons that promote future success.
Graham Baughman, former CEO of Whitebox Learning, said the Kentucky Enterprise Fund’s support in his educational software company was about more than money for him; it helped validate his belief that he could be a successful entrepreneur.
“That assistance and confidence-boost helped lead to an eventual successful exit seven years later,” said Baughman, who sold the startup to an Illinois company.
“Building and growing a successful early-stage business is hard in itself,” said John Willmoth, managing partner of Poplar Ventures, a Louisville venture investment fund. “Without adequate support from private investors and funds like the Kentucky Enterprise Fund, it’s becomes nearly impossible. Knowing that you have a pool of capital and expertise to help you along is extremely valuable and KSTC has been a great partner in that process.”
KSTC continues to manage the remainder of its portfolio of programs. For more information about KSTC and its many roles in positioning Kentucky as a leader in the development of knowledge and an investor in innovation, visit kstc.com or contact kstc@kstc.com.