Medical Firm Snags An Initial $5 Million

WELLESLEY, Mass. – Mi3, a new venture firm focusing on the medical imaging market, in late November held a first close on $5 million from the Indiana University Department of Radiology.

Mi3, which stands for Medical Imaging Innovation and Investment, will target a final close in June somewhere between $25 million and $35 million. The vehicle will focus on strategic corporate investors who are interested in early-stage imaging opportunities, said Bill McPhee, president of Mi3. Several qualified individual investors also have expressed interest, he said.

The medical imaging market is a $75 billion industry, accounting for seven cents out of every dollar spent on health care, Mr. McPhee said. Since its creation, Mi3 has seen a tremendous amount of deal flow due to interest in the fund’s specialized focus, he added.

“The curse of the small fund is resources,” he explained, noting that fund managers must balance high deal flow with fund raising.

The firm will work closely with other VCs for follow-on investments and advice. “Because we’re such a niche player, other VCs look to us for our technical expertise,” Mr. McPhee said. “Having the resources of IU’s Radiology Department gives us instant access to some of the best scientists and radiologists in the country.”

MI3 is teaming with Ampersand Ventures to purchase the breast imaging technology of Caprius Inc., a publicly traded operator of breast imaging centers. The $5 million deal is expected to close in mid-January, if due diligence does not produce any roadblocks, Mr. McPhee said. The fund’s average deal size will range between $250,000 and $2.5 million.