By the end of next year, Harpoon Medical's minimally invasive surgical tool could be in operating rooms across Europe.
Harpoon still is testing the technology, but believes its device could revolutionize mitral valve repair, a hours-long surgery that requires splitting the breastbone and stopping the heart. Harpoon's tool can finish the job in a hour and a half through a small incision.
The Baltimore startup, whose device was just a prototype in a surgeon's office three years ago, has raised $17.5 million and has a financing deal with Edwards Lifesciences that could result in the California device-maker acquiring Harpoon next year.
Harpoon's success is thanks, in part, to a state program that invests in startups at their earliest stage, before any venture investor would give them a second look.
The Maryland Innovation Initiative was launched in July 2012 as a catalyst for commercializing more university research, by awarding grants to faculty members and startups being built on university research.
Now in its fourth year, the program, operated by the Maryland Technology Development Corp., is starting to show results. Through the initiative, TEDCO has invested $18 million in 180 commercialization projects. With the program's help, 45 companies have been created and they've raised $21 million in additional funding.
What's more, university administrators credit the program for bolstering commercialization programs that are helping them compete for top faculty and students.
The initiative coincides with a statewide push for commercialization among academic research institutions, most notably the Johns Hopkins University and the University of Maryland. Both have expanded their commercialization offices, built incubators and office space for startups, and dedicated more resources to supporting fledgling companies built on their technology.
Maryland ranks among the top states for research and development spending, but Hopkins and the University of Maryland generally fall short of their peers in turning that research into patents, licenses and startup companies.
"In Maryland we're blessed with powerhouse universities," said John Wasilisin, president of TEDCO. "The state needs to maximize those research engines."
The Maryland Innovation Initiative funds projects at the state's five research universities: the University System of Maryland's Baltimore, Baltimore County and College Park institutions; Johns Hopkins; and Morgan State University.
The state puts $5.6 million toward the program every year, and universities are expected to match any funds awarded to their faculty members.
The program makes awards in two funding rounds, first as faculty members begin pursing an idea for how to apply their research in the commercial market and again when they or a business partner license technology from the university.
The goal of the initiative is for the state to spur economic development in a way traditional venture capitalists can't, Wasilisin said. Companies so early in their development are typically too risky for venture firms, which need better odds that they will see a return on their investment.
TEDCO can make that gamble because the state thinks of the program as an economic development initiative — not an investment program. The awards, up to $265,000 over two phases, are convertible nonrecourse debt. If the company raises at least $500,000 in additional funding, TEDCO has the option to convert its debt loan to equity in the company or ask the company to begin repaying the loan. If the company fails, the loan is forgiven.
"There's not that threat of 'Now you owe us,'" Wasilisin said. "You owe us back if you succeed, but if you flame out, we don't come after you."
For researchers and entrepreneurs, a Maryland Innovation Initiative award can be the break they need.
Harpoon CEO Bill Niland was just starting to build a company around technology licensed from the University of Maryland, Baltimore when Harpoon was awarded $200,000 from the Maryland Innovation Initiative.
"It was big," Niland said. "You're clamoring at that point."
The cash was much appreciated, but perhaps more importantly, Niland said, the award helped Harpoon attract other investors, who saw the investment as a vote of confidence from the state.
Last year, Harpoon announced a structured financing deal with Edwards Lifesciences under which Edwards agreed to fund Harpoon through its European regulatory approval. Edwards later will have the opportunity to acquire Harpoon.
Among its success stories, the Maryland Innovation Initiative also counts Longeviti, which is using robot and laser technology from Johns Hopkins to improve skull reconstruction surgery.
While doctors can use a 3-D printer to replicate any missing pieces of a skull they are reconstructing, without the tissue and fat that typically accompanies bone, patients typically have dent or lump when they heal, said Dr. Chad Gordon, Longeviti's chief scientific officer and a craniofacial plastic surgeon at Johns Hopkins.
The company, which launched in November 2015, already has raised $2 million in equity financing and attracted a Fortune 500 medical technology company executive to serve as its CEO. Jesse Christopher most recently worked as a regional manager for Stryker Corp., which makes surgical implants and tools.
The program also has been a boost to Maryland universities that are racing to catch up to their commercialization-savvy peers.
The Maryland Innovation Initiative came along just as the University System of Maryland made a bigger push to reverse a centuries-old aversion to research for commercial gain among its academics, said Jim Hughes, the vice president of economic development at University of Maryland, Baltimore.
In 2012, the system announced a central commercialization office, UM Ventures, and updated faculty tenure guidelines to give professors credit for pursuing a patent or startup.
"We had small offices — we like to think they did work, but they were underfunded," said Hughes, who is also director of UM Ventures. "It's a bigger priority now."
Earlier this year, the system's board approved plans for an equity investment fund and seeded it with $10 million over the next four years.
The yet-to-be-named venture fund will make investments of between $50,000 and $500,000 in early-stage Maryland-based companies with ties to the university system. The fund could start making deals early next year.
The innovation initiative has made an even bigger impact at Morgan State, which created a commercialization office partially in response to the program's creation, said Victor McCrary, whom Morgan hired in 2013 as its first vice president of research and economic development.
"This program has been a catalyst in terms of us saying, 'OK, let's think a little bit differently,'" he said. "It's really brought this sense of entrepreneurship among the faculty."
Becoming a bigger player in research commercialization is now part of the university's strategic plan. McCrary sees the technology transfer office as a way to elevate the university's reputation, attract faculty who might have overlooked Morgan State before, and give students new career options.
In the past, Morgan students followed one of two pathways after graduating — teaching or working for the government, he said.
"Now we give them a third leg to the stool," McCrary said. "You can go out and create your own business."