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Tuesday, Dec 5, 2023

Octane Aims to Keep Investment Returns in OC

Octane is creating new sources of capital to prop up local entrepreneurs and, ultimately, ensure returns from successful investments benefit Southern California.  

It’s a step the Aliso Viejo-based group—Orange County’s largest and best-known business accelerator—is taking to address what it says is a common problem facing entrepreneurs and early-stage companies in the region.

“We don’t have enough capital in Southern California,” Bill Carpou, chief executive of Octane, and a former operating partner at Blackstone, told the Business Journal, pointing out that data shows only 13% of needed capital comes from the region itself.

“It’s one of our beliefs that a full-circle ecosystem requires capital to be there, so the economics of the fund go back into that marketplace.”  

Octane’s first fund of its type, Elevation Ventures Fund I, is industry-agnostic and planned to total up to $50 million; forthcoming funds are expected to focus on sustainable technologies and pediatric devices and therapies.

Proven Approach 

Octane is channeling proceeds from its Launchpad accelerator for technology and life sciences businesses into Elevation Ventures Fund I, which will provide late seed-stage and Series A capital to select companies that have completed the Launchpad process.

Investment in 10 Launchpad companies that were handpicked by a panel of investors as the two most compelling deals per year for five years resulted in a return on investment of 4.35x over five years, according to Octane.

Alumni of Launchpad include micro-investing fintech Acorns, which last week disclosed plans to go public, as well as project management software firm Mavenlink and cancer-focused drugmaker Bioniz Therapeutics.

“We believe we’ll be able to provide local investors with a good path to steady and high-quality companies coming out of Launchpad,” Carpou said.

Octane said Launchpad helps reduce investment risks by evaluating more than 30 criteria ranging from business and technical plans to investment opportunities. It brings in subject matter experts to analyze business components, and uses a historical database to compare current companies to past graduates, according to JC Ruffalo, managing director of Elevation Ventures and formerly the director of Launchpad.

Out of the 677 companies that have gone through the Launchpad accelerator since 2010, about 80% have received funding and 76% remain in operation. Those companies have created some 17,096 jobs in Southern California, putting Octane on track to achieve its goal to create 55,000 high-paying jobs in the region by 2030.

Octane held its annual Tech Innovation Forum from May 17 to 19. The event drew over 1,100 participants through a mix of virtual and in-person events that explored the future of work, next-generation entertainment and gaming, and the innovation economy in Southern California.

Sustainability, Pediatrics 

Octane is no stranger to playing to the strengths of the region; it plans to continue to do so with a pair of upcoming Elevation funds aimed at sustainability and pediatric innovations.

Neal Rickner, a former Google operations lead and head of operations for wind turbine offshoot Makani, has been tapped to lead the sustainability fund, which is expected to launch in July.

The sustainability fund aims to “accelerate the development and deployment of climate and sustainable technologies that have an impact globally,” Rickner said.

He pointed to several advantages the region offers these companies: Orange County has infrastructure that spans 34 cities, which makes for ideal testing grounds for transportation-related pilot programs. Furthermore, the region has a demonstrated history of supporting efforts to improve air quality and sustainable farming.

Octane has yet to finalize plans for its pediatric fund, which is expected to start in early 2022. Furthermore, an Elevation Ventures Fund II is planned for 2024.

The new family of funds are modeled after the success of Visionary Ventures, according to Carpou. The ophthalmology fund that Octane helped launch as a general partner in 2015 has raised more than $150 million over two funds and supported some companies to initial public offerings, such as Tarsus Pharmaceuticals Inc. (see story, page 11).

Health Data Hub 

New funds aren’t the only thing in the works for Octane; it’s also helping lead an artificial intelligence coalition of 71 organizations focused on making Southern California one of the healthiest populations in the world

Participants include Alteryx, Children’s Hospital of Orange County, City of Hope, FivePoint Holdings, Kofax and more.

The initiative, called healthsocal.ai, is “not only about creating an end-to-end coalition and engagement.” It’s also leveraging “the success Octane has had in ophthalmology and medical aesthetics, where Orange County is an epicenter of innovation worldwide,” Carpou said.  

He referred to the coalition’s strategy as “precision medicine for one, population health for all.”

The coalition aims to gather data on health metrics and social determinants of health to produce actionable items that will advance care for individuals and bring health equity to the population, according to Anthony Chang, chief intelligence and innovation officer at CHOC, and a member of the group’s leadership council.

Carpou said a search for a managing director to lead the coalition is ongoing, as there is no single organization that has the resources to tackle the initiative alone.

Chang described the health data project as an ambitious, though achievable effort that has yet to be taken on by a region, and will position Southern California as “health conductors” of the country.

“We aim to create a generational legacy,” Chang added. 

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