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Nonprofit OCTANe Seeks to Expand Prospects for Startups

OCTANe’s new strategy to attract investment dollars and emerging companies to the region is showing early returns for Orange County’s vibrant startup and entrepreneurial scene.

The Aliso Viejo-based group played a key role in the recent seed round of BluStor PMC Inc. and the company’s planned relocation from Chicago to OC, where the security service provider aims to leverage the region’s strong talent pool, funding options, and potential customer base of medical equipment and device makers.

“We really need the company to be closer to the West Coast, and it will probably be Orange County,” said BluStor founder Finis Conner, a pioneer in Silicon Valley. “It’s a good place to be in attracting and building our team and working with strategic companies.”

Conner founded Western Digital Corp. rival Seagate Technology and Conner Peripherals, a hard drive and PC maker that became one of the fastest-growing U.S. companies in the mid-1980s before its $1.1 billion sale a decade later to Seagate, which has annual revenue of about $13.7 billion.

BluStor has a small team in San Diego and Irvine, where it plans to scale the company, which uses fingerprints, iris scans, voice patterns and facial recognition software to store and secure data on a card.

It’s targeting mobile phone technology developers with its core product, which authenticates identities through biometric scans and relays the encrypted information through Bluetooth or near-field communication tags.

“The medical side of security has been terribly underserved,” said Conner, who secured a $2.5 million seed round last month largely through OCTANe contacts and local angel investors.

The BluStor developments underscore an ongoing shift at OCTANe, which is trying to provide more resources to early-stage companies and investment outlets for local and nationwide backers as the group expands the scope of its flagship program, possibly including a fund of its own.

OCTANe’s LaunchPad program, established in 2004, has primarily served a single purpose of shepherding emerging companies through their first institutional funding round. About 300 companies have raised $1.1 billion through the program. Recent LaunchPad companies that have attracted venture capital include Irvine-based biosensor developer PhageTech Inc., which took in $3 million; Aliso Viejo-based neuroscience company CNS Response Inc., which raised $2.3 million; and Irvine-based skin-wound treatment maker Harbor MedTech Inc., which got $10 million.

Outside funding is typically an integral component to viability, though the ultimate success rates for LaunchPad companies have varied as some struggled to take the next step in development.

“Our plan is to stay with these companies longer,” said Bill Carpou, who took over as chief executive this year following the departure of Matthew Jenusaitis. “The basis of what we’re trying to do is to create a lot more opportunities for companies that are coming through LaunchPad rather than being one-dimensional.”

The longtime consultant, who most recently was charged with turning around underperforming portfolio companies as an executive of a BlackStone Group subsidiary in Michigan, has devised a four-pronged strategy to connect entrepreneurs and investors:

• Expanding relationships beyond Orange County to attract institutional investors that focus on funding medical tech and high-tech companies;

• Aligning corporate venture funds that invest in promising technology;

• Increasing exposure to individual high-net-worth, or angel investors, from OCTANe’s network, including board members and advisory committees. OCTANe also plans to evaluate a set of rules recently approved by the Securities and Exchange Commission on equity crowdfunding for startups;

• Exploring additional opportunities for direct investments, including a potential OCTANe fund.

The group has had discussions with interested parties in the medical strongholds of Boston and Minneapolis that could join its roster of 62 partnerships with big-name companies such as Medtronic Inc., Edwards Lifesciences Corp., Allergan PLC, and Abbott Medical Optics, and some of their venture arms.

Carpou said the new initiatives will create deal flow for OCTANe partners and access to capital for regional startups.

Conventional access to capital has gotten a little bit tighter, he said.

“We’re looking outside this area for investment money.”

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