Ramin Karimpour, the CEO of agriculture-tech startup Targan, had been funding the company with a variety of government grants and even his winning $1 million dollar lottery ticket in 2015. But he was about to close shop on the business, which he operated out of a 480-square-foot apartment.
Disappointed by the difficulty raising money to fund his Raleigh company, Karimpour was ready to accept an offer from a Japanese company to run its U.S. solar business.
“It was very frustrating,” says Karimpour, who had built a machine that could vaccinate 100,000 chickens each hour. “People didn’t understand what we were trying to do. This is not a very sexy business.”
In the nick of time, he grabbed the attention of Raleigh’s Oval Park Capital, which invested in Targan. That led to additional investments from Merck Animal Health and Mountain Group Partners and Raleigh-based NovaQuest Capital Management, which led
a $35 million investment in 2022. Now, Targan expects to become profitable in the second
half of 2025, CFO David Price says. He credits NovaQuest Managing Director Brian Axe
with helping the business secure additional financing earlier this year.
Targan’s song and dance with the venture capital community is illustrative of what hundreds of startups are encountering in North Carolina—they’re all seeking money to make their business fly during a time of shrinking funding. Venture capital funding in North Carolina declined by 38% in 2023 to $535.4 million, according to the N.C. Biotech Center. That compares with a five-year average of about $691 million and a record of $907 million
in 2021.
The trend isn’t improving, either. In the first six months of 2024, VC funding dipped 21.4% to $270 million, according to the biotech center. As it has historically, North Carolina lags way behind Silicon Valley and Boston when it comes to funding ideas, whether it’s a new drug or transformational new technology.
California had $81.6 billion in venture capital investments in more than 4,000 companies in 2023, more than four times the value of the next closest state, New York. Massachusetts had $7.7 billion in VC investing in 2023. (North Carolina ranks No. 10 in the country.)
Mike Carnes, vice president of emerging company development at the N.C. Biotech Center, says a decline in initial public offerings and outright sales of companies has meant VC firms are holding on to their investments for a longer time, decreasing the capital available for new investments.
“It’s taking much longer, so companies have to be more patient and take alternative investment strategies,” says Carnes. “Most early stage companies are going to have to be pretty scrappy. They’re going to have to diversify their options. We just don’t have enough local capital to support all of these companies.”
Durham entrepreneur Robbie Allen, who raised money for his Automated Insights and Bionic Health startups, also notes that higher interest rates have pressured venture capital investing. “They go in preservation mode and extend their fund as long as they can, which means they don’t spend their money, or they spend their money judiciously,” he says. “They’re much less likely to invest in companies.”
Several North Carolina-based funds are trying to change that mentality and help make North Carolina more competitive with other regions. None has been as active, in terms of total funds raised, as NovaQuest.
The Raleigh-based firm was founded in 2000 as an investment arm by Quintiles Transnational (now Iqvia) founder Dennis Gillings, a former UNC Chapel Hill statistics professor and British expat who saw the need for investments in companies developing drugs. Gillings is no longer involved in the management, but he still provides insights on markets, trends and opportunities.
NovaQuest split off from the drug -testing giant in 2010 and has raised more than $2.5 billion that it has invested in biotech firms and other companies. That makes it arguably the largest biotech investor in the state. It’s governed by a management committee, and its investments have resulted in 17 new drugs and an additional 24 potential drugs in development.
NovaQuest often complements its in-house expertise with the development and commercial analytics at Iqvia, which formed in 2016 after Quintiles merged with IMS Holdings. Since then, the Durham-based company has nearly doubled in size to more than $15 billion in annual revenue with a market value topping $43 billion.
NovaQuest spun out its private equity team in 2021 and the business, now called QHP Capital, focuses on tech-focused life sciences firms and pharmaceutical services companies. QHP has invested more than $1 billion in about a dozen companies, according to its website. (Business North Carolina profiled QHP Capital in July 2023.)
Meanwhile, NovaQuest has stuck to biopharma and animal health operations. It has now invested in more than 35 biotech firms and five in the animal health industry. It has five partners and an 11-member investment team, which includes liaisons from Japan’s Mitsui & Co., exploring potential investments.
The company’s mainstay strategy is to invest through financing or licensing deals where it is paid royalties based on a drug’s sales after it receives regulatory approval. In 2022, for example, it provided San Francisco-based FibroGen with $50 million in exchange for 22.5% of royalties from Evrenzo, a drug to treat anemia caused by chronic kidney failure. NovaQuest’s royalties were capped at $125 million in that deal.
But in the case of Durham-based Viamet, NovaQuest decided to buy the whole company and insert its management.
Former UNC Chapel Hill Chancellor Holden Thorp started Viamet in 2004 after his previous company, Xanthon, ran out of money and closed two years earlier. Xanthon was a bioinformatics company with detection technology for analysis of DNA, RNA and proteins. “It was a combination of 9/11 and technical challenges and being close minded about how we could have exited,” says Thorp, now a chemistry professor at George Washington University in Washington, D.C. “We ran out of venture capital and shut it down.”
A Xanthon investor asked Thorp if he had other ideas for a business. Thorp said he wanted to explore new ways to create drugs that would treat infectious diseases without causing side effects. But when it came time to find some funding, “because there are so few funds in North Carolina, there weren’t a lot of others for us to go to.” One reason is that many out-of-state investors prefer not to travel for board meetings and site visits, he adds.
Viamet’s team conducted studies on treating ailments such as athlete’s foot, nail infections and chronic yeast infections, but realized it needed more money to conduct a Phase 3 study of one of its drugs. That’s the last step before applying to the U.S. Food and Drug Administration for approval.
Strong data from the first two phases of testing a drug to treat chronic yeast infections, as well as Viamet’s management, caught the attention of NovaQuest, says managing partner Patrick Jordan, who had returned to the investment firm after working at Quintiles and Iqvia.
NovaQuest declined to disclose its investment in Viamet, which it acquired in 2018 and has renamed Mycovia. But Jordan became its interim chief executive officer and is now chair of the company, which had its yeast infection drug, called Vivjoa, approved in 2022.
“[NovaQuest] brought us a level of financial acuity and quite frankly a Rolodex that none of us had access to,” says Stephen Brand, Mycovia’s chief development officer. “Our overall credibility changed overnight significantly. When you’re a company of 25 people, you can only shout so loud.”
In addition, Thorsten Degenhardt, Mycovia’s chief operating officer, lauds the close proximity between the company’s office and NovaQuest’s headquarters; the two are 20 minutes apart. Jordan drops in frequently, unlike other investors, to offer advice. Instead of hiring consultants to provide marketing, operational or label design assistance, Mycovia has relied on NovaQuest’s partners and staff.
Jordan’s experience at Quintiles and Iqvia helped Mycovia negotiate a deal for the Phase 3 testing with his former employer and through the process of striking licensing deals in China, where the drug is also approved, and Europe. “These studies are huge for us as a small company, but for them, they’re small potatoes,” says Brand. “But we got an A team and I think if we were with anybody else, we were gonna get a B team or a C team.” The drug development study occurred in 11 countries and on three continents.
At Targan, the investment was different for NovaQuest. CEO and founder Karimpour had moved to Durham in 2010 to be the chief engineer for Zoetis, a Pfizer subsidiary that produced vaccinations and drugs for livestock and pets. (Pfizer spun off Zoetis in 2014.)
Karimpour left Zoetis in 2015 and developed a machine that would vaccinate chickens. He intends to develop a similar machine for livestock and fish, noting that world meat consumption is expected to double by 2050. “We intend to be the capital equipment company for animal protein production in the world,” he says.
Karimpour started with some small grants from the National Science Foundation and, yes, he used the proceeds from a $1 million lottery ticket that he bought at a Shell gas station in Durham in 2015. “I’ll never forget the first three years of me trying to raise money,” he says. “How did I have the patience?
I talked to all these people, and they were all unconvinced.”
He then secured investments from Merck and Oval Park Capital, before attracting the interest of NovaQuest. Managing director Axe had joined the firm in 2017 to launch its investments in animal health. He concluded Karimpour’s technology could disrupt the poultry industry, which has a huge presence in North Carolina. There are about 5,700 farms and an economic impact of $34.4 billion, making it the No. 1 state in pounds produced.
“It just kind of fits all the parameters that we’re looking at – tremendous technology, and what they’re doing is just really so innovative,” says Axe. “That’s the way we saw it from day one.”
Justin Wright-Eakes of Oval Park Capital, an early investor in Targan, noted that Karimpour was a tough negotiator who turned down some VCs because they weren’t valuing the company at a level he thought appropriate. He added that the company was “running on fumes” before getting the NovaQuest money.”
Karimpour also lauds the proximity to NovaQuest’s staff, noting he has conversations with Axe regularly to discuss his company’s finances or other animal health companies. “The fact that we are down the road is one thing, but more important is that they have been very generous with their time,” he says. Last September, Targan moved into a 100,000-square-foot headquarters and manufacturing facility in north Raleigh.
Targan contends that its vaccination system can save about 15% of the cost to produce chickens, which is a $300 billion global industry. Its system uses high-speed imaging and artificial intelligence to accurately identify chick sex, achieving as much as 98% accuracy at a rate of 100,000 per hour. In the United States, about 9.5 billion chickens are produced each year.
Axe has introduced Targan’s executives to companies with farms and processing plants across Asia. And the company has struck partnerships in Canada and the Netherlands.
That’s the kind of expertise, and knowledge of what works and what doesn’t in venture capital investing, that NovaQuest brings to the table.
Axe says what sets NovaQuest apart from other VC investors is that the firm has developed drugs and understands it takes time to develop a new medicine or procedure. Other investors, he says, “get more upset when things go wrong. We understand that they won’t always work.” ■
