The Idea Fund of La Crosse today announced it has acquired the SwallowSTRONG medical device from Madison-based Swallow Solutions LLC for $500,000.
SwallowSTRONG is a custom-molded mouthpiece device linked with software used to treat swallowing disorder dysphagia. Swallow Solutions, which was established by University of Wisconsin School of Medicine and Public Health professor JoAnne Robbins in 2009, stopped producing the device in 2017 because it was unable to gain a dedicated reimbursement code from the Centers for Medicare & Medicaid Services, said Eric Horler, the company’s most recent chief executive officer. That year, Swallow Solutions pivoted to marketing a beverage made for people with dysphagia. The company no longer has any employees, Horler said, and a third party is seeking to sell the beverage division separately.
Idea Fund bought the inventory, intellectual property, customer lists and books and records of SwallowSTRONG, with plans to establish a different revenue model for the device. It has formed a La Crosse company, Idea Fund Investment Co. dba Swallow Therapeutics, to market SwallowSTRONG, said Jonathon Horne, managing director of the Idea Fund. Idea Fund plans to open an office in La Crosse and is seeking to hire a new CEO, and additional employees down the road for SwallowSTRONG.
“Dysphagia’s a major problem, it impacts a lot of people, it’s not well-controlled today and this product seems to work,” Horne said. “We’re giving it a total fresh start, so it won’t be the prior management.”
In addition, the La Crosse area has a number of resources that could help SwallowSTRONG, including Mayo Clinic Health System, Gundersen Health System and Logistics Health Inc., he said.
“I think it’s good that they are in a position to inject some new capital into the idea,” Horler said of Idea Fund. “We, as a startup, had to figure out how we were going to allocate our capital.”
This is the first acquisition a Badger Fund has made. Horne said about two-thirds of its deals will be venture capital investments of about $500,000, and one-third will be acquisitions like this one.
“It still fits with the venture strategy in terms of very early stages of commercialization,” Horne said, with plenty of risk involved. “We may do some more of this, either opportunistic stuff or starting our own businesses, too.”
The $13 million Idea Fund is one of the Badger Fund of Funds. In the 2018 BFOF report on its statewide investments, the Swallow Solutions deal was referenced but leaders declined to provide specifics. Santa Fe, New Mexico-based Sun Mountain Capital is partnering with Stoughton-based Kegonsa Capital Partners LLC to manage the Badger Fund of Funds, which was formed in 2013 with $25 million from the State of Wisconsin and $10 million in private funding to establish six to eight new venture capital funds in the state.
The BFOF funds that have been publicly disclosed are: Idea Fund of La Crosse, Winnebago Seed Fund LP in Neenah, Rock River Capital Partners Fund I in Madison, The Winnow Fund for college entrepreneurs in Madison, Milwaukee-based Bold Coast Capital Fund I L.P. and Milwaukee-based Forward Capital Fund. Each fund is either raising or has raised its own venture capital fund to invest exclusively in Wisconsin companies, and BFOF matches 40 percent of that total.
