Investor becomes major player on med tech scene

Medical entrepreneurs, memorize this name: Haofu “Donald” Tang.

His investment firm has quietly become one of the most prominent dealmakers in Northeast Ohio's medical technology community.

And he's just getting started. His company — Shanghai Creation Investment Management Co., or SCI for short — just raised a $40 million fund. Tang says that most of that money will probably go to companies in this region.

After all, the company has never done a U.S. deal outside of this area.

Since 2006, Tang and SCI have helped two medical imaging companies — AllTech Medical Systems and FMI Medical Systems, both of which have operations in Solon and China — each raise tens of millions of dollars from Chinese investors. SCI also has made its own investments in two other local companies: a dental implant technology firm called Zuga Medical and Surgical Theater, which has developed software doctors use to simulate surgeries.

Thus, SCI is making itself at home here. The firm has hired three local, part-time employees, and it rents an office at the Cleveland Clinic's Global Cardiovascular Innovation Center. SCI also sponsored the Clinic's 2015 Medical Innovation Summit in late October. The firm brought 18 people to the event from China. They met with about 10 local medical technology companies during their visit.

“You see how deeply I'm tied to this area,” Tang said during a phone interview from New York, while waiting to fly home to China.

He also has deep ties in his home country — ties that have served Surgical Theater well.

SCI helped the Mayfield Village-based company get its foot in the door at Shanghai Huashan Hospital. This past July, officials from Surgical Theater met with 30-some neurosurgeons at the hospital and demonstrated how they could use the software to tour a digital version of a patient's brain before performing surgery on it. Now the hospital is planning to give the technology a try, according to CEO Moty Avisar.

Avisar added that SCI helped the company gain credibility with HTC Corp., a massive electronics company in Taiwan that's best known for making smartphones. In October, Surgical Theater announced that it had raised $9 million from both SCI and HTC.

“The first phone call HTC made was to Donald,” he said.

Avisar said SCI has “been a pleasure” to work with, noting that negotiations were free of the “unpleasant pushing and shoving” he would've expected while doing such a deal. Other companies have had great things to say, too, according to Tom Sudow, who serves as a liaison between the Cleveland Clinic and SCI.

Thus, Sudow has been more than happy to introduce the investment firm to Clinic spinout companies and other medical technology businesses in the area.

“All the things you want to hear come out when you talk to the people who they're investing with. That encourages us then to introduce them to more companies,” said Sudow, director of business development for the Global Cardiovascular Innovation Center.

Although Tang went to graduate school in the United States, he had no relationships in Cleveland until AllTech Medical reached out to him in China roughly 10 years ago.

At the time, SCI didn't exist. Tang was an investment banker who helped companies raise capital. Which is what he did: He helped AllTech secure roughly $50 million in capital in 2006. That total included funds from Chinese investment firms and AllTech founder Mark Xueming Zou.

Zou had strong ties to medical imaging companies in Northeast Ohio: He served as an engineer at Picker International in Highland Heights, which eventually became part of Philips Healthcare, before starting an MRI coil maker called USA Instruments in 1993. General Electric bought that Aurora-based company in 2002.

Thus, AllTech's U.S. operations are based in Solon. Zou also had invested in another medical imaging company called FMI Medical. Tang, who formed SCI in 2009, also helped FMI set up a deal to be acquired by a Chinese firm called Zhejiang Mingfeng Medical. That firm ended up investing roughly $45 million into the company, which included the purchase price and money for expansion, Tang said.

Through those relationships, Tang met Tom Sudow, who introduced him to Zuga Medical, a Clinic spinout company, and Surgical Theater, which Sudow knew from his days running the now-defunct Beachwood Business Incubator. SCI invested less than $1 million into Zuga Medical and $2.7 million into Surgical Theater, Tang said.

SCI's primary expertise is in medical imaging, but Tang said the company is becoming more familiar with other types of medical technologies. It also occasionally looks at deals in other sectors, such as advanced materials and high-end manufacturing.

The firm considers whether a company can take advantage of SCI's connections in China, but first and foremost, it's looking to fund a company with great technology, Tang said. Although he is a trained investment banker who holds a master's degree in finance from Columbia University, he considers himself more of a “technology guy.” He also holds a master's in computer science from the University of Bridgeport in Connecticut.

Northeast Ohio's research institutions produce great technology, he added.

SCI's heavy focus on doing deals in this region says something about how far the local medical technology community has come, Sudow added.

“Here is someone who could be investing anywhere in the world … and SCI is concentrating on Cleveland,” he said.

"Investor becomes major player on med tech scene" originally appeared on the website of Crain's PUBLICATION.