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Driven by venture capital, respirator making startup helps ease health crisis Added in 5/19/2020
 

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Magnamed is one of Criatec's investments. How was this investment made?

Robert Binder: In 2007, BNDES launched a public notice that mandated capital to create the first large seed capital fund in Latin America: Criatec. Antera, which I founded in 2005 after finalizing my role as Executive Director of ABVCAP for 4 years, joined up with the Innovation Institute in Belo Horizonte and we won the mandate. The target at first was to make 50 investments through six regional offices in Brazil.

With the support of the Innovation Institute, and based on initial strategy, we set up seven regional bases for Criatec and made 36 investments. In the first two years, there were 24 capital investments, and our shareholders, BNDES and BNB, decided that instead of 50 investments, we would make only 36 with some additional rounds for those doing well.

Among the companies that received more than one contribution is Magnamed. In 2008, through Francisco Jardim, our regional manager in São Paulo, we found this company at CIETEC (Innovation, Entrepreneurship and Technology Center) at USP, looking to enter the pulmonary ventilator market.

They had only one prototype at the time. In three rounds, they received R$ 5 million of Criatec investments, not including Vox's contribution in 2015. With these capital infusions a whole range of ventilators has been created over the last 10 years and produced with national based technology. A Magnamed ventilator has approximately 200 components and 85% of them are produced today in Brazil.


Was Magnamed prepared for the high demand generated by the coronavirus?

The company already exported to over 40 countries and its production was approximately 250 ventilators per month. The increase in orders from Italy had already made the company understand that it needed to increase its production dramatically.

When there came the demand from the Ministry of Health, a group of companies joined together to make it happen. Suzano advanced money so that Magnamed could produce. Without any remuneration, other companies, such as Klabin and Positivo, also joined the effort.

We are in the middle of the process to produce the 6,500 units and, if successful, we should produce much more. This story has much more to be told. We delivered 600 ventilators in April, and we expect to reach the capacity of 2,000 ventilators per month.


Was it possible to prepare for a crisis like this?

There was no way to predict this . No one was prepared for Covid-19. As an investor, when you think about an investment, you try to foresee everything that is possible, but the imponderable is imponderable.


And how the investor can contribute with the entrepreneur beyond the financial investment,

especially at a time like this?

In seed capital that's a mantra. The investor is "hands on", he is joined with the entrepreneur to do all he can to help. You have to separate the roles, but the investor must be there to help in everything the entrepreneur is doing. In the case of Magnamed, in the process of 6,500 ventilators, we had a member of our team, Paulo Tomazela, who worked entirely dedicated to the company to solve production problems.

 

What will the post-crisis look like for Magnamed?

The domestic market has large demand and this request for 6,500 ventilators can be expanded. The recommendation of the World Health Organization is that a ventilator should not exceed five years in use and the average in Brazil is well above that, at approximately 17 years.

In addition, a company that already exports to over 40 countries shows that it is competitive. The trend is that the unit cost will fall due to differentiated production levels.

There is also a typical trajectory in the investment cycle that indicates that new growth capital investors could enter the company and it will no longer be invested only by Venture Capital funds.

If Magnamed books the expected revenues of R$ 400 million this year, it could become highly interesting for a Private Equity fund. Finally, there is another possibility which is to exit from the company through the capital markets and the Stock Exchange.


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