When Jan Garfinkle couldn't get a job at a Michigan venture capital firm, she started her own.

Garfinkle, who grew up in San Francisco, had more than a decade of experience working with startups before moving to Michigan in the early 1990s.

But the venture capital community in the state was exceedingly small at that time, and none of them were hiring.

"I thought, this is crazy," Garfinkle said. "I'm going to start my own venture fund."

Garfinkle's goal was to change health care by starting a venture capital firm that could help with rising health care costs, which were 12 percent of the GDP at that point.

With that mission in mind, Garfinkle founded Arboretum Ventures with Timothy Petersen in 2002 to focus on emerging health care companies in the Midwest.

"I felt that through innovation, we should be able to provide better health care at a lower cost point," Garfinkle said. "The founding principle of Arboretum is investing in companies that will drive costs out of our health care system but still provide great clinical care."

Today, Ann Arbor-based Arboretum Ventures has 15 employees and manages $700 million in five funds. The venture capital firm has invested in 55 portfolio companies, which employ 4,000 people.

Arboretum Ventures has been incredibly successful. Last year, the firm raised the largest VC fund in state history, closing Arboretum Ventures V LP at $250 million.

"I was an odd duck coming to Michigan, and to be able to have done what we did is such a blessing for me," Garfinkle said. "I'm so proud of the Arboretum team and what we've accomplished."

How did health care become a focus for you?

I wanted to be a pediatrician when I was growing up, but careers are winding paths. I went to school at Berkeley in the College of Engineering. I studied bioengineering because it's a combination of engineering and pre-med. When I started my career, I was trying to get a job in bioengineering, but it was hard back then. It had just become a new major and there were few jobs. My first job was in manufacturing working for Procter & Gamble making Pampers diapers. I did that for three years and then wanted to get into medical devices. For some reason, I just happened to love them. I have no idea why. My parents are not in the health field. I decided to go to business school at Wharton and had an incredible internship as a marketing analyst at Eli Lilly (an American pharmaceutical company headquartered in Indianapolis, Ind.). They were trying to acquire medical device companies at that time. I worked with a physician who started Advanced Cardiovascular Systems, a venture-backed angioplasty company. Back in the early 1980s, if a patient was having a heart attack, you'd either give them a nitroglycerin pill to relax their arteries and treat their blockage, or they'd have to have a bypass procedure, which is a huge surgical procedure. With the advent of angioplasty, an image could be taken of the coronary arteries to see the blockage. Then, a tiny balloon is inserted across the blockage through a small hole in one of your arteries. It's noninvasive an easy way to stop a patient's heart attack. Patients only had to stay in the hospital for a day and then were able to go home. It changed the world of cardiology and health care for cardiac patients.

What was your experience like when you first worked with a startup?

After I received my MBA, I got a job at ACS working in marketing and sales. I had a great experience launching 20 different medical technologies while I was there. The physician who started ACS asked me if I would write the business plan for his second company, Devices for Vascular Intervention. I wrote the plan and then joined that company. At DVI, I was director of Marketing and director of Clinical Research, where I led the big FDA trial to get FDA approval for an atherectomy catheter, and then launched it worldwide to all the physicians that were doing angioplasties. I had incredible operating experiences in both of those companies. I fell in love with the entrepreneurial spirit of these new medical technologies that were changing the world for patients and making a much better life for them.

California is known for its venture capital ecosystem. Why did you move to Michigan?

My husband moved from Chicago to California when we got married. We met in California, where he was in training as a cardiologist. However, after a couple years in California, he said, 'I'm really not that happy here.' He found a job in Michigan, and I was a reluctant trailing spouse at that point. We had three little girls around that time. It was just a really, really busy time. I couldn't see how I could do everything, so I quit my job. However, Guidant (a spin-off company of Eli Lilly) called me and said, 'Would you do some consulting for us?' I said, 'I'd love to do about 10 hours a week.' That led me to start a consulting business, with Guidant as my main client. Around that time, the state of Michigan created the Michigan Life Sciences Corridor, where they invested tobacco settlement dollars into startups in the health care space. Every six months or so I helped one new startup with their business plan. I also helped a few venture funds doing health care investing do some due diligence (on companies to invest in). Through those experiences, I thought I'd love working in venture. I tried to get a job at both of the venture funds that were here at the time, but neither of them were hiring. I was frustrated that I couldn't get a job in either of them. So, I went on irs.gov, filed for a tax ID number and started Arboretum Ventures in 2002.

How did you get Arboretum Ventures off the ground?

It's really hard to start a venture fund. I was so naive honestly. I didn't know what to do. Tom Porter (a Michigan venture pioneer) was a terrific mentor to me in my early days. He told me, 'Jan, you have to get a partner. No investor is going to invest in a single person venture fund.' I put out an ad in Venture Wire, which was an electronic newspaper in the early days of the internet. All these people from California that had Ph.D.s in biochemistry responded and said they knew how to run a venture fund, but they had no idea. Luckily, I met Tim Petersen, who ran the Wolverine Venture Fund at the University of Michigan. He heard I was looking for a partner and joined me about six months after I started Arboretum. We were these two very different people, but were able to come together. He knew how to run a venture fund, and I knew a lot about health care.

How did you raise your first fund?

Around this time, Mike Finney, who led the Michigan Economic Development Corp., believed we needed more venture funds in the state. He found a little pool of money, $500,000, and ran a request for proposal process. We replied to the RFP process with our proposal to start Arboretum Ventures. There were 17 applicants and two winners. We were one of them. Each fund won $250,000. However, they wouldn't give us the money up front until we closed on our first $5 million. Tim and I drove all over the upper Midwest in order to raise the money, even sleeping on the floor of my brother's house. We got so many nos when we were fundraising. We went to donors Tim knew, which were large family offices and three Michigan foundations. We also had two corporations, Guidant and a medical device corporation. These were people that could vouch for and validate what we could do because they knew us well. We were able to raise the $5 million and got the $250,000. The first close on Arboretum was $6 million. It was small, but it got us in business. The first fund actually ended up being a $25 million fund. In the early days, it's a ton of sweat equity to make it work. I went without a salary for four years. We had five employees, rent, insurance and legal bills. Our total operating budget was around $400,000. But if you persevere, you can do it. Looking back at that fund now, it is a top decile performing fund in the world of all venture funds from the 2002 vintage year.

How has the COVID-19 pandemic affected venture funding?

The deal flow in the number of companies coming to us is phenomenal. Many companies are still fundraising and new ideas are coming out. We have three companies in term sheet right now. Luckily, we met the CEOs and the management team members before COVID started. However, for the first 3-4 months of COVID we were totally focused on making sure our portfolio companies were going to be successful and survive. That was a pretty scary time for all of our portfolio companies, just like for every small business. In August, we started looking hard again at new potential companies for investment. It's been remarkable to see how companies can cut costs and still advance a technology or a clinical trial. Entrepreneurial people tend to be very resilient and tend to persevere.

Have you seen any groundbreaking technologies in health care? Anything COVID-related?

There's some cool stuff happening in cancer detection and the new drugs that are being established for cancer. There's a company in Michigan we've invested in called Strata Oncology. Strata can take a small biopsy of a cancerous tumor and determine what happened genetically to cause that tumor. It's identifying the mutation, giving the patient the drug that kills that mutation, and killing the tumor. That's going to greatly enhance the mortality and longevity of patients that get cancer. We just had a large exit with a company that was in Ann Arbor called NeuMoDx. It developed the fastest, most accurate PCR test for COVID. It's a robot that can basically take your sample and give you an accurate testing result in 80 minutes. In early March they got FDA and EUA approval. It's probably the best PCR test on the market, and they're selling millions of these tests all over the world.

How can a company that's hoping to be backed by your venture capital firm stand out?

We're trying to find the best technology in a big market with an absolutely fantastic management team. We look at all their patents, FDA and reimbursement approval. We also look at how they're going to manufacture and make money at it. There's a lot of things we have to understand and evaluate. About 2,000 companies approach us every year. We invest in two or three. It's a steep funnel to get through to the very end. Many times we'll pass on a company but say, 'come back to us when you have your first human clinical data,' as an example. A company stands out by following up in a timely manner and sharing data with us as it becomes available. It's a red flag if someone's not transparent with us about something. If they're not that's a quick no. We have to build trust.

Do you have any advice for young people considering a career in venture capital?

It's helpful to have a strong operating career to be successful in venture. That means you've worked in a company and helped launch a product to market. I encourage young people to work in as many jobs as possible at a startup. It's important to learn how to sell because you're always having to sell either yourself or your product. Finally, learn to advocate for yourself. Stuff happens all the time. Figure out how to overcome those speed bumps and don't take no for an answer. Being super resilient is one of the most important things anybody can learn.

More here:
Jan Garfinkle's path to running one of the largest VC funds in Michigan - Crain's Detroit Business