Celerus Diagnostics is raising money, rolling out new products and settling into its expanded home.

The Carpinteria company developed a machine that drastically cuts down the time it takes to diagnose cancers. In recent weeks, the firm has closed a $5 million funding round, expanded its offerings to identify more kinds of cancer and brought aboard as chief executive David Gross, the tech entrepreneur who built online advertising firm Fastclick from a $400,000 start-up to one of the region’s highest-profile players before it was sold.

The $5 million funding comes as venture capital investments have taken a nose dive, dropping 33 percent between the fourth quarter of 2008 and the fourth quarter of 2007, according to the most recent data from the National Venture Capital Association.

But that group’s data also shows that venture capital is shifting away from early stage companies as investors work to shepherd their portfolio companies to profitability. The most recent funding is a C-series round for the firm and came from existing investors, said Gross, who is also a partner in Great Pacific Capital, one of Celerus’ investors.

“Though we talked to people who liked the Celerus opportunity, they weren’t looking for any new opportunities,” Gross said. “They were investing in their existing companies.”

Celerus has 32 employees and nearly doubled its space when it moved its headquarters from Goleta to Carpinteria last year. Its machine helps doctors diagnose cancer.

The system washes antibodies over tumor samples on slides, and the antibodies bind to proteins and turn them colors. Based on which proteins show up, doctors can identify which type of cancer might be present.

The Celerus machine uses a hydraulic system to force antibodies over the tumor samples. Taking advantage of wave motions and a property of liquid called surface tension – the same phenomenon that lets water bugs skid across a pond – the device does what used to take four hours in as little as 15 minutes.

That opens up the possibility of diagnosing a cancer while a patient is still on the operating table. “The only competitor in the inter-operative diagnosis space is the inertia of being new,” Gross said. “Doctors and nurses have to get used to the idea that they could do it better.”

In the meantime, Celerus is marketing the machine’s efficiency over conventional competitors in more traditional uses. Though sales are picking up and the firm is shipping about six units a month, Gross said, the health-care sector is only “relatively” recession-proof, especially for a new company in an established market.

Some prime potential customers – medical schools – find themselves defending capital budgets amid tanking financial markets.

“Lots of those budgets are completely locked down right now,” Gross said. “All those large institutions, their endowments are hurting. But health care marches on. The tests get done regardless.”

Gross is hoping that an expanded line of 12 new antibodies – which in turn allow the Celerus machine to diagnose more kinds of cancer cells – will help lure new customers.

“The new products are additions to our antibody menu,” Gross said. “It helps us put out a fuller offering for customers who want one-stop shopping. Menu size is a driver in customer acquisition.”

Gross is no stranger to growing a company.

He founded online advertising firm Fastclick in 2000 with only about $400,000 in funding. By 2004, a group of private-equity investors recapitalized the firm with $75 million, about $55 million of which went to buying out the founders – including a $10.4 million payout for Gross.

After Fastclick went public, Westlake Village-based ValueClick agreed to buy it for $214 million.

Gross initially came onto Celerus’ board of directors as an investor and took over the reins in February. “It’s comfortable,” Gross said of running the company, his first time on a payroll since Fastclick. “It’s a lot of work.”

“The company’s position and the current economic environment drove us to make some changes,” Gross said of coming aboard as CEO. “Working toward a cash-flow-positive position – that’s our goal. My experience – with everything from selling candy in junior high school to Fastclick – is that once you get to positive cash flow, a lot of doors start to open. Before that, you’re backed into a corner.”

Though Gross is now focused on ramping up Celerus, he said that as an investor he thinks it’s the perfect time to invest in a start-up. Rent and talent are cheap, and there’s little competition from other investors, making it a prime few years to fund research and development.

“If Great Pacific had a second fund, we’d be looking at bare-bones start-ups,” Gross said.

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