Dive Brief:

  • The well-funded venture capital firm Versant Ventures said Wednesday it has raised another $950 million to invest in biotechnology and healthcare companies.
  • The money is split across three funds. The first has $560 million to form 20 or more biotech startups in the U.S., Canada and Europe. The second has $140 million to, alongside other firms, co-invest in the early fundraising rounds for startups that show "potential to be breakout companies." And the third has $250 million to use in the later fundraising rounds of companies that are already in Versant's portfolio and are nearing a liquidity event.
  • Versant's announcement comes as record levels of money flow into biotech. In a report also released Wednesday, KPMG found that from January through March, U.S. pharmaceutical and biotech companies received $10 billion in venture capital funding — equivalent to 38% of all venture capital investments in those sectors last year, according to KPMG.

Dive Insight:

In the 20 or so years since its founding, Versant has become a major player in biopharma investing. The firm was an early backer to high-profile startups like Audentes Therapeutics, CRISPR Therapeutics and Quanticel Pharmaceuticals, and has watched at least 40 of its portfolio companies either go public or get acquired. Just this year, two Versant-funded biotechs, Five Prime Therapeutics and Pandion Therapeutics, were each bought for about $2 billion.

Unlike some of its peers, Versant has developed a flexible approach to venture capital investing. The firm was one of the first to experiment with a "build-to-buy" model, in which startups were created with the specific aim of getting acquired by a prearranged buyer.

That was the case with Quanticel. A year after its founding in 2010, the cancer-focused biotech inked a research and development deal that gave Celgene an exclusive option to acquire it. By 2015, Celgene decided to act on its option, and purchased Quanticel for $100 million upfront.

The "build-to-buy" model, while a useful tool in times where it was difficult to raise money or find returns on investments, has since fallen out of favor among biopharma venture capitalists. Cash has been easy to come by for startups in recent years, with record sums raised in both private and public fundraising.

But Versant employs other strategies as well. For example, the firm has 'incubators' in key biotech hubs, such as San Diego and New York, in which its employees keep an eye out for opportunities to make deals with academic institutions or form new startups.

Versant's latest cash raise reflects this varied approach, as the $950 million heads into three funds specialized for different kinds of investing.

In a Wednesday statement, Versant explained that the $560 million fund will be run by the same team and have the same investment strategy as the firm's previous global biotech funds. The $250 million strategic opportunity fund is also similar to its predecessor, Versant said, and is designed to provide later-stage investment opportunities in portfolio companies that look like they'll deliver returns within the next year.

As for the $140 million "booster fund," Versant said its purpose is, in part, to avoid jeopardizing the cash reserves planned for other portfolio companies.

"During the course of constructing any given portfolio, we inevitably generate a select number of deals showing exceptional potential from the outset,” said Brad Bolzon, chairman and managing director of Versant, in the statement. "In these circumstances, we now have the ability to access additional Versant capital beyond our typical Series A investment allocations to increase momentum."

Versant said all three funds surpassed their initial targets and were "heavily oversubscribed," and that the money came from existing investors and a "select number of new top-tier limited partners."

Wednesday's raise comes about two and half years after Versant's last big haul of $700 million. The firm spread that money across two funds: one, with $600 million at its disposal, would finance 20 or more biotech companies in the U.S., Canada and Europe, while the other would deploy $100 million across five to eight startup companies with Canadian operations.



Source link