Diving letter:

  • The well-funded venture capital company Versant Ventures said Wednesday It has raised an additional $ 950 million to invest in biotechnology and healthcare companies.
  • The money is divided between three funds. The first has $ 560 million to create 20 or more biotech startups in the US, Canada and Europe. The second has $ 140 million to invest with other firms in the early rounds of fundraising for startups that “have the potential to be breakouts.” And the third has $ 250 million for future fundraisers from companies already in Versant’s portfolio and nearing a liquidity event.
  • Versant’s announcement comes when a record amount of money is poured into biotechnology. In a report also released on Wednesday, KPMG found that US pharmaceutical and biotech companies raised $ 10 billion in venture capital from January to March – this is 38% of all venture capital investments in these sectors last year, according to KPMG .

Dive Insight:

In the 20 years or so since its inception, Versant has grown to be a major player in biopharmaceutical investments. The company supported well-known startups like Audentes Therapeutics, CRISPR Therapeutics and Quanticel Pharmaceuticals early on and has observed that at least 40 of its portfolio companies have either gone public or have been acquired. Just this year, two Versant-funded biotech companies, Five top-class therapeutics and Pandion Therapeuticswere bought for about $ 2 billion each.

Unlike some of his colleagues, Versant has developed a flexible approach to venture capital investing. The company was one of the first to experiment with a “build-to-buy” model, creating startups with the specific goal of being acquired by an agreed buyer.

That was the case with Quanticel. One year after its founding in 2010, cancer-focused biotechnology signed a research and development agreement that gave Celgene an exclusive option to acquire it. By 2015, Celgene decided to exercise its option and bought Quanticel for $ 100 million upfront.

While the “build-to-buy” model is a useful tool in times when it has been difficult to raise money or generate returns on investment, it has since fallen out of favor with biopharmaceutical venture capitalists. In recent years, it has been easy for startups to get hold of cash. Record sums were achieved in both private and public fundraising.

But Versant also uses other strategies. For example, the company has “incubators” in key biotech hubs like San Diego and New York, where employees look for opportunities to do business with academic institutions or start new startups.

Versant’s recent fundraising reflects this diverse approach as the $ 950 million goes into three funds that specialize in different types of investments.

In a statement Wednesday, Versant stated that the $ 560 million fund is being managed by the same team and following the same investment strategy as the company’s previous global biotech funds. The $ 250 million strategic opportunity fund is also similar to its predecessor, according to Versant, and is intended to provide later portfolio opportunities for portfolio companies that are expected to generate returns over the next year.

Regarding the $ 140 million Booster Fund, Versant said its purpose is, in part, to avoid jeopardizing the cash reserves planned for other portfolio companies.

“As we build a portfolio, we inevitably generate a select number of deals that have exceptional potential from the start,” said Brad Bolzon, chairman and general manager of Versant, in the statement of Opportunity beyond our typical Series A investment allocations to additional Access Versant Capital to add momentum. “

Versant said all three funds have exceeded their original targets and are “heavily oversubscribed” and that the money has come from existing investors and a “select number of new top-tier limited partners.”

The increase on Wednesday comes about two and a half years after Versant’s last big win of $ 700 million. The company split that money across two funds: one with $ 600 million would fund 20 or more biotech companies in the United States, Canada, and Europe, while the other would fund $ 100 million among five to eight Canadian-based startup companies would use.