Venture Round: A Big Quarter

IN VIVO Blog tries not to get too wrapped up in the value of quarterly numbers. Honestly, what exactly does three months of data tell you other than what's happened over the last three months?

Yet, here we are. Reporting on a new quarterly report, this time Dow Jones' Private Equity Analyst newsletter's report of a booming quarter of fund raising for private equity firms (and that includes venture capital), quite simply because we can.

You can examine the handy chart yourself. Venture capital firms had a big quarter, presumably because private equity firms can't invest money in this tight market.

All that's fine, but the most interesting note for us was Essex Woodlands Health Ventures drawing the largest venture commitment with $800 million of what's likely to a $1 billion-plus fund. The firm's principals aren't discussing the fund, of course, but it'll likely be invested in a similar if not identical fashion to the current $660 million fund.

So here we are on the cusp of having a health care-oriented venture capital firm break the $1 billion barrier and no one--meaning us in the media--seems too worried. Quite a difference from when MPM Capital blew the lid off venture capital fund sizes with its $600 million and $900 million funds, raising all sorts of questions about whether the model was sustainable.

As it turns out, the firm's partnership, as it was constituted, wasn't sustainable. But the strategy was. Spin-out group Clarus Ventures and the reconstituted MPM are faring well, with the former now investing from its second fund.

Both those firms seem more centered on later-stage opportunities. But a careful blending early-stage venture capital with larger growth equity-style investments seems to be the right combination for Essex Woodlands as well as Frazier Healthcare Ventures and Domain Associates, the firms managing the largest funds in the space.

As always, the ultimate proof will come in the exits.

***

For those who prefer some old fashioned venture capital, Cincinnati St. Louis-based RiverVest Ventures reported today the closing of $75 million for its second fund.The firm will have an additional $45 million from Small Business Administration to invest alongside the private funds.

Like Open Prairie, which we discussed last week, RiverVest placed a great deal of its attention on deals coming out of the Midwest. But the firm doesn't limit itself to the region. Half of the firm's 16 portfolio companies are located elsewhere

The firm also announced the addition of John P. McKearn, Ph.D., as a venture partner. He'd been CEO of Kalypsys Inc.

***

RiverVest portfolio company, IDev Technologies Inc. raised $25 million for a Series C to fund the commercial launch of its new stent, according to this morning's VentureWire Lifescience. The report, quoting the company's chief financial officer, said the entire round came from existing investors, who previously committed $24 million. The FDA gave 510(k) clearance for the company's interwoven nitinol self-expanding stent in January.

RiverVest also is an investor in Tryton Medical Inc., the peripheral stent company that announced its $14 million round that we discussed last week. Incidentally, our look at venture capital investment in stent companies that we mentioned in that item will be in our May issue of Start-Up, not April.

***

No quarterly data report would be complete with disappointing news from Europe, and you'll find some in the Dow Jones report. Unfortunately, that's not the only bad news we bear. This week the Financial Times reported that Sir Christopher Evans, founder and primary backer of Merlin Biosciences, is shifting his dollars and focus away from life sciences start-ups.

Instead of Merlin, Evans will invest from a new firm, Excalibur, which will concentrate on late-stage investments only.

From the Financial Times;

Excalibur is 75 per cent-owned by the Welsh entrepreneur. He hopes to raise a UK fund of up to £100m and an international fund of more than £100m. Investors include Sir Tom Hunter, the retail entrepreneur.

The company plans majority stakes in companies ranging from speciality pharmaceuticals and diagnostics to healthcare services and surgical equipment.

Merlin has three funds worth more than €450m (£360m). Sir Christopher said the first two, largely biotech-focused, would not perform as well as the third, which was more diversified.

As if the shift toward later-stage didn't make the point, Evans gave the start-up world a bit of kick on the way out.

He said the environment for early-stage biotech companies was “fraught with difficulty” and said many would have to consolidate.

The article also has a bit on the "cash-for-honours" investigation that surrounds Evans and the firm.

***

IPOHome, the site managed by Renaissance Capital, reports the lock up period for investors in spinal company Trans1 Inc. expires next week. Shares in the company are trading at $10.45 this afternoon, so it's difficult to say whether the venture capitalists involved will be looking to sell right away. According to SEC documents filed after the IPO, investors paid $7.33 for preferred stock in the company's last private round, a Series C. Each preferred share converted into a share of common stock after the IPO, so there'd be a slight gain. Among the major investors are Advanced Technology Ventures, Delphi Ventures, Cutlass Capital, Sapient Capital and Thomas Weisel's health care fund.

***
Any private suggestions, tips, or if you want to send me a picture of an even bigger quarter just email me here.