Friday, November 16, 2007

Venture Rounds: You Stay Classy, San Diego

San Diego's life sciences start-up community took a bit of a hit recently. Enterprise Partners Venture Capital suspended its fundraising after an ill-advised attempt to raise a life sciences-focused fund instead of its traditional formula of investing heavily in information technology and life sciences companies.

The blow to Enterprise Partners represents the latest in a string of disappointing fundraising results for local firms. We swapped emails with Partner Drew Senyei but he declined to discuss the fund raising. (Tip of the cap to PE Week Wire which first reported the news.)

Unlike the Bay Area and Boston, San Diego doesn’t boast a network of homegrown venture capital funds. Enterprise Partners probably had been the largest but now it sits on ice. Forward Ventures, for example, settled on a $150 million fund in 2003 after failing to secure larger funds. The firm—which invests exclusively in life sciences—is still investing that fund and has no immediate designs on raising a new one, according to Partner Standish Fleming.

Meanwhile, we haven’t heard much from smaller San Diego-based firms like Windamere Venture Partners and Hamilton Bioventures. In an email, Scott Glenn, managing partner of Windamere, says the firm is still making investments but it apparently hasn’t raised a new fund since 2001. We tried but couldn’t reach Hamilton BioVentures in time for this post.

Yet, the region keeps chugging along as one of the top recipients of life sciences venture capital. According to the....take a breath...The MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association based on data from Thomson, which tracks data by region, San Diego biotech companies raised more capital in the first three quarters of this year than they did all of last year. (We'll give you details in the upcoming Start-Up.)

Avalon Ventures, of course, is building on past success. Founded by Kevin Kinsella, the firm invests both in life sciences and information technology--as Enterprise Partners once did. It's likely to keep building on that model. "From our perspective (the San Diego venture scene) is great," Kinsella says. "I don't care if there are any other firms. When we need to syndicate, we have the Bay Area and East Coast firms. If we like a deal the chances are one of our confreres will also like it."

San Diego's life sciences start-up scene has other obvious strengths. The first is an established life sciences industry, although the acquisition of Idec Pharmaceuticals may have put a kink into that. The second is it's a relatively short flight from the Bay Area and Silicon Valley so firms can send a partner down for the day or set up offices as Sofinnova Partners and Sanderling Ventures have done.

The third is the weather, which can be particularly appealing to East Coast firms like Domain Associates. Partner Jim Blair says two Domain general partners spend half their time in San Diego where they're joined by two full-time general partners and three principals.

Check out the next issue of Start-Up for more.

Step Ups

According to one institutional investor, Frazier Healthcare Ventures is ready to close $600 million for its sixth fund. It previously closed on $450 million in 2005.

Frazier likely had little difficulty reaching the once unfathomable peak of $600 million (remember MPM's second fund?). Skyline Ventures quickly wrapped up its own $350 million fund this week, shooting past its $300 million target right up to the hard cap. "All of our significant limited partners from the previous funds came back and we got a number of new ones," says John Freund, managing director. "We got them the way we like to get them from referrals by our existing LPS." Skyline will employ the same strategy with the fund as it did to deploy its previous $200 million fund.

HealthCare Ventures, which recently lost general partner Eric Aguiar to Thomas, McNerney Partners, likely will be in the market for a new fund next year. Augustine Lawlor, who was named managing general partner over the summer, says the firm’s focus and fund size will remain the same.

Essex Woodlands Health Ventures added Lisa Ricciardi, former Licensing and Development SVP at Pfizer, as an adjunct partner. She'll be responsible for both sourcing deals and working with portfolio companies, giving her a completely different take on partnering. "I was on the buy side of a company that could do anything it wanted," she tells IN VIVO blog. "The goal was to look at a potential partner and see 30 opportunities when others only saw 10. To be on the other side—working with small companies that are really struggling with decisions on the $5 million to $10 million level, I hadn’t appreciated that a trade sale or partnering decision had such an enormous impact. It’s so interesting. It’s the absolute other side of the coin."

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