BioPharma, Pharma, Startups

With new $280M fund, Atlas Venture cuts the IT and “right-sizes” to biotech

Atlas Venture just closed its tenth fund at $280 million – marking its switch over […]

Atlas Venture just closed its tenth fund at $280 million – marking its switch over to a biotech-only firm, the firm’s Bruce Booth blogged today.

“At our core, we’re biotech therapeutics startup folks, and that’s where we’re going to focus,” he wrote.

Conversely the company’s last fund, at $265 million in 2013, was split between IT and life sciences. But late last year, Atlas jettisoned its IT venture arm, which is now a separate entity and remains in the firm’s original Cambridge office. Just last month, the tech biz raised a $200 million fund and is crowdsourcing a new name.

The new incarnation of Atlas just moved to 400 Technology Square in the life sciences-rich Kendall Park, also in Cambridge. Notably, Atlas just brought on a new chief financial officer- Ommer Chohan, former CFO of Summerhill Ventures in Toronto. The now biotech-only firm has a team of five.

In his blog, Booth makes the case for Atlas’ changeover in focus.

“The hands-on business of early stage venture capital just doesn’t scale well,” he said. When you add in multiple sectors, Booth said, the organizational flow because a logistic nightmare, so simplicity is best in venture partnerships.

“Over the last three fund cycles, we’ve steadily stripped out the complexity of the model and re-scaled the business,” Booth wrote. “Today, we’ve completed that quest for simplicity: we’re a flat and equal five-person partnership, totally focused on a single sector, and are right-sized for driving returns from early stage biotech investing.”

Booth said Atlas found the best returns in biotech investing – as they meaningfully outperformed other life sciences sub-sectors like diagnostics, medical devices, specialty pharma and tools. Atlas hasn’t touched the other life sciences sectors since 2009; after all, some of its biggest deals came from Atlas’ incubation and seed funding in startups like Zafgen and Stromedix.

Booth spoke with Xconomy on the shift, detailing the firm’s goals in funding new companies:

Booth estimates Atlas will start and invest in four to six new companies in each year of the fund’s roughly four-year life cycle. That means it could seed some 20 to 25 companies, but some of the seed projects never make it to a more formal Series A round. (Booth says anywhere from a third to half of Atlas’s seed projects end up on the cutting room floor).

Atlas typically syndicates its seed rounds, which can be anywhere from $500,000 to $2 million, but the checks it hands out on its own in those rounds can be as small as “a couple hundred thousand [dollars].” Booth says Atlas could put $10 million to $20 million into single companies over their lifespan.

Atlas’ oversubscribed fund was backed by Amgen and Novartis. It plans to focus on neuroscience and neurodegenerative disease, Booth told Xconomy, though its seeding could run the gamut of biotech.

 

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