Atlas Venture focuses on helping start and fund emerging life sciences companies – therapeutics, diagnostics, tools and devices. Corporate venture capital’s role in the new biotech ecosystem could not be understated today. Corporate venturers are major syndicate partners for those of us in the early-stage arena, and we could not power up our start-ups without them. I have written on this before, as have many others, but thought I would put some numbers behind two points – how important they are in the early stage, and how big they actually are.
Corporate venturers are now truly "preferred partners" for our early-stage deals. To quantify their impact on our portfolio, we assessed how many deals had some participation from their funds. From 2000 to 2005, Atlas invested in nearly 40 life sciences companies from its Funds V and VI. Only 5% of those had any corporate venturer involvement. Fund VII was deployed from 2006 to 2008 and a third of those deals had a corporate syndicate member. And since 2009, 67% of the deals in our Fund VIII (our current vintage) have at least one corporate venture participant.
Many of the deals have several corporates – for example, Nimbus has SR One and Lilly Ventures, Bicycle has SR One and Novartis, RaNA has SR One and Monsanto, F-star has Merck Serono, Mitsubishi and SR One. I suspect this metric will not reverse in our portfolio anytime soon – we are likely to build most of our companies with at least some element of a pharma equity partner at our side for the foreseeable future.
Corporate VC funds have very large implied assets under management. Based on discussions with those funds about the pace and scale of their investments, I have tallied the implied fund size for a number of corporate venturers. This estimate for implied fund size is a function of taking the annual investment pace and assuming a traditional four-year investment period, with reserves thereafter.
For example, $50m per year direct investments, or $100m of investments plus future reserves, equates to a roughly $400m standalone fund. I have guesstimated such a level for Novartis and SR One. Medimune I put at about $300m, others at slightly less.
The corporate venturers I counted – and I almost certainly forgot a few – represent more than $2.5bn of traditional venture funds by conventional measures of fund size. This is a significant amount of capital. While there are larger life sciences dedicated funds in existence, the typical early-stage life sciences funds – or life sciences allocations within diversified funds – are in the $100m to $250m range. These funds are clearly dwarfed by the size of several of these early-stage corporate venturers.
In addition to direct investments, many corporate pharma groups have been active in becoming strategic investors in venture funds. This further augments their role in supporting early-stage innovation, and is a trend that is likely to continue.
Early-stage investors now have their favourite corporate venturers on speed dial for their next start-up funding round.