In a year of big venture capital numbers, Canaan Partners has provided one of the biggest. The Westport, CT-based firm announced Thursday a $675 million fund, its tenth.
As with its previous general funds, Canaan, which also has a main office in Silicon Valley, will put the money into both tech and life sciences. Both sectors have provided ample exits for the firm in the past twelve months. Canaan counts twelve total, including biopharma firms Labrys Biologics and Civitas Therapeutics, and on the tech side, Skybox Imaging and Metacloud.
According to the National Venture Capital Association, Canaan X is the ninth largest fund raised in 2014, and the only one in the top ten with a large biotech commitment. It also arrives less than three years after the firm closed its ninth fund with $600 million in commitments.
The recent success is in part a result of a strategy shift about a decade ago, says general partner Wende Hutton (pictured). “Since 2005 we’ve had a focus on early stage and seed stage companies, we’re talking handcrafted deals, small amounts to take early companies forward into their first institutional rounds,” she said. “That is something different from prior generations of Canaan, and many of our lucrative returns have been early-stage successes.”
That doesn’t always mean taking huge technological risks, however. On the biotech side, two of the big “early stage” wins for Canaan were built around relatively advanced products that had stalled out at bigger companies. “We do look for opportunities where we can take forward clinical assets with a lot of data or intellectual property in back of them,” said Hutton.
One was Labrys, which Canaan and Series A syndicate partner venBio formed around a treatment for migraine that they licensed from Pfizer in late 2011. Another was San Diego’s Advanced BioHealing, which Shire bought for $750 million in 2011. ABH was based on Dermagraft, a commercial wound healing product that Smith & Nephew was no longer interested in carrying. (That deal ended up as a boondoggle for Shire, which sold its regenerative medicine business in 2014 and wrote off Dermagraft as a $650 million loss.)
On the tech side, general partner Dan Ciporin, one of the firm’s tech investors based in New York, said areas ripe for disruption are the financial sector, where Ciporin led the firm’s investment in LendingClub; marketplaces like ridesharing and real estate; and storage technology.
The tenth fund will follow the previous rule of thumb for the firm: two-thirds allocated to tech, one-third to health care. The firm will also pursue the growing field of digital health, which incorporates elements of both sectors. When asked which pot of money the digital health funds will come from, Ciporin said it would generally hinge upon which partner is leading the deal.