Hatteras Venture Partners has reloaded, closing a new fund this morning to make a fresh round of investments in life science and health IT companies.
The Durham, NC-based venture capital firm has raised more than $90 million for the fund, the company’s fifth. Ireland-based Malin (ISE: MLC) led the investment, which could reach as much as $150 million and be the firm’s largest fund to date.
Clay Thorp, a Hatteras co-founder and general partner, says Malin will broaden the opportunities for the firm’s portfolio companies by helping to connect startups to its network of potential partners. Malin already has some connections to Hatteras companies. The company last fall participated in the $60 million Series D round for Viamet Pharmaceuticals, and in March, led a $50 million investment in Novan Therapeutics, both Durham-based Hatteras portfolio companies. Rather than operate as an investment firm, Thorp describes Malin as a holding company with “long-term, patient capital.” He says the approach to building long-term value could give Hatteras portfolio companies additional options besides an initial public stock offering or an acquisition.
“We can build up crossover investments, but we can also decide to go deep and long,” Thorp says.
The new Hatteras fund will take a similar investment approach to the firm’s fourth fund, a $90 million fund launched in 2011. That fund put 20 percent of its capital into seed-stage companies, an endeavor the firm called Hatteras Discovery. The fourth fund has finished making new investments, though it still retains reserves for follow-on investments. Thorp acknowledges that some venture capital firms are retreating from early-stage investments, but he says Hatteras aims to find promising nascent technologies that the firm can help advance. Thorp says that even if technologies flop, the goal is to fail early before the bills get more expensive.
“If you go to areas where people are not, you often find the right kind of opportunities at the right values,” he says.
Hatteras invests throughout the U.S. but Thorp says the firm places emphasis on the Southeast, a region that doesn’t have as many investment firms as Boston or Silicon Valley. He says the firm can be a leader in the South, identifying promising companies and technologies and developing relationships with other firms looking to join a syndicate of investors that want to deploy capital to the region.
The new Hatteras fund coincides with an uptick in investing. In the second quarter, U.S. venture capital firms raised $10.3 billion for 74 funds—the strongest three-month period for VC fundraising since the fourth quarter of 2007, according to the National Venture Capital Association. Disclosed investors in the new Hatteras fund include GlaxoSmithKline (NYSE: GSK), LabCorp (NYSE: [[ticker: LH]]), and the University of North Carolina at Chapel Hill. Though Hatteras has invested in six UNC spinouts in the last six years, Thorp said that the firm would not have considered a UNC investment in a Hatteras fund as long as his brother, Holden Thorp, was chancellor of the university. Holden Thorp left UNC to take a position at Washington University in St. Louis in 2013, clearing the way for a UNC investment.
Approximately 40 percent of Hatteras’ portfolio is in cancer therapies and Thorp says the firm would consider making a play in the crowded field of cancer immunotherapy if it can find something that stands out from the pack. Other areas that Hatteras is targeting with its fifth fund include rare disease drugs, companion diagnostics, and health technologies that help move the needle on costs by providing more information to help patients make healthcare decisions.