Versant Ventures now has $400 million in its coffers to fuel its pursuit of early-stage healthcare technologies and startups, and it has a particular goal of expanding its investment approach in Europe.
With the closing of its sixth fund announced Tuesday, San Francisco-based Versant now aims to invest in as many as 25 companies in both North America and Europe—half of those investments in “companies we create from scratch,” says Brad Bolzon, Versant’s managing director. Those companies will be formed through Versant’s network of laboratory and incubator spaces, a network that is now adding a new site in Europe.
Versant takes a different tack than some venture capital firms with a “build-to-buy” approach to biotech investing. The firm backs an early-stage company so it can take that startup’s technology far enough for the it to be acquired by a larger company. Versant operates what it calls “discovery engines,” which are wet labs and incubators that partner with academic institutions to form and nurture these biotech companies. The startups typically focus on a single drug and already have a potential buyer lined up.
Highline Therapeutics, the newest of Versant’s incubators, opened in New York in 2015. The others are Inception Sciences, which has sites in San Diego, Vancouver, BC, and Montreal; and Blueline Biosciences in Toronto. As Versant looks for investment opportunities for its latest fund, the firm is launching a new incubator site called Baseline, which will be based in Basel, Switzerland.
Versant’s presence in Europe dates to 2005, although the firm did not create a formal European office until 2011. Since then, Bolzon says Versant has completed 14 Series A investments in Europe. Some of those companies receving investment moved to the United States while others remained in Europe. Bolzon says Versant’s new Switzerland-based incubator will allow the firm to create more companies in Europe rather than moving technology to the United States as it had in the past.
“This gives us a capability in Europe we never had before,” he says.
Quanticel Pharmaceuticals, a cancer drug company that emerged from Stanford University, was Versant’s first build-to-buy company. Summit, NJ-based Celgene (NASDAQ: CELG) signed on as a partner and ultimately acquired Quanticel in 2015. But not all of the investments from Versant’s sixth fund will mirror that structure.
Bolzon says that about one third of the new $400 million fund will be invested in companies coming out of Versant’s incubators. And not all of those investments will be build-to-buy deals. Bolzon says Versant applies the build-to-buy strategy across all of its funds, although the fifth fund turned out fewer such companies than the fourth. The number of build-to-buy deals made by sixth fund will depend in part on the interest of potential pharmaceutical partners, Bolzon says. Some of the investments could be structured as more traditional venture deals that include a syndicate of other VC investors.
Versant does invest in companies that aim to grow on their own rather than becoming acquisition targets. CRISPR Therapeutics (NASDAQ: CRSP), a Versant portfolio company headquartered in Switzerland with research and development operations in Cambridge, MA, completed an initial public stock offering in October. Versant also strikes deals with big pharmaceutical companies. Last month, Versant and Bayer joined forces on a $225 million Series A round to back new stem cell therapy company BlueRock Therapeutics. BlueRock aims to develop cell therapies to regenerate heart muscle in patients who have had a heart attack.
The firm says a mix of current and new investors backed the oversubscribed sixth fund. Across all of its funds, Versant says it has more than $2.3 billion under management.