Venture Capitalists Raise Second Fund As Health Care Focus Draws Investors
By RAJIV VYAS
Orange County Business Journal
The Newport Beach office of venture capital firm Versant Ventures has closed a $400 million fund for investing in early-stage health care firms, a reflection of the stepped-up interest in that industry among private investors.
“Almost all of our existing limited (partners) signed up, and they wanted to have more of this fund,” said Donald Milder, a partner. “So we really had only 10 percent of the $400 million unallocated when we went out.”
The new fund counts 32 institutional investors and endowment funds as investors.
Versant only invests in early stage biotechnology companies, health care service providers and device makers. If a portfolio company performs to expectations after the first round, then the firm follows with second and third rounds until the company goes public. Versant typically invests $9 million to $15 million in a company in all rounds.
“The tide seems to have changed,” said Barbara Lubash, managing partner. “There’s a lot more interest in investing in health care.”
Versant, which also has a Menlo Park office, started raising money for its second fund in September, a week before Sept. 11. The partners said the stock market’s drop after the attacks didn’t hamper their efforts.
The firm has aimed to limit its portfolio to 40 companies. With eight partners company-wide and five companies per partner, 40 is considered a good number. “Deviation from our existing model could have impacted our performance,” Milder said.
Versant raised $270 million for its first fund in late 1999, right around the time many had forsaken health care investments for the Internet.
Portfolio companies in the firm’s first fund include: Laguna Hills-based Glaukos Corp., a startup working on an implantable glaucoma treatment; San Clemente-based Cameron Health Inc. a seed-stage heart device developer; and Laguna Hills-based Cogent Healthcare Inc., which helps insurers and hospitals manage costs.
“Now that the Internet bubble has burst, many investors have found their weighting is skewed towards tech, and they want a more diversified holding,” Milder said. “Health care is now back in vogue.”
Despite launching during the height of the dot-com era, Versant’s first fund raised its target in three months, too. So far, none of the fund’s 26 portfolio companies has gone public. Almost 80 percent of the fund’s investments have been in California companies.