Canaan Closes $675 Million Fund With An Eye For Biotech And Medtech Startups

Published: Oct 17, 2014

Canaan Launches $675M Biotech, Medtech Startup Fund

October 17, 2014

By Mark Terry, Breaking News Staff

Venture capital firm Canaan Partners, headquartered in Menlo Park, Calif. and Westport, Conn., announced yesterday the creation of a new fund worth $675 million, dubbed Canaan X.

The VC said it intends to focus on early stage and seed-stage startups in technology and healthcare. The healthcare focus will be on therapeutics, with special interest in companies working on antiviral and antibiotic therapeutics.

“Our strategy for Canaan X,” said managing partner Maha Ibrahim in a statement, “will be similar to the proven diversified sector strategy we’ve used for almost three decades, with two-thirds of Fund X dedicated to information technology and one-third to healthcare.”

Canaan currently has healthcare investments in Arvinas, Chrono Therapeutics, CytomX, Liquidia, Spinifex and Truveris. The VC firm manages more than $4.2 billion in funds and assets.

It has been on a roll with 12 exits in the last year. These successes include Labrys Biologics, Civitas Therapeutics, Skybox Imaging, and Metacloud. Skybox Imaging was sold to Google for $500 million. Another non-life science investment was Ebates, an online coupon firm, which was bought by Tokyo’s Rakuten for $1 billion.

“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 round,” said general partner Wende Hutton in an Xconomy article. “That is something different from prior generations of Canaan, and many of our lucrative returns have been early-stage successes.”

Two significant successes for Canaan on the biotech side are Labrys and Advanced BioHealing.

Canaan and venBio, a Series A syndicate partner, funded Labrys on the basis of a migraine therapeutic licensed from Pfizer in 2011. Teva Pharmaceuticals acquired Labrys for $200 million in cash and milestone payments up to $625 year earlier this year.

Advanced BioHealing, headquartered in San Diego, was sold to Shire for $750 million in 2011. BioHealing developed Dermagraft, a wound healing product. Although a win for Canaan, it wasn’t for Shire: The U.K.-based company unloaded its regenerative medicine business in 2014 and took a $650 write-off on Dermagraft.

Canaan’s new fund, its 10th, will be managed by its general partners. In addition, the company recently promoted Tim Shannon to managing partner. Typically Canaan invests about $15 to $20 million per company.

According to the National Venture Capital Association and Thomson Reuters, this new fund is the eighth-largest raised this year in the United States. Ibrahim indicated they expect to typically provide seed investments up to $2 million and Series A contributions ranging from $3 million to $10 million.

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