With an inaugural $225 million fund earmarked for late-stage medtech ranging from digital health to surgical devices, Versant Ventures spinout Vensana Capital aims to exploit what it sees as one of the few healthcare sectors not overheated by generalist activity.
“Private medtech is still relatively undervalued in a world where it seems like nothing is undervalued,” said Vensana’s Justin Klein. Vensana plans to deploy the fund across 10-12 companies, investing $10-$30 million per company.
Klein, previously a partner at New Enterprise Associates, co-founded the firm with former Versant Managing Partner Kirk Nielsen. Both led medtech investments at their former firms, and Nielsen will continue to manage medtech portfolio companies from prior Versant funds.
By supporting Vensana’s independent launch, Versant is reinforcing its identity as a biotech shop, while keeping a line open to crossover areas such as digital health, where the firms have the option to co-invest.
In addition to digital health, Vensana listed medical devices, diagnostics, data science, drug delivery and tech-enabled services as subsectors of interest.
“We’re seeing an increasing convergence, or blurring of lines, between these different subcategories,” Klein said. “We believe there’s a lot of opportunity in that.”
Versant’s Brad Bolzon told BioCentury the firm decided to spin out medtech investments last year, completing its transition from a diversified healthcare VC to an innovative therapeutics firm, an evolution that began with Versant’s fourth fund (see “Versant’s Capstone”).
Bolzon said the medtech sector’s slow recovery after the financial crisis, which created a narrower IPO window and a higher bar for acquisition, led Versant to focus on later stage medtech plays, a strategy that’s carrying over to Vensana.
“We had a couple really nice successes with that later stage strategy in medtech, and we thought it was time to really give it the resources and capital it needed,” he said.
“A lot of these companies do create meaningful value, but if you get in two or three rounds too early, you might not see it,” said Nielsen. “You don’t see the same round-to-round step-ups in medtech as you do in other sectors.”
He added that Vensana’s strategy could evolve over time, “based on what the M&A or IPO backdrop looks like.”
The new firm’s Vensana Capital I fund was oversubscribed, and its LPs include public pensions, university endowments, foundations, academic health systems, family offices and fund-of-funds -- several of which are shared with Versant.
“A number of the existing Versant LPs see us as a natural opportunity to continue their exposure in medtech,” said Klein.
Versant, which is providing Vensana with back office support, is not an LP in Vensana.