6:37 PM
Aug 09, 2018
 |  BC Innovations  |  Finance

Super-sized ambitions

How $100M-plus A rounds are bringing in new sources of capital

A trend toward super-sized initial financings is attracting a new set of deep-pocketed investors to the early stage space. These new players are making earlier commitments with hopes of guaranteeing larger ownership positions at an IPO, particularly in companies that could have multibillion dollar market cap potential.

Venture rounds in general have been breaking the $100 million barrier with some regularity since at least 2000. But until 2014 it was rare to see a series A round of that size.

Already this year there have been seven series A rounds of $100 million or more. The tally since 2014 stands at 19 (see “Figure: $100M and Up”).

Figure: $100M and up

$100 million-plus series A rounds began to take off in 2014. Already this year, seven companies have raised a total of $1.3 billion in A rounds of $100 million or more each. The chart shows the total number of $100 million-plus rounds each year and the aggregate raised in those rounds. Data include tranched and untranched rounds. Source: BCIQ: BioCentury Online Intelligence

Eight companies have disclosed the structure of their rounds. Four were untranched.

At least 10 traditional early stage VCs have invested in one or more of these giant rounds. These VCs, who typically remain the largest stakeholders, say large rounds that attract crossover investors can provide an accelerated path to a liquidity event.

The new players include crossover investors and family offices. They typically are not taking an active role on boards. Rather, their participation serves as a signal that they will commit more funds at a higher share price down the line if the company meets its first milestones.

Young giants

Since 2014, VCs have more commonly been supplying super-sized venture rounds to equip companies to build out platforms and pipelines to reach inflection points that could lead to a larger step-up at the next round (see “Finance Follows Function”).

Companies receiving $100 million-plus series A rounds are generally platform companies or those developing or in-licensing large clinical pipelines.

The former category includes the likes of T cell immunotherapy play Tmunity Therapeutics Inc., which closed an untranched $135 million series A round in April, and neoantigen cancer vaccine company Gritstone Oncology Inc., which raised a $102 million series A in 2015. Gritstone has not disclosed whether its round was tranched.

Gossamer Bio Inc. and SpringWorks Therapeutics LLC are examples of pipeline-builders. Gossamer launched with $100 million in January, which included undisclosed seed funding and an untranched series A round. The company was preparing to start a Phase IIb/III trial of its undisclosed lead candidate, and planned to in-license additional candidates.

"We're trying to bring in the people that will own your stock when you're a $10-$15 billion company."

Robert Nelsen, Arch

SpringWorks raised $103 million in a tranched A round last year to bring two in-licensed Phase II cancer therapies through NDA submission, and candidates for hereditary xerocytosis and post-traumatic stress disorder (PTSD) through Phase II testing.

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