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12:00 AM
 | 
Oct 06, 2014
 |  BioCentury  |  Finance

Atlas' next chapter

What splitting from tech team means for Atlas life science portfolio

After separating from the tech group, Atlas Venture's healthcare team plans to stick to the early stage investing strategy the firm says has provided returns in the top quartile of life science VCs.

For the last six years or so, that strategy has revolved around giving small amounts of highly tranched seed funding to start-ups - often formed around ideas plucked from academia - and telling them to "prove" they are viable. The firm employs a range of investment models, from building companies around big ideas to an asset-centric approach.

"We like to back big, first-in-class ideas and then put the right business and liquidity model around those ideas," partner Bruce Booth told BioCentury.

"The firms that do well at building companies around innovative opportunities have a very clear strategic view of the kind of company that can be created based on the underlying nature of the science," added Jason Rhodes, who joined the firm as a partner last week. He was most recently president and CFO of epigenetics company Epizyme Inc.

Over the past 15 years, 20 Atlas-backed life science companies each have reached exits or achieved public market valuations of over $400 million.

The past three years have seen four IPOs and five M&A events from the life sciences portfolio, including the first under an asset-centric initiative launched in 2011 (see "This Way Out," page 26). The firm also has raised over $600 million in syndicated financings for its biotech portfolio over that time.

Booth said returns from tech and life sciences have been "remarkably similar," but the ecosystems and business models in each space have been growing more and more different.

"Over the last three funds or so, we've been starting to operate as individual franchises within the firm," he said. Ultimately, Atlas decided the teams would be "stronger by raising independent and stand-alone funds."

The healthcare team, which will retain the Atlas name, plans to raise an independent fund next year on the order of Atlas' $265 million ninth life science-tech fund.

"If you have five investing partners like we do, that's roughly $50 million per partner to do early stage biotech," Booth said. "That's the right amount of capital you need to have critical mass in the space."

Vintage Atlas

The size of the funds Atlas has raised and its approach to life sciences investing have evolved over more than three decades.

The 1990s saw Atlas raising small to medium-sized funds - including the $230 million Atlas Venture Fund III in 1997 and the $400 million Atlas Venture IV in 1999 - with an investment focus on fairly early stage innovator biotechs.

The firm's 1990s life science investments and...

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