Flagship Closes New $270M Fund For Healthcare and Cleantech Ventures

1/11/12Follow @arleneweintraub

Cambridge, MA-based Flagship Ventures announced today that it has closed its fourth fund, raising $270 million—significantly more than the $250 million the firm initially intended to secure. “We could have raised even more, but we decided to cut it off and get on with forming a portfolio,” says Noubar Afeyan, CEO and managing partner of Flagship Ventures.

Flagship was founded in 2000 and has since built a portfolio of more than 65 companies in the fields of biotech, medical technology, and sustainability. Afeyan believes the firm generated so much interest in its fourth fund because of recent successes from the $235 million fund it established in 2007. That portfolio includes Agios, for example, a Cambridge, MA-based company that established a $150 million development deal with Celgene last year.

Flagship’s approach to investing is distinctive in that about 25 of the companies in its portfolio come from its own innovation unit, VentureLabs. It’s not an incubator, Afeyan says, but rather a mechanism for transforming concepts into companies in completely new markets. “We explore opportunities in spaces where there are no companies whatsoever,” he says. Companies emanating from VentureLabs include Hypnion, BG Medicine, and Adnexus Therapeutics. Afeyan estimates that about 35 percent of the new fund’s portfolio will come from VentureLabs.

The new fund will also pursue some late-stage opportunities, though it will do so very selectively, Afeyan says. “Our approach is quite different from typical late-stage investing, where the company is totally de-risked and you have to pay a high value to join a syndicate of investors,” he says. Instead, he says, Flagship looks for value plays—companies that are capital-constrained but promising enough to be close to an exit.

One late-stage investment with a happy ending for Flagship was Accuri Cytometers, a Michigan maker of scientific instruments that was bought by New Jersey medical device giant Becton, Dickinson and Company in 2011 for $205 million. Afeyan says about 20 percent of Flagship’s last fund was dedicated to later-stage investments, and such opportunities will account for “that or more” in the new fund.

Overall, Afeyan says, the vast interest in this latest fund bodes well for companies in biotech, medical technology, and cleantech. “People are announcing all sorts of new funds now, but most are investing only in late-stage assets,” he says. “That’s important, but it won’t improve innovation. Ultimately, if you want a wellspring of innovation, you need people who are willing to take this type of early-stage risk. It’s good to see that dedication from our investors.”

By posting a comment, you agree to our terms and conditions.