‘Breakthrough’ startups reap investments from new early-stage fund

January 25, 2012 – 11:33 am by Michael Christel

Cambridge, Mass.-based Flagship Ventures recently launched the company’s largest fund to date, raising $270 million for its life sciences funds, money that will add around 20 new biotechnology companies to Flagship’s portfolio, according to officials. With the closing of the new fund, the company now has more than $900 million of early-stage capital under management.  Noubar Afeyan, Ph.D., managing partner and CEO of Flagship, answered questions from R&D Directions about the company’s latest cash infusion.

R&D Directions: How will this new fund impact or expand efforts in your early-stage portfolio?

Dr. Afeyan: We will continue to pursue and expand our investment and venture creation strategy through Flagship Venture Capital and Flagship VentureLabs. We have already started to put some of the money to work through investments in a few breakthrough companies such as:

• Breathable Foods, which is pioneering devices and formulations for the delivery of nutrients in a breathable format.
• Blend Therapeutics, which is developing combination medicines with the ability to control each agent’s therapeutic action.
• Tangent Medical, which will commercialize a novel intravenous catheter to improve patient and hospital staff safety and reduce complications.
• Essentient, a company that is going to transform global nutrition and food supply

R&D Directions: Can you highlight a few startup successes resulting from Flagship’s last fund, launched in 2007?

Dr. Afeyan: We invested in 24 companies, including Joule Unlimited (which has developed proprietary photosynthetic organisms to generate ready-to-use ethanol and diesel using only sunlight, CO2, and water as inputs); Agios (developing anti-cancer drugs that target tumor metabolism); Selecta Biosciences (pioneering an anti-smoking vaccine using its proprietary synthetic vaccine particles); and Permeon (which has a new class of protein therapeutics that can, for the first time, act inside a cell). We also invested in Accuri Cytometers, a later-stage company, which was sold to Becton-Dickinson for $205 million in 2011.

R&D Directions: How would you assess the general VC funding climate at the moment in the life sciences, particularly for early-stage venture firms?

Dr. Afeyan: Early-stage life science investing has been challenging for the last 10 years and returns for funds in the area back this up. Our strategy is different. First, the experience of our investment professionals is a mix of operating and investing in the sectors where we are active. We have been involved on the management teams of startups and participated in launching and growing these kinds of companies. We have sat at the table when it was time to take these kinds of companies public or sell them. In addition, we have also participated in some situations where there were failures and learned a tremendous amount from those situations.

Second, our VentureLabs program is unique in that we continue on the legacy of conceiving new companies. We have a team that institutionalizes entrepreneurship and offers proprietary investments to our limited partners. What we have found is that existing and new limited partners are comfortable and even enthusiastic about investing in our strategy. I don’t know what this says more broadly about investors becoming more comfortable with the early-stage life science investing but we are pleased that investors embraced our program with the level of support we received.

R&D Directions: Which areas in early-stage research seem to be generating the most buzz among investors? How important is it for VC firms such as Flagship to be able to adjust investment strategies in line with medical, technology, and regulatory trends?

Dr. Afeyan: In general, we strongly believe that life sciences and sustainability remain rife with opportunity for the foreseeable future, and solutions that have a meaningful and substantial impact in these two sectors and that are at the same time sustainable and practicable, will always represent the best opportunities.

As such, Flagship hasn’t focused too much on trying to pursue industry buzz and trends. We work very hard to match unmet global needs to an existing or achievable technological solution or invention, and explore ways to commercialize these breakthroughs. That’s the mission of Flagship VentureLabs, and what is creating the most buzz today. Sometimes opportunities do come to us and we invest, and sometimes, we have to create a venture where we don’t see any existing or imminent solutions.

Tags: biotechnology, early-stage venture capital