Avalon Ventures spins off a separate fund to handle life science companies — armed with $135M

Avalon Ventures has been a major player in the investing games both in tech and in the biotech world, but now a new fund will be zeroed in on investing in the life science field.

Kevin Kinsella

Christened Avalon BioVentures, the venture capital firm will be committed to investing in early-stage biomedical companies and has officially closed the fund with $135 million on hand from new and existing investors. The company will be focused specifically on the life science space only and emerging from Avalon’s tech and life science approach. The company will continue to “leverage” Avalon’s team and accelerator; Avalon founder Kevin Kinsella will be brought in as an emeritus partner.

In an interview with Endpoints News, managing partner Jay Lichter said that with Avalon having a “good run” in the life sciences side of the business, its investors recognized and encouraged the VC firm to the group into a life science-only fund. However, Lichter is adamant that the strategy will remain the same.

“And that is starting companies from scratch, picking up new ideas of whitespace novel targets, novel platforms, building great teams around that, keeping them in our accelerator in San Diego until they’re ready to be, if you will, birthed into the world and then off they go,” Lichter said.

And while a Form D filing last year stated that the fund looked to raise $200 million, according to Lichter, that was the max that Avalon BioVentures wanted to raise, but the target was $100 million.

Avalon Ventures itself has had a long run of investments in the biotech and startup world such as Avelas Biosciences, Janux and Jnana.

The fund, dubbed ABV1, will be looking to invest in therapeutics companies, sticking to its playbook on investing in biotechs that are “highly differentiated” and that have IP protection and timeline advantage over the competition as well as having a novel way of looking at a disease or going after a disease that has not been addressed.

The fund will also be wide open modality-wise and will go after large molecules, small molecules and nucleic acids, among others.

“Indication wise, we’ll find indications that make sense, where we can be ideally, first in disease or first in a new class of molecules,” he said.

Lichter said that Avalon BioVentures is not going to be sitting on its hands and the fund plans to make around three investments a year and possibly one investment later this year and early next year. But with the fund now being separate from the original structure of Avalon Ventures, it’ll offer some some new advantages for Lichter and offer a straighter direction for the fund.

He said:

I think it’ll be a lot easier in some ways to do things like manage reserves and focus on managing the portfolio. Because in previous Avalon funds…half the portfolio, were these companies with names with no vowels and I don’t really know what they do, and I hope they work out. I mean, I just literally have a lot of those companies. I mean, I could, do the headline of what they do, but you operationally had no real sort of instinct as to whether they were going to be successful or not. So in a life science-only program we’re all therapeutics, we’re going to know where all the programs are. We’re going to understand the risk of each program, the likelihood of needing more capital, the likelihood of exits. So, I think I think in that regard, it’s going to be a little more straightforward because we can all understand everything in the portfolio.

Although the biotech market is experiencing some harder times, that is not putting off Lichter and Avalon BioVentures. He is confident that the downswing will end in around three to four years and is not particularly worried about the current market swings.

“If anything, it’s helpful for us because we can be a little more aggressive on valuations. The public market valuations can be impacted on a daily basis. Private is a much slower response rate because you have to adjust valuations on either around financing, which could be, a year or two separated, or maybe there’s a term sheet that comes in, or you do some sort of deal of some kind that gives you a hard metric for valuation. So, for us, it’s probably okay, just because of our investment style,” he said.

Apart from Lichter, the other managing partners include Tighe Reardon, Sanford Madigan and Sergio Duron, with Reardon also serving as CFO.

therapeutics
small molecules
biotech
life sciences
vc
venture capital
fund