Following up on a $250 million second close that occurred last September, ARCH Venture Partners is expecting to hold a $380 million final close next week on its fifth venture fund, said Robert Nelsen, a partner at the Chicago-based firm.
He also confirmed that the firm would stick to its strategic knitting by using the new fund to back early-stage companies in the physical sciences, life sciences and information technology spaces. More specifically, the fund will also focus its efforts on companies that develop products with proprietary technologies, as ARCH spends a considerable amount of time scouting national research laboratories and academic research institutions.
ARCH Venture Fund V is designed to invest in between 30 and 35 companies, with an average deal size of approximately $10 million. Roughly 20% to 25% of the vehicle’s total capital will go toward life sciences deals and approximately 30% to 40% of the fund will back physical sciences companies. The remainder will be invested in IT and information sciences technology deals.
In a December interview with Venture Capital Journal (a sister publication to Private Equity Week), ARCH Partner Keith Crandell said that fund raising for Fund V had been a more arduous process than had been fund raising for 1999’s $175 million Fund IV.
“There is a little less money out there right now, so we had to go out and meet some more people,” Crandell said. “It’s a little disappointing in comparison, because it is not as easy – but the net-net is that is the way it is now.”
New LPs for Fund V include The Goldman Sachs Group Inc., First Union Corp. and the Mitsubishi Pension Fund. The firm’s existing LPs include the Wellcome Trust, Massachusetts Institute of Technology, Dow Chemical Co., Allstate Insurance Co., the University of Washington, Washington University and the University of Southern California. There is at least one more LP that hasn’t been disclosed yet, which is holding up the company’s close on the fund.
Nelsen declined to reveal how much capital ARCH itself will invest in the fund, beyond saying the firm’s managing directors participated strongly.
The majority of ARCH V’s investments will most likely be made in companies based near the firm’s Seattle, Chicago, New York and Austin, Texas offices.