Last week, Atlas Venture announced that it had closed out its sixth early-stage venture vehicle at $950 million.
While the fund missed its $1 billion-plus target, Atlas Venture, like many other firms, was forced to trim its expectations due to a cautious investment climate, however, the fund still may eke out a significant presence in the communications, information technology and life sciences sector. The firm’s latest vehicle is almost $200 million larger than Atlas Venture V, capitalized at $760 million in 2000 – meaning that it will take bigger equity stakes in its portfolio of companies. Atlas Venture VI will invest between $15 million and $18 million over the life of a company, rather than the $8 million to $12 million stakes it had carved out in the past.
While Atlas Venture’s previous funds weighted almost half of their investments in the information technology space, investments in that sector will be cut to 35% to 40% of the fund’s capital. Emphasis will shift into the life sciences, up from a 20% allocation to a target range of 20% to 30%, and to communications investments, which are expected to fill out the remaining 40%.
“It’s the nature of the companies we’re investing in,” said Tom Eddy, senior principal and chief operating officer with Atlas Venture. “The communications companies are more capital-intensive in nature. In a life sciences company, at the early stage it’s seven to 10 years before the company can go public and requires more capital.”
Indeed, the firm has witnessed a number of liquidity events in its life sciences portfolio, while its Internet-heavy information technology portfolio has been dragged down by the market collapse. Since its founding in 1980, the firm has liquidated 26 companies on the public markets, and at least 16 of those IPOs fall into the life sciences portfolio, according to Private Equity Week publisher Venture Economics. In 2000, 11 of the 14 Atlas Venture-backed companies were life sciences and biotechnology companies.
On the other hand, portfolio companies like ClickMango.com, a London-based online vitamin store, and Citikey, a Swedish developer of personalized wireless information, failed during the same time span.
Limited partners in the new fund include return investors Common Fund Capital Pennsylvania State Employees’ Retirement System and the Virginia Retirement System, and new commitments from Alliance Private Equity Partners, Grove Street Advisors and the University of Texas Investment Management Group.
Now, with $2.5 million under management, Atlas Venture also maintains satellite offices in Menlo Park, Calif., Seattle, Germany, France, the Netherlands and the United Kingdom.
Contact Carolina Braunschweig.