Prospect?s Fund II Eyes Med Sector

Fresh off the fund-raising circuit, Prospect Venture Partners has already started spending its new capital. As a matter of fact, today it is expected to announce a new investment in a drug discovery company.

The Palo Alto, Calif.-based VC closed its sophomore Prospect Venture Partners II just last week, netting $500 million in the oversubscribed vehicle. The fund will focus on companies in the medical technology and life science arenas.

Prospect Venture Partners II, which held its first close in February, was initially targeted at $400 million, said Alex Barkis, a managing partner at Prospect. But “we were able to take some more because it was consistent with the pace of our investing and the size of the investments we were looking to make on average,” he said.

Companies blessed with cash from Prospect can expect to fetch between $500,000 and $5 million in the first round, and an average of $12 million over the life of the investment. The firm will typically syndicate its deals and seek board-seat representation.

According to Prospect Managing Partner Jim Tananbaum, the fund will “generally be the first money on the scene. The company?s stage can range from mature, with products that are already coming out on the market, to raw start-ups.”

Each of the firm?s four partners are expecting to close about two deals per year, with the hope that the fund will be fully invested in the next four years.

The only real difference between this fund and its predecessor is Prospect Venture Partners II is “substantially larger,” the 1997?s $100 million Fund I, Barkis said.

Prospect?s portfolio includes such companies as San Diego-based Structural GenomiX, a maker of high-throughput protein-structure determination platforms, and Signature Biosciences, a developer of drug-screening technology platforms, located in Hayward, Calif. Barkis said the previous fund has plenty of dry powder left for follow-on financings.Roth funds are focused on the medical field because it is an extremely attractive environment that is expanding, he added.

The company?s newest fund will look primarily at early-stage companies in North America, and may invest in PIPE deals. Besides the latest investment, Prospect Venture Partners II has already backed Archemix Corp., a maker of nucleic acid-based products and services related to drug discovery based in Waltham, Mass. Additionally, it recently closed a deal with Infinity Pharmaceuticals.

While CalPERS is the only previously disclosed investor, Barkis said the firm?s LP roster is comprised of the usual mixture of endowments, foundations, pensions and high-net worth families.

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