It’s the largest U.S. venture fund raised this month, following a flat Q3. Sofinnova Ventures is expected to close on $375 million for its seventh fund this week, PE Week has learned. It is the firm’s largest fund to date and it tops its initial target of $300 million, thanks to the addition of several new limited partners, according to sources faimilar with the fund-raising.
Among the new LPs is the Pennsylvania State Employees’ Retirement System, which commited $30 million this month (see chart, page 3). Previous LPs to come back for fund VII include Wilshire Associates, the California State Teachers Employees’ Retirement System, Dow Chemical Pension, France Telecom and Silicon Valley Bank. A firm spokesperson would not comment on the fund, citing regulatory restrictions.
The fund ranks as the largest U.S. venture fund to have closed so far in the fourth quarter, continuing the slow fund-raising trend in the summer as activity slowed to a crawl. Only about 40 VC funds in the market raised about $4.5 billion during the third quarter, compared to 62 funds that raised $5.6 billion in the same quarter last year, according to Thomson Financal (publisher of PE Week) and the National Venture Capital Association.
Sofinnova’s new fund throws another log onto the fire over the issue of whether the traditional VC model is dead. Earlier this month, Sevin Rosen Funds withdrew a 10th fund on the eve of an anticipated $250 million first close. The firm was targeting up to $350 million. When it pulled the plug on new fund-raising, Sevin Rosen cited the fact that there was too much money chasing too few deals and that the good old fashioned VC model is “severely damaged.” While many in the industry don’t agree with Sevin Rosen’s argument, Sofinnova hasn’t exactly been stellar when it comes to its own performance.
Sofinnova took Novacea (Nasdaq: NOVC) public in May, offering at $6.50 per share after its underwriters cut the spread from the initial $11 to $13 range. The company, which was trading at $6.95 per share last week, raised $40 million in its IPO. It was the venture firm’s only exit this year, according to data from Thomson Financial (publisher of PE Week). However, before its IPO, Novacea, a developer of cancer-fighting drugs, raised about $100 million in venture funding from Sofinnova, Apax Partners, Domain Associates, New Enterprise Associates and Versant Ventures, among other investors.
The firm, which invests about two-thirds of its capital in life sciences and the remainder in IT, had more liquidity events in 2005:
- It sold networking company Salira Optical Network Systems, which raised $41 million, for an undisclosed amount.
- It sold Discovery Innovations, an Internet-based health care information company which had raised $26 million, for an undisclosed amount.
- It sold enterprise software company Clariteam, which raised more than $15 million in venture funding, for an undisclosed amount.
- It sold wireless infrastructure company AirZip, which had raised $10 million, for an undisclosed amount.
- It sold auto-immune disease drug company Cellective Therapeutics, which had raised nearly $28 million, for an undisclosed amount.
- It sold pain-drug company AlgoRx Pharmaceuticals, which had raised $97 million, for an undisclosed amount at the end of the year.
The firm also took Threshold Pharmaceuticals (Nasdaq: THLD) public in February 2005, offering at $7 per share after its underwriters cut the spread from the initial $14 to $16 range. The company, which raised more than $37 million in its IPO, was trading at $3.25 per share last week. Threshold raised about $50 million in venture funding from Sofinnova, Morgenthaler Ventures, ProQuest Investments and Three Arch Partners, among others.
The firm expects Sofinnova Venture Partners VII to resemble its previous fund of $250 million that it raised in 2002. It will invest about two-thirds in life sciences startups and one-third in information technology companies. About 90% of the firm’s portfolio companies are U.S.-based while the remaining 10% are in Europe. Sofinnova, which is based in San Francisco, is an offshoot of Sofinnova Partners, a Paris-based venture firm. Launched as the U.S. arm in 1986, Sofinnova Ventures gained its independence in 1997, but the two firms have continued to collaborate and share deal flow.
The firm’s five general partners are Alain Azan, Eric Buatois, Nicola Campbell, James Healy and Michael F. Powell. The firm added Brian Wilcove as a venture partner to focus on networking and communications earlier this year.