Canaan reloads with $850M in fresh funds for startup investing

2023-04-06

Dive Brief:

The venture capital firm Canaan has raised $850 million in new funds earmarked for investments in technology and medical companies.

The bulk of the cash — $650 million — will make up a fund called Canaan XIII focused on seed and Series A financing with reserves to see startups through events such as initial public offerings or mergers, Canaan said Thursday. The other $200 million will be used to help grow companies already in the portfolios of prior Canaan funds.

As in the past, Canaan anticipates it will allocate about 65% of its capital for technology investments, with the rest going into the healthcare sector. There, Canaan said it will prioritize “new modalities” in areas like oncology, immunology and neurology as well as in heart and respiratory diseases, where it said promising assets are often “overlooked.”

Dive Insight:

Canaan is raising new money to put into the biotechnology sector even as general investors appear to remain hesitant. The firm’s 35-year track record through market ups and downs gives it an edge, and allowed it “a relatively quick and efficient fundraising process,” according to Julie Grant, a general partner at the firm.

“Despite the market landscape, this remains a great time to be at the forefront of creating and investing in life science companies based on the staggering knowledge that has been amassed on the fundamental drivers of health and disease,” Grant said in an email to BioPharma Dive.

One area that’s particularly promising is precision medicine, Grant said. The idea is to develop treatments that can be tailored to a patient’s particular genetic makeup, instead of a one-size-fits-all approach. Precision medicine has allowed for “great strides” in cancer treatment and has the potential to help address other conditions, Grant said.

Canaan isn’t alone in seeing the potential for new technologies. In the last few months, two new venture capital firms — Cure Ventures and Dimension — each raised $350 million to invest in biotechnology startups. And SR One, the former venture arm of GSK, brought in $600 million to bankroll a second fund that will look for later-stage investments as well as companies just starting out.

Overall, U.S. venture deal activity last year across all sectors was “relatively resilient,” according to the National Venture Capital Association’s PitchBook Venture Monitor. The total number of deals and money involved topped the figures from 2020. Still, there have been four consecutive quarters of declines from the peak in the fourth quarter of 2021, the group found.

In biotech, one concern is a looming “Series A cliff” faced by companies that raised Series A financing during the boom year of 2021 that are now having trouble generating interest in new funding rounds at the same valuations.

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Cure Bionics