California dreamin': Red Tree VC shop takes Boston funds' spinout approach to West Coast
The leaves are brown, the temperature is warm and Red Tree Venture Capital is dreaming of California — and some other West Coast states as well.
The VC firm is out with its first fund, two years in the making and officially wrapped up in June, to bankroll at least a dozen biotechs and medical device startups for which the capital deployer wants to be the first institutional backer.
Named after its co-founder’s Stanford roots and the team’s love for the outdoors, Red Tree wants to replicate the university spinout approach that has cemented the biotech creation blueprint for Boston funds like Third Rock, Polaris, Atlas and Flagship, managing partner Heath Lukatch told Endpoints News in a preview of the Thursday unveiling.
Except Red Tree’s sights are set on its academic neighbors in San Francisco, Los Angeles, San Diego and elsewhere across the West Coast, including Seattle.
Lukatch founded the firm with chief scientific advisor Jennifer Cochran, and the duo brought on board former Medicxi partner Jon Edwards as managing director. “I pinged my trusted network,” Lukatch said, and a CEO friend connected the two.
“I’ve spent a lot of time investing early, putting companies together and just saw the opportunity and thought it was a once-in-a-lifetime chance to be able to help create a new fund and build the team out together,” Edwards said in an interview with Lukatch.
Red Tree has already backed 10 companies, including clinical-stage Pipeline Therapeutics, and the goal is to fund at least another two with the initial pool of $272 million. The VC’s leaders will hit the road for fund two next year, Lukatch said.
Cochran, who chairs the bioengineering department at Stanford, said Red Tree is “particularly proud” that more than half of its investments to date have been in companies with female founders and/or CEOs.
Check sizes range from a couple hundred thousand dollars to $15 million, with Red Tree aiming to invest about $20 million to $30 million over the span of their financial relationship with each portfolio company, Lukatch said. The goal is to focus on oncology, neurology and immunology, the managing partner said, noting those areas have garnered a majority of M&A and IPO exits in recent years, as well as FDA nods.
“We like to take the teams out and replicate it as quickly as possible and really do the initial de-risking in a fairly virtual way and scaling these companies as the data has earned that capital,” Edwards said, “and then we look to go syndicate these companies with our friends, other great early-stage investors and really turn the human clinical data card.”
The portfolio’s spread includes about 70% seed-stage and early-clinical companies, and the other 30% in late-clinical or early-commercialization phases, with the latter mainly coming from the medical device investments, Lukatch explained. Biotech represents about three in four investments, with the remainder in medical devices.
Red Tree’s investments to date include: gene editing shop Acrigen Biosciences; brain monitor maker Ceribell; food allergy-focused Alladapt Immunotherapeutics; small molecule drugmaker Sardona Therapeutics and others.
While at Medicxi, Edwards was on the board of multiple companies, including Xenikos, Phathom, Palladio, Celgene-acquired Impact Biomedicines and others, including serving a short stint as board observer at Checkmate Pharmaceuticals, which Regeneron bought earlier this year.
Lukatch was previously a partner at PE firm TPG and has served on the boards of more than a dozen companies.