Canaan reels in a jumbo $800M fund with a big focus on a new wave of biotech startups

In the latest sign of the leviathan appetite venture investors have for new technology, Canaan Partners — one of the busiest players in biotech — has raised a firm-record $800 million fund to drive a new wave of bets in the biz.

The Silicon Valley-based Canaan has many interests — fintech, marketplaces, enterprise — with a special place in the portfolio for a big chunk of biopharma. Known as a regular in seed financings and Series A rounds, Canaan likes to get in early.

Canaan also likes to make money, which has been helped with 30 exits over the past 3 years. Nine of those were from the biotech portfolio. The limited partners have been good in return; the last fund Canaan raised rang in at $675 million.

Tim Shannon

Tim Shannon, the East Coast general partner and an experienced biotech vet who’s currently working with a slate of companies that includes Arvinas and IDEAYA, is ready to roll.

There are a number of early-stage investors that Canaan likes to work with, he says. Once their companies hit Phase I, says Shannon, they prefer to invest in areas where they know they have a good chance of success. So genetic validation is important for de-risking their work. Anti-infectives have been a hallmark of their work.

But aside from the bigger numbers in Fund XI, adds Shannon, not much changes.

“I think we’ll keep our same philosophy in terms of the kinds of investments we’re targeting,” he says. Then he ticks them off: “Early-stage, transformative, high ownership, high returns.”

You can figure about 40% of the fund will go to healthcare, roughly $360 million. Of that, look for about 75% to go into biopharma after “dialing up a notch” in the industry. That will translate into about 15 new companies — platforms are a key — with about $15 million or so for each. A good rule of thumb is that 60% will become successful exits. Break it down further, he says, and 20% will be fund makers, 20% will contribute, 20% will get by.

What’s not on Canaan’s plate? Common diseases are tough to crack, says Shannon. Diabetes and cardio are two prime examples, where genetic validation is often lacking. PCSK9 could have been a breakthrough, he notes, but it hasn’t fired up yet.

That basic philosophy, translated by a small team of professionals, has paid off consistently for the past 10 years.

In a blog post out today, the VC underscored the value of diversity and collaboration:

It may sound trite, but having a “no assholes policy” works. Ours is a team-oriented, transparent and collaborative culture, with a compensation structure that rewards performance — regardless of a team member’s tenure. Silicon Valley, in particular, has seen the impact of underrepresentation in gut-wrenching ways over the past few weeks. We know that having more points of view at the table makes a difference and we lead by example, with an investment team that is 40% women — including at the General Partner level — and 47% immigrant or first-generation.

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Research Scientist - Immunology
Recursion Pharmaceuticals Salt Lake City, UT
Director of Operations
Atlas Venture Cambridge, MA

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