In search of 'household healthcare brands of the future,' Foresite Capital raises $969M to satiate a tech-heavy appetite
Back in April 2018, just before Foresite Capital unveiled its $668 million Fund IV and a strategy to focus on tech-driven life science bets, one of its portfolio companies quietly made an announcement.
Fount Therapeutics, a drug discovery outfit backed by Foresite and Eshelman Ventures, had raised $22 million in Series A cash to hatch several fledgling spinouts. “The first ‘NewCo,’ Kinnate, will be focused on developing precision oncology treatments,” read a press release.
Foresite would go on to participate in all of Kinnate’s subsequent rounds, ultimately helping scale the kinase inhibitor specialist to a $240 million IPO and covering the full breadth of early-through-late-stage investments that the San Francisco-based firm would like to make with the $969 million it’s raised for its fifth — and largest to date — fund.
Lots have changed in those same three years. Foresite launched its incubator, Foresite Labs, to create new startups harnessing data science in healthcare. It pitched its first SPAC, flipped a biotech to Nasdaq with $216 million in the bank, then assembled $175 million for a second blank check play. Some of its portfolio companies, such as Lyell and Relay, shot to fame as big-name partners bought into their ambitious R&D agenda.
Over the past year they also found time to address the biggest change of it all: Covid-19.
“We believe that many of the household healthcare brands of the future will emerge from this crisis, and Foresite Capital will be there to support them,” said Jim Tananbaum, founder and CEO of Foresite Capital.
That means not just therapeutic developers but also those creating life science tools and diagnostics, added Michael Rome, who’s now one of six managing directors. The Fund V portfolio should comprise 20 to 30 companies in total.
On the therapeutic side, expect to see more examples of incorporating tech in drug discovery and development.
“Those are trends that when they first emerge, they’re really exciting, right, ‘oh we have tech and we have biotech,’” he said. “But when you get both groups of entrepreneurs and scientists speaking the same language, that takes time and working together.”
What is new, perhaps, is the new options for entrepreneurs to access a seemingly endless flow of money — whether in the form of megarounds, IPOs or SPACs, the last of which Rome says simply provides an additional option in the Foresite family.
“So our team is really adept at doing those Series B to crossover rounds, and we view the SPAC in a lot of ways as consolidating a crossover with an IPO,” he said. The merger with Gemini “was a good experience for us and enough to say, you know what? This is a tool that we can make available to every company.”
And if it’s just a little over the top, so be it.
The influx of capital gives all the companies working on new tech, new modalities and new ideas plenty of funding, Rome said — the same kind of money that had bankrolled the development of technologies that the world relied on to fight Covid-19.
“So now I think we’re entering a new cycle,” he said. “Even if things in the capital markets could be choppy for the next 1 or 2 years, we think net this is gonna be a positive trend.”