Article preview from Start-Up - June, 2012
Secondary firms such as Saints, which is raising a $300 million seventh fund, step in to acquire stakes from other VCs at the end of their funds’ lifespans. With a biotech VC shakeout in progress, the secondaries are banking on more opportunities soon.
Article preview from Start-Up - June, 2012
Between the blockbusters and failures in a life sciences investor’s portfolio lie another set of start-ups: the how-long-can-we-wait companies, motoring along with potentially valuable assets but not able to produce an exit via IPO or trade sale. As those companies age, their shareholders feel growing pressure from limited partners to deliver returns.
That’s where secondary investors enter the picture. Firms such as Saints Capital buy into VCs’ aging portfolios, often at a discount, providing returns to the VC and capturing late-stage upside with reduced risk for themselves. Amid a weak IPO market and cautious strategic buyers, secondary firms look to play an increasing role in the growth of private biotech start-ups.
San Francisco, CA-based Saints recently completed the first close of a planned $300 million seventh fund. It closed a sixth fund of similar size nearly five years ago and still has $60 million to invest from it. Moreover, the firm’s limited partners typically match each dollar it invests with a dollar of their own, effectively giving Saints and its LPs $600 million worth of buying power from the new fund. As much as 40% of that money will be earmarked for life sciences investments, according to Saints managing director Scott Halstead; the rest goes to tech sectors such as software and the Internet.
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