SEATTLE – With strong support from existing and new limited partners, ARCH Venture Partners in early May wrapped its fourth fund on $175 million, 40% oversubscribed and more than 60% larger than the group’s previous effort.
ARCH Venture Fund IV, focused on seed- and early-stage information technology, life sciences and physical sciences deals, welcomed a host of returning L.P.s, including Ewing Marion Kauffman Foundation, Falcon Technology Partners, John Deere Pension Trust, Allstate Insurance Co., State Farm Mutual Automobile Insurance Co., TIAA/CREF, Wellcome Trust, University of Washington and Tredegar Investments.
“Basically, we could have raised the entire fund from our existing L.P.s,” said Robert Nelson, an ARCH co-founder and managing director in the firm’s Seattle office.
ARCH Venture Fund III closed on $107 million in September 1997 (VCJ, November 1997, page 6).
However, the firm complemented its original investor lineup with a list of new university endowments and institutions, such as Massachusetts Institute of Technology, Howard Hughes Medical Institute, University of Southern California, University of North Carolina at Chapel Hill, Washington University and Frank Russell Capital Inc.
New L.P.s could not be reached for comment by press time.
ARCH concentrates on very early-stage companies, making investments as small as $100,000 and backing them all the way through an initial public offering or sale. “Ninety-five percent of all our investments are in the seed or first venture round,” Mr. Nelson said, adding that the firm’s typical deal size is between $3 million and $7 million dollars.
The firm at press time had inked about six deals since an initial fund close in January, including undisclosed medical device, telecommunications hardware and e-commerce deals. ARCH in June co-invested with Waltham, Mass.- and Seattle-based Polaris Venture Partners in Syncronex Inc., a Bellevue, Wash., developer of directory-guided software that helps businesses manage corporate information, formerly known as InteleSoft.
ARCH IV is expected to fund between 25 and 30 deals. The firm generates most of its deal flow in and around its offices in Seattle, Chicago, New York, Albuquerque, N.M., and a new satellite office in Austin, Texas.
The firm has promoted two staff members to managing directors for its fourth fund: Karen Kerr, who joined ARCH in 1996 as a vice president specializing in information technology and specialty chemicals and materials companies; and Alex Knight, who joined the firm in 1997 as a specialist in Internet software and IT applications.
Mr. Knight does not believe his promotion will significantly affect his day-to-day responsibilities with the firm. “The challenge as always is picking the right ideas and the right teams to back,” he said.
Mr. Knight and Ms. Kerr are ARCH’s fifth and sixth managing directors, joining the firm’s four founders, Steve Lazarus, Keith Crandell, Clint Bybee and Mr. Nelson.