If New York Tribune Founder and Editor Horace Greeley were to advise venture capitalists instead of young American pioneers, he might say to new venture capital funds, “Go Midwest, young venture fund. Go Midwest.”
The partners putting together the latest Charter Venture Capital affiliated fund are doing just that.
The Palo Alto, Calif.-based venture capital firm announced in late February it closed on $30 million for Charter Life Sciences, a new fund dedicated to investing in early-stage medical devices, biotech and specialty pharmaceuticals. The fund, which has a target of $100 million, will also have a special focus on cancer, cardiology and women’s health. It will operate in Palo Alto and Cincinnati, which marks the first time that Charter has concentrated on the Midwest for investment.
Palo Alto-based asset management firm C.M. Capital Corp. committed the first $30 million on behalf of a client. The fund also has several institutional investors lined up for its next closing, which the firm expects to hold during the second quarter.
Tri-State Growth Capital Fund, managed by Cincinnati-based Fort Washington Capital Partners, has committed to participate in the next closing.
The managing directors of the fund are Barr Dolan, Charter Ventures’ founding partner; Dr. Donald Harrison, an advisor to Charter and former senior vice president and provost for health affairs at the University of Cincinnati Medical Center; Fred Schwarzer, former chairman and CEO of two Charter portfolio companies; and Dr. Nelson Teng, chief of gynecological oncology at Stanford University School of Medicine.
One managing director, Harrison, is based in Cincinnati. Dolan has worked with each of the other partners on venture-backed companies in the past.
The partners say that they are getting a good reception so far from potential limited partners despite the fact that some LPs are reporting that they are over-allocated to VC or life science funds.
“We are finding some who are not quite sure about their allocation; they’re not quite sure about the valuations,” Schwarzer says. “We’ve gone through a lot of changes in valuation over the course of the last two or three years.”
Schwarzer adds that some investors say they are starting to wonder if there isn’t enough life science funds already setup.
Charter’s fund will make initial investments between $500,000 and $2 million and put a total of $4 million to $8 million in each portfolio company.
The fund’s focus will be split equally between medical device companies and biotech and specialty pharmaceutical companies. Schwarzer says that the fund has a lot of deals in the pipeline and plans to close its first one soon.