SAN FRANCISCO – CMEA Ventures expects to hold a final close on its newest vehicle, the $125 million-targeted CMEA Ventures Life Sciences 2000 fund sometime during the first quarter of this year, said Thomas Baruch, a general partner at the firm.
The vehicle has already surpassed its targeted amount, Baruch said, noting the fund has raised a little over $140 million to date. “There is no question in my mind this fund will go to $175 million in size, which is where it is capped,” he said.
The vehicle was launched in October and held an initial close at the end of October. A second close took place at the end of November, he said.
Like its predecessor fund, 1998’s $40 million CMEA Ventures Life Sciences fund, the new vehicle will concentrate on funding companies developing research tools and systems intending to streamline the drug delivery process, Baruch said. “We look for companies that have platform technologies – a suite of new tools with broad applications, as opposed to companies that are trying to commercialize a specific drug,” he explained.
The new vehicle will back approximately 30 companies in life sciences industries, with an average investment size ranging between $5 million and $8 million over the life of the deal, he added. The fund will back both early- and late-stage companies evenly, Baruch said. CMEA is committed to backing early-stage companies, Baruch said, noting the effort involved in mentoring a developing company is tremendous and takes a significant amount of time. “So we combine this with opportunistic late-stage investing which is, in comparison, less time-intensive,” he said.
The fund will be invested primarily on the West Coast, though CMEA has made investments throughout the country and will consider deals in other areas, Baruch said. The vehicle has a 78%/22% carried interest structure and a 2% management fee. CMEA will put up 1% of the fund’s total capital, he added.
Approximately 95% of the Life Sciences 2000 fund’s capital will come from existing limited partners, Baruch said.
The firm’s existing LPs include Dow Chemical Corp. and Keyport Life Insurance Co. and a number of high-net-worth individuals, he added. The firm has tried to diversify its investor base to include one-third institutional investors, one-third corporate investors and one-third high-net-worth individuals, he said. “This approach provides us with more points for leverage in aiding our companies,” he noted.
In February 2000, CMEA held a final close on its most recent information technology dedicated vehicle, the $180 million CMEA Ventures Information Technology II fund, Baruch said.
CMEA raises separate IT and life sciences vehicles because the firm believes it is important to have dedicated partner groups each investing their own specific funds. “We don’t think a large group all working on the same fund gives the same depth of attention of a focused group,” he explained. However, the firm does have a few investment professionals who work across both funds, because CMEA believes there will be opportunities arising between the IT and life sciences industries, he added.
To date the CMEA IT II fund has backed approximately 10 companies and is about one-quarter to one-third invested, Baruch said. The Life Sciences 2000 fund has done three deals for $10 million so far, he added.