Fund Profile: Sofinnova Is Halfway There –

Hanging in the industrial chic San Francisco office of Sofinnova Ventures Managing Partner Michael Powell is a 17-foot-long lizard skeleton. Some 85 million years ago, it was the Jaws of the Cretaceous period.

For visitors to Powell’s Union Square digs, the beast is an immediate icebreaker, especially for nervous entrepreneurs. For Powell, the fossil is a reminder that survival isn’t guaranteed-even for something that ruled the earth for 20 million years.

Plenty of venture firms have cause to ponder their odds of survival these days, but Sofinnova Ventures isn’t one of them. In the face of a sharp-toothed business climate, Sofinnova is thriving. It just finished a first close of $100 million on its sixth fund, which has a long-term target of $250 million and will split its investment focus between health sciences and information technology.

Powell and his partners, who started fund-raising in March for SVP VI, are about halfway to the final close. They’re not under any pressure, since the firm has not yet finished investing its $210 million fifth fund, which was raised in 2000. Powell expects to start making deals out of SVP VI next year.

It took Sofinnova just four months to raise its fifth fund, so the fund-raising pace this time around is noticeably slow, but Powell understands that’s just part of the new environment. “Some LPs that put in $10 million in the last fund are investing $2 million or $4 million in this fund,” he says. “It’s not like they like us any less: That’s just all the money they have to invest.”

Returning LPs in the first close include AGF Private Equity, Credit Agricole, Glenmede Trust Company, Swiss Life, VenCap International and Venture Capital Management (Munich). New LPs include Wilshire Private Markets Group and Credit Suisse Germany. Sofinnova’s partners have also committed to put up 4% of the new fund.

In trying to raise SVP VI, Sofinnova is challenged with trying to sell itself to new LPs at a time when LPs have no loyalty and are especially skittish about private equity, Powell says. The Sofinnova pitch is that with valuations as low as they are in IT and dropping in health sciences, now is the perfect time to invest in early-stage companies. The public market turmoil will not have an impact on companies that are ready to go public in four to five years, he says. And while it is impossible to know whether the stock market will be rewarding health sciences or IT companies years from now, as long as the fund has a diversity of investments, the investors are covered.

Sofinnova focuses its investments within IT to components, network/telecom systems and enterprise software. In health sciences, Sofinnova invests in drug startups.

Sofinnova’s roster of portfolio companies includes Actelion, Aviron, InterMune, Millennium Pharmaceuticals, Phone.com, Premisys, Element 14 and Tumbleweed Communications.

“At the beginning of this year I went through about a four-month period where there was nothing. Now, I have like six deals, and they are all doable deals. Of those, I’ll do one or two.”

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