LPs urge Excel to cap fund, focus on deals

Excel Venture Management recently closed on $125 million for its first independent fund, half of what the health care investor had set out to raise nearly two years earlier.

The Boston-based firm’s limited partners pushed the general partners to quit fund-raising in favor of investing, says Managing Director Juan Enriquez.

Part of the push came from the realization that startup valuations are down, says Enriquez. “The rounds that you are seeing on a whole series of companies ready to go to market are really attractive,” says Enriquez. “We had a sense from the limited partners all this stuff is from the table and we should just do it.”

The firm raised the majority of its Excel Medical Ventures fund—$100 million of the $125 million—between October 2007 and February 2008, according to regulatory filings. Early investors included the John D. and Catherine T. MacArthur Foundation, the Hartford Capital Appreciation Fund, MB Private Equity Partners II and the Meadows Foundation, regulatory filings show. It is a mixture of foundations, family offices and pension funds, says Enriquez.

A 13-month dry spell followed the initial round of funding, filings show.

In March 2009, the firm hired four placement agents—IVP Capital, Ariane Capital Partners, Abshier Webb Donnelly & Baker and Sword Securities Corp.—to sell its fund, offering each firm 2% of whatever commitments it could secure, filings show.

Excel Venture Management managed to collect an additional $25 million after hiring the placement agents.

The firm then set its sights lower, revising its fund-raising target to $200 million from $250 million.

The rounds that you are seeing on a whole series of companies ready to go to market are really attractive. We had a sense from the limited partners all this stuff is from the table and we should just do it.

Juan Enriquez

Excel Venture Management formed in 2007 as a combination of investors from CB Health Ventures and Biotechonomy Ventures. Managing directors include Enriquez, Frederick Blume, Enrico Petrillo and Steven Gullans.

Excel reports that it has already made three investments from the fund, including two this year. It joined with CHL Medical Partners and Noro-Moseley Partners to do a $12 million Series A in May for Dormir Inc., which operates sleep diagnostic centers, according to Thomson Reuters (publisher of VCJ). The following month, Excel joined with F. Hoffman-LaRoche Ltd., Lilly Ventures, Novartis Venture Fund and S.R. One to do a $40 million Series D for Aileron Therapeutics Inc., which is developing cell-permeable peptide technology to help treat cancer, according to Thomson Reuters.—Martha SanchezDEALWATCH: Five investments by Excel Venture ManagementAileron Therapeutics Inc._Cell-permeable peptide technology to treat cancer.

BioTrove Inc._Nanofluidic platforms for drug discovery.

Dormir Inc._Sleep diagnostic centers and services.

Healthcare Management Directions Inc._National hospital management company.

U.S. Genomics Inc._Genomic informatics.

Note: Investments made between August 2007 and June 2009.Source: Thomson Reuters