Portfolio Profiles –

ARCH Venture Partners

CHICAGO – ARCH Venture Partners invests in seed- to early-stage information technology, life sciences and physical sciences companies throughout the United States.

The firm’s latest vehicle, the $175 million ARCH Venture Fund IV, closed in June, and about one-third of the fund has been invested or committed to some 20 companies, said Steven Lazarus, a managing director at ARCH. Targeted at $125 million, the fund was “vastly oversubscribed,” said Karen Kerr, a managing director at the firm.

The vehicle will back about 25 to 30 companies, with typical investments ranging from $3 million to $7 million over several rounds of financing. ARCH tends to back early-stage companies and continues to invest in subsequent rounds until a liquidity event takes place.

The firm’s previous vehicle, the $107 million ARCH Venture Fund III, which closed in September 1997, is almost completely invested in 25 companies (VCJ, November 1997, page 6).

ARCH, which raised its first fund in 1989, has a total of $325 million under management and has participated in the initial round of venture financings for more than 60 companies.

“We’re seeing the best deal flow we’ve ever seen,” said Robert Nelson, a managing director at the firm.

ARCH’s limited partners for Fund IV included financial institutions, major corporations, endowments, pension funds and high-net-worth individuals. New limited partners include 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.

ARCH’s six managing directors are Alex Knight, Keith Crandell, Clinton Bybee, Kerr, Lazarus and Nelson. The firm is interested in hiring additional venture partners and CEO’s in-residence.

The following is a sample of ARCH portfolio companies:

Apropos Technology Inc. (Oakbrook Terrace, Ill.) develops and markets Web and call-center management software.

Co-investors included William Blair Capital Partners, Allstate Insurance Co. and The Ohio Partners.

Birthday Express.com Inc. (Kirkland, Wash.) is an on-line supplier of party goods to more than 500,000 customers throughout the U.S. and abroad.

Sigma Partners and ATV Associates were co-investors.

Caliper Technologies Corp. (Mountain View, Calif.) is a “lab on a chip” company that offers products for research labs and the pharmaceutical industry.

Co-investors included Avalon Medical Partners, Venrock Associates, CW Ventures, Hoffman-LaRoche Inc., Lombard Odier, State Farm, Dow Chemical Co. and MPM Capital.

Camdens Gifts Inc. (White Plains, N.Y.) is an e-commerce company that offers a selection of gifts for business occasions.

Europ@Web, Viridian Capital, Garage.com, Sands Brothers & Co. Ltd., Staenberg Capital, Constantin Partners and The Angels Forum were co-investors.

Cancerfacts.com (Seattle) is an on-line provider of support services for cancer patients.

Cardinal Health Partners was a co-investor.

Extreme Devices Inc. (Austin, Texas) develops vacuum micro-electronic devices.

Austin Ventures was a co-investor.

Illumina Inc. (San Diego, Calif.) develops novel information-dense biological and chemical sensing systems to meet the needs of a range of emerging markets including genomics, proteomics and optical olfaction.

Co-investors included CW Ventures, Venrock Associates and Tredegar Investments.

ImproveNet Inc. (Redwood City, Calif.) is an Internet home improvement portal that links homeowners with contractors, architects and designers.

Co-investors included Alta Partners, Allstate Insurance Co., August Capital and Zero Stage Capital.

Malibu Networks Inc. (Calabasas, Calif.) develops and markets fixed broadband wireless IP products.

Co-investors included Polaris Venture Partners and CommVest.

New Era of Networks Inc. (Englewood, Colo.) develops and markets business integration software.

Venrock Associates and Merrill Lynch & Co. Inc. were co-investors.

Quarry Technologies (Burlington, Mass.) is a developer and marketer of Wide Area Network edge-routing equipment.

Co-investors included Walden Ventures and GTE Labs.

Xtera Communications Inc. (Sunnyvale, Calif.) is a developer of optical amplifiers and systems for broadband telecommunications applications.

Enterprise Development Fund was a co-investor.

ARCH Venture Partners is located at 8725 W. Higgins Road, Suite 290, Chicago, Ill. 60631. tel: (773) 380-6600, fax: (773) 380-6606. The firm’s Web site may be found at www.archventure.com.