Arch, a prolific biotech creator, is raising $3B for startup investing

Arch Venture Partners, one of the biotechnology sector’s most prolific company creators, is raising a new $3 billion fund, according to a regulatory filing.

The fund, which would be Arch’s 13th, is being put together less than two years after the firm closed a similar-sized $3 billion raise that was its largest to date. Plans were outlined in a filing Arch made this week with the Securities and Exchange Commission. The form was signed by Arch managing director and CFO Mark McDonnell.

Arch declined to comment on the filing.

Arch’s planned raise comes at a time of tenuous optimism in biotech. An uptick in dealmaking and the prospect of interest rate cuts in 2024 has fueled a recent rally in the sector’s stocks. There have been signs of life for initial public offerings, too, with four biotechs raising about $800 million combined over the past 10 days. More are set to follow.

Arch isn’t alone in raising investment: A number of venture firms closed new funds in the second half of last year, including OrbiMed, Westlake Village Biopartners, Bioluminesence Ventures, Pivotal Life Sciences, Abingworth and Yosemite. Combined, those six funds alone have more than $6 billion to deploy into new investments.

Yet the good signs could be fleeting. The Federal Reserve this week indicated it won’t cut rates just yet. An election year and geopolitical tumult could bring further financial uncertainty. Funding for biotech startups has also fallen from record highs as investors have become more selective and turned toward safer bets. Many startups and publicly traded biotechs are still struggling to survive.

“I’d put myself in the ‘cautiously optimistic’” group,” said Arch managing director Kristina Burow, in an interview last month. “The pace of innovation is sky high,” she said, but added that “2024 is probably going to be a roller coaster.”

Still, even against that backdrop, Arch has placed more bets than most. A recent report by investment bank Oppenheimer & Co. found the firm put $2.1 billion into companies last year, the third most of any biotech investor.

In a January report, meanwhile, HSBC’s Innovation banking division found Arch participated in more deals, 11, than any other biotech venture focused on early-stage investments. Those deals included Neumora Therapeutics, a brain drug developer that went public last year, and RNA drugmaker Orbital Therapeutics, which raised one of 2023’s largest funding rounds.

“2023 was a very difficult year. The industry really scrambled,” said Burow, who’s been at Arch for more than two decades. But “our strategy hasn’t changed in the years I’ve been around.”

Founded in 1986, Arch was an original investor in DNA sequencing giant Illumina. Over the years, the firm has become one of biotech’s most prolific early-stage investors, often participating in cutting-edge areas of science, like RNA interference with Alnylam Pharmaceuticals or genetic medicine with Juno Therapeutics and Bluebird Bio. More recently, the firm has invested in gene editing startups like Beam Therapeutics and Tome Biosciences.

While Burow is concerned about the broader economy, she’s still expecting money to flow into biotech in 2024, just at a slower pace than during the sector’s peak.

“This my third downturn. It’s not an unprecedented series of events,” she said. Though there is “some economic instability, you have drugs and innovation coming from biotech and reaching patients at an accelerated pace with, I think, bigger impact.”

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