Atlas Venture: The Next Chapter

Posted October 2nd, 2014 in Atlas Venture

Today we’re excited to announce a new chapter in the Atlas story – we are transitioning from our ‘two franchise, one firm’ diversified venture model into two specialized, independent firms focused on technology and life sciences investing, in order to better capture the growing opportunities in our different ecosystems.

As a result of this firm evolution, and when the transition is complete in 2015, the Atlas Venture brand will be focused exclusively on early stage life science investing.

After 35 years as a diversified fund, this new direction is not a decision we came to lightly; we are very proud of our shared track record and reputation, and of the life science and technology companies we helped create and support throughout the firm’s history.

Like many diversified funds, we’ve repeatedly discussed the merits of having two sector franchises in one firm.  In reality, over the past decade we’ve increasingly moved towards a franchise-based operating model: all initial investment decisions, budgeting, personnel, brand cultivation, and marketing have been owned at the franchise level for the past few fund cycles.  At our annual strategy offsite in the summer of 2013, shortly after closing Fund IX, our tech partners raised the elephant in the room: wouldn’t we both be better positioned to capitalize on the rapidly diverging business models and changing ecosystem dynamics of our respective sectors if we were separate funds?

It became clear to us that evolving towards two independent sector-focused funds was the best configuration going forward for lots of reasons: focused pools of capital with greater critical mass and scale in each franchise, clearer and more nimble governance allowing sector-specific agility and adaptation, and greater clarity around our message and mission with regard to both internal and external constituencies. Since then, we’ve been thoughtful about setting up a framework to achieve this transition without distracting our focus from delivering on the value of our four existing active funds.

So what does this mean for life sciences at Atlas?

Like our tech partners, we are moving forward from a position of strength. Our franchise strategy has been consolidating over the past three funds to a tight focus on early stage, seed-led venture creation around innovative therapeutics, best embodied by four key elements:

  • Discover.  We like to facilitate the creation of new startups by identifying cutting-edge science and helping translate it into potentially transformative medicines; risky, bold science is the only way to secure big impact
  • Derisk.  We believe in a seed-led, “prove it” model to starting companies; we focus on setting a high bar for stringency with a titration of funding around testing the key hypotheses before scaling up a company
  • Shape.  We are a blend of investor-entrepreneurs; we frequently roll-up our sleeves, take initial operating roles, and actively work to efficiently deploy the early equity capital of our startups.
  • Strengthen.  We strive to bring the best of Atlas to bear on our deals, including connecting our startups with the firm’s extensive Pharma network and relationships.  It also involves encouraging unorthodox, creative approaches to engendering greater optionality in our deals, including novel corporate structuring.

This strategy has helped us launch and/or back great companies like Zafgen, Avila, Stromedix, F-star, miRagen, Nimbus, Bicycle, and RaNA in prior funds, and a number of new exciting ones in Fund IX like Synlogic, Padlock, Ataxion, Spero, and many others (see link here to our seed portfolio).  In short, it’s a strategy that has kept us quite busy over the past three years, where we’ve:

  • Delivered four IPOs, five M&A exits, and three additional structured “built-to-buy” deals
  • Co-founded and/or helped launch 20 new seed-stage startups, with the vast majority incubated at Atlas’ offices and focused on first-in-class breakthrough medicines
  • Raised over $600M in syndicated financings into our biotech portfolio, including $200M in new financings for Atlas-led “seed-to-A” graduates in our new Fund IX portfolio (2013), and over $400M in financings for existing portfolio companies

People matter, and the new partnership additions of Jason Rhodes (here) and Dave Grayzel (here) in 2014 are a testimony to our franchise’s momentum in the marketplace.  They both greatly strengthen our footprint and capabilities – and certainly raise the IQ (and EQ) of the group.  Further, our momentum has been accomplished in large part due to our exceptional Entrepreneur-in-Residence (EIR) brain trust: over a dozen experienced and talented executives from R&D and operational roles, these EIRs have been crucial to the Atlas strategy of creating and launching new startups. Lastly, we’re proud to say we’ve recruited over thirty C-level executives across the portfolio since early 2013. Venture capital investing starts and ends with great people.

We’re truly excited about the future of Atlas and opening a new chapter in our story, and that enthusiasm extends to our technology partners: they are an exceptional tech franchise and have been both instrumental to and tightly integrated with the seed-stage tech renaissance in Boston. We are looking forward to working closely with them to maximize the value of our existing Atlas funds, while helping each other launch successful independent franchises over the coming year – and to continuing our respective missions to support transformative innovations and visionary entrepreneurs.

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