Bob Nelsen will tell you that ARCH Venture Partners is always chasing home runs. The early-stage VC firm has backed some of the most recognizable names in drug development, like Alnylam, bluebird bio and Juno Therapeutics.
He’s sitting in his car in Vermont as he says this — about to head out on a road trip with his family. It’s from the driver’s seat that he reasserts the grand vision that has steered ARCH since its founding in 1986.
“We just try to hit home runs all the time,” Nelsen said Wednesday in an interview with Endpoints News.
Take, for example, AI bio Xaira Therapeutics, which raised $1 billion this spring. It’s one of ARCH’s biggest bets and one of biotech’s largest company launches.
It’s that scale and propensity to only fund and spend time on “cool shit” that lured almost all of ARCH’s limited partners back for a 13th fund of more than $3 billion. It’s slightly larger than the firm’s last fund of $2.97 billion that was revealed in the summer of 2022.
“Because it was a more scarce environment and people were cutting back a lot on other funds, they did a lot of diligence,” Nelsen said. “We saw more in-depth diligence this time than other times, even though it was our existing LP base. Almost everyone came back in, with one or two exceptions who are just rotating out of venture.”
ARCH disclosed the new fund on Thursday, the same day that one of its notable bets in neuroscience may get an FDA approval for treating schizophrenia.
Endpoints first reported in February that ARCH planned to raise $3 billion for the 13th fund. Bain Capital Life Sciences and Flagship Pioneering have also revealed new funds of a similar size in recent weeks.
‘Not slowing down’
Since the late 1980s, ARCH has built itself into one of the biggest risk-takers on next-generation biotechs and life sciences startups. It’s invested in Illumina, bluebird bio, Alnylam, Karuna, Vir and dozens of others. Not all of the bets have ended in success.
In recent years, the firm has placed an emphasis on AI, including Xaira, and mental health through its funding of Neumora and Seaport Therapeutics. It is now playing a key role in a new obesity startup named Metsera, which unveiled its first clinical data this week. It’s also invested heavily in the burgeoning autoimmune field by way of Mirador Therapeutics, a startup founded by ex-Prometheus Biosciences CEO Mark McKenna.
About half of ARCH’s deals are those big bets, and the others are built “the old-fashioned way, a little bit at a time,” Nelsen said.
The firm is comfortable dishing out checks for $50,000 or $350 million, he said. And while ARCH can provide scale that most other biotech VC firms can’t, there’s still “a lot of room in the space for these different types of [funding] models,” managing director Kristina Burow said in a joint interview with Nelsen.
“We’re trying to slow down, but not slowing down because there’s so much cool stuff right now,” Nelsen said. “Every time we think we’re going to slow down, AI happens or some other thing happens, so it’s an amazing environment to start companies, small ones or big ones, and we do both.”
Nelsen said ARCH doesn’t have any plans to invest in other biotech VC firms, like it has done in the past with Curie.Bio. It also has an affiliation with AN Venture Partners, a Tokyo-based VC that is supporting new biotechs based on research out of Japan.
Precision & preventative medicine
ARCH has increasingly focused on precision medicine for disorders and diseases like depression and obesity that affect broad swaths of the population. One such example is Neumora, which is set to have its first batch of Phase 3 data for an oral kappa opioid receptor antagonist in depression by the end of the year.
“I’m very hopeful over the next 10 years, and certainly the life of Fund XIII, that we’ll continue to evolve the precision medicine models so that we can better serve patients with lupus, with rheumatoid arthritis, with metabolic disease, cardiovascular disease,” Burow said. “Those aren’t just giant, lump diseases. We’re going to start to be able to parse different patients into different medicines.”
Burow and Nelsen emphasized the need for more precise drugs and for proactive healthcare.
“Right now we have a very reactive, wasteful healthcare system,” Nelsen said. “That’s the argument I get in with people who say, ‘We need to take the existing healthcare system and offer it to everybody.’ And I’m like, ‘Why would we take a really shitty healthcare system that wastes $3 trillion a year, probably, of the $4 trillion, on a reactive healthcare system instead of reinventing it to be more preventive and more curative and that we don’t need all these big, giant hospitals and a bunch of other stuff?’”
To break up that healthcare system, ARCH will occasionally dabble outside of drug development and invest in other areas if it sees “really cool technology” that addresses a key problem, Nelsen said.
“We started a company to do cognitive care of the elderly in the home,” Nelsen said, referring to a startup called Rippl.
“That’s probably something even Bernie Sanders and I would agree on,” he added.