Canaan unveils $800M fund for fresh wave of biotech bets

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Canaan's fund is close to 20% bigger than its previous investment vehicle

Canaan has put together an $800 million investment fund. The fund positions Canaan to place a fresh round of bets on early-stage biotechs, continuing the strategy that has delivered it paydays as companies including Johnson & Johnson and Teva have snapped up pieces of its portfolio.

In keeping with the strategy it has followed over its 30-year history, Canaan will split the latest fund between tech and biotech. Today, about 40% of Canaan’s cash goes into biotech and medical technology, the Wall Street Journal reports, suggesting its 11th fund could funnel about $320 million into developers of drugs and devices. Given Canaan invests early, that positions plenty of biotechs to land investments from the VC shop.

Canaan’s $800 million fund is close to 20% bigger than its 10th fund. The step up in size resulted from the desire of backers of the previous fund to collectively commit about 50% more and from the interest of new limited partners.  

This level of interest reflects Canaan’s successes—two of its past three vehicles have been among the top VC performers—and a broader trend for big investors to get bigger. Fellow tech-biotech investor New Enterprise Associates set the tone when it raised $3.3 billion for its latest fund. And Canaan has now added to evidence limited partners are clustering behind proven prospects.   

“It feels like people are saying, we want to double down on the winners,” Maha Ibrahim, a managing partner at Canaan, told the WSJ. “It’s a very active environment.”

Canaan has established itself in the winner’s circle through investments in companies such as Civitas Therapeutics, Labrys Biologics and Novira Therapeutics. Acorda Therapeutics bought Civitas for $525 million in cash. Teva bought Labrys for $200 million upfront to join the competitive CGRP migraine race. And J&J bought Novira for an undisclosed sum to acquire its hepatitis B virus.