Arch raises $1.5B to back early-stage biotechs through accelerating 'healthcare revolution'

Arch Venture Partners has raised $1.5 billion to place another round of bets on early-stage biotechs. The VC shop, which lists Alnylam and Juno among its previous investments, raised the money across two funds that will deploy cash to help biotechs get started and grow into more established players.

Despite the COVID-19 pandemic disrupting work at biotechs around the world, Arch has been able to raise close to $1.5 billion across its Venture Fund X and Venture Fund X Overage. The amount is around one-third more than Arch raised for its ninth pair of funds in 2016 and almost three times as much as it reeled in for their predecessors in 2014.

Arch will invest the money in an environment that differs from that it encountered in 2014 and 2016. Yet, while many assessments of the midterm effects of the SARS-CoV-2 pandemic understandably skew toward the negative, Arch sees signs that some good may come out of the tragedy.

“The healthcare revolution will be accelerated by the changes that are happening now and we are excited to continue to invest aggressively in risk takers doing truly transformational science,” Arch co-founder and managing director Robert Nelsen said in a statement. 

Nelsen expressed similar sentiments in blunter terms on Twitter, telling his followers that “all the bullshit rules that delayed progress—practicing across state lines, telemedicine, reimbursement, diagnostics, mental health care online....are all gone or going. They will never come back. Total revolution.”

While the world and amount of money available to Arch have changed since it raised its ninth set of funds, the VC shop will continue to follow the same broad playbook. That means Arch will still work with scientists to help turn promising early-stage science into well-financed biotechs and continue to support them as they grow, handing out sums ranging from $50,000 to hundreds of millions of dollars depending on the needs of the project.

Venture Fund X Overage will typically handle the larger investments. That fund will commit larger sums to fewer companies, thereby enabling Arch to retain a sizable stake in the biotechs it backs as they grow and start requiring more money to support their operations. Arch used its eighth overage fund to invest in companies including Homology Medicines, Sienna Biopharmaceuticals and Unity Biotechnology.

Based on Securities and Exchange Commission filings submitted by Arch last year, the $1.5 billion raised for its 10th set of investment vehicles is likely to be fairly evenly split between the two funds. At the time of the filings, each fund had raised close to $636 million, with more still to come. 

The timings of the filings, which date back to October, show that Arch began raising the money well before COVID-19 disrupted working life in the U.S. But there are also signs the VC shop is continuing to get things done in the face of the disruption, with the disclosure of the 10th set of funds coming the day after Aspen Neuroscience revealed it has raised $70 million from investors including Arch. Nelsen said portfolio companies will disclose close to $500 million in new financings within weeks.