Bob Nelsen on Arch-led megarounds: 'We want the IPO book in the seed round'

The three highest private biotech financings so far in 2024 totaled nearly $1.7 billion, led by Xaira Therapeutics’ $1 billion unveiling last week. One constant behind all three companies: Arch Venture Partners.

The formidable venture firm led each raise, which included Mirador Therapeutics and obesity-focused Metsera. Bob Nelsen, the lean, mean, sometimes-swearing machine at the firm's helm says a billion dollars is just the beginning for some. 

“We want the IPO book in the seed round,” he said in an interview. “We want to know who wants to build something big and stay with it.” Nelsen added that sometimes, “It's better to get the right people in and to have people that essentially write bigger checks.” 

In the case of Xaira, Nelsen said investors were cognizant that $1 billion would likely be just the start if the company can realize its lofty dream of revolutionizing drug discovery. This meant building a team that could “put another billion or more in.” Xaira’s other backers include Forsite Labs, F-Prime Capital, Sequoia Capital and Lux Capital, among others. 

“It's gonna take billions, not a billion, to make the ultimate company that rethinks the system,” Nelsen said, neatly summarizing his larger thesis about investing. 

In the case of Xaira, every dollar isn’t accounted for, and that’s on purpose. Nelsen conceded that forecasting spending this early is a largely fruitless endeavor. But the company led by ex-Stanford president and former Genentech scientific chief Marc Tessier-Lavigne, Ph.D., is not without a plan, working on targets that have previously been too difficult to drug. 

Arch Venture Partners
Bob Nelsen

Xaira was co-founded by David Baker, Ph.D., a scientist at the forefront of AI’s biology application whose University of Washington lab is advancing software that builds and designs proteins. Nelsen said the goal is to develop predictive software so precise that it could design drugs for diseases described by patients or a company. That is likely contingent on just how unified a model drug developers can build—or how much data they’re willing to share to collaborate on said models. 

The last billion(s)-dollar bet Nelsen and Arch threw their weight behind was Altos Labs, the secretive cell restoration biotech that launched with $3 billion in 2022. Billionaires Yuri Milner and Jeff Bezos were reportedly among the company’s backers. Two years later, the company has been relatively mum on its progress, though the science centers on epigenetic reprogramming. But according to Nelsen, all is going exactly as planned.

“We're super happy with their progress,” he said. “I would say, significantly faster than I expected.” 

So where to next? Arch recently backed Seaport Therapeutics’ $100 million launch, a neuroscience biotech founded and led by the same people who started Karuna Therapeutics. Nelsen said the biotech industry is just at the beginning of a mental health revolution, with more therapies spawning from scientific advancements targeting pathways old and new. 

Psychedelics are included, a field that Nelsen said Arch has an interest in. He said that there’s more scientific rigor needed to really dig into how psychedelics work but that the mechanisms of action are intriguing. Zooming into the future, Nelsen believes mental healthcare will be more based around moods or reactions, like happiness and agitation.

“I think that will be an interesting more preventive, or more proactive, form of treating people with drugs that are not necessarily for a specific condition,” he said.