Report: Biotech backer OVP Venture Partners winding down

After a string of losing funds, OVP Venture Partners has decided to throw in the towel on future fundraising and take steps to shut down operations, Xconomy's Luke Timmerman reported. The Kirkland, WA-based venture firm is among the casualties of a sinking venture industry, and its eventual demise means one less source of fresh capital for startups in biotech and other sectors. 

OVP--which has backed life sciences, tech and clean energy outfits during its 29-year history--isn't making new venture bets. It plans to let go half of its managing directors this year and keep a lean crew aboard to manage investments from its 2007 fund of $250 million, Managing Director Gerry Langeler told Timmerman, who broke the news.

This is obviously a blow to the startup scene, particularly the early-stage biotech community in the Northwest region that Timmerman follows so closely. OVP Venture Partners has funded key players in the territory such as Seattle Genetics ($SGEN), which employs hundreds of people and has a new cancer drug on the market. And as VC sources shrivel, the next generation of biotechs face funding challenges to achieve that kind of growth and success.

Not all VCs are as candid as OVP's Langeler was with Timmerman, and there are likely many more groups that haven't gone public with their setbacks. In fact, venture capital fundraising hasn't recovered from the financial calamity of 2008. In the third quarter VC fundraising sank 17% to $5 billion compared with $6 billion in the same period in 2011, according to data from Thomson Reuters and the National Venture Capital Association.

As quoted by Xconomy, Arch Venture Partners' Bob Nelson called the developments at OVP a "huge loss," and added that that firm's members have been key to promoting early-stage investing activity and funding biotechs.

For instance, OVP's Carl Weissman, who is expected to leave the firm this year, started the Seattle-based biotech incubator called the Accelerator. And the firm has helped provide capital to other biotechs such as Allozyne and VLST, Unfortunately, the VC outfit took stakes in other companies such as Complete Genomics that didn't pan out as well as hoped.

- check out Timmerman's scoop