ARCH Venture Partners, an American biotech investment institution, announced the completion of over $3 billion in ARCH Venture Fund XIII fundraising, aimed at supporting the establishment and development of early-stage biotech companies. The 13th fund was established following the 12th fund of $2.975 billion announced in June 2022. "After 38 years, ARCH's investment philosophy remains the same: we bet on great science and great teams to build breakthrough companies," said Robert Nelsen, co-founder and managing director of ARCH. "We believe that artificial intelligence and new data-driven insights into biology will help build a more preventive, curative and equitable healthcare system." "ARCH has a long history of identifying the top forward-looking trends in life science R&D and individuals who drive truly groundbreaking scientific hypotheses," said Keith Crandell, co-founder and managing director of ARCH. "We are very excited about the pace of innovation and efforts to understand diseases at a deeper level." In February of this year, ARCH announced the completion of the 13th new fund of up to $3 billion, less than two years after the company completed its largest financing of similar size to date, $3 billion. So far, the 13th fund has invested in a number of biotechnology companies including Xaira Therapeutics, Metsera, ArsenalBio and Mirador Therapeutics. Among them, Xaira Therapeutics received a huge $1 billion financing from Fund XIII in April. This is also the highest amount of financing in the biopharmaceutical field so far this year. When artificial intelligence is a transformative technology, ARCH believes that there is room for imagination in this field to create the next Genentech or Regeneron, and Xaira is highly expected.

Xaira was founded in May 2023 and is still in stealth mode. Xaira was co-founded by two outstanding venture capital experts in the biotechnology field, Bob Nelsen of ARCH venturePartners and Vik Bajaj of Foresite Labs, and is committed to applying AI to three areas: discovering new biology, designing molecules, and conducting clinical trials. Drug development is a job full of failures. New generative AI methods, such as designing complex molecules from scratch and finding new targets, can shorten the time by months or even years. In order to better understand biology and find new drug targets, Xaira introduced teams and technologies from gene sequencing giant Illumina and biotechnology startup Interline Therapeutics, focusing on proteomics, that is, how proteins change in health and disease.

With the completion of the fundraising of the 13th fund, ARCH has raised 13 funds so far, with a total management scale of US$12.3 billion. Judging from ARCH's investment projects and the focus of the new fund, ARCH is very optimistic about the future potential of AI pharmaceuticals and has made a major bet on a number of AI pharmaceutical companies. In addition to Xaira, which set a record for the amount of biopharmaceutical financing this year, ARCH has also invested in several AI+ new drug research and development unicorns. For example, insitro, a star AI pharmaceutical company, was founded by Daphne Koller, a genius female scientist in artificial intelligence. It has raised more than $600 million. ARCH is one of the company's founding investors and has participated in all financing so far.

In addition, Generate: Biomedicines, an AI+ protein therapy startup with a cumulative financing of more than $700 million, is also supported by ARCH. Generate was founded in 2018 and aims to use artificial intelligence technology to understand the relationship between protein sequence, structure and its function, so as to design new proteins from scratch that have never been seen before. Generate's proprietary generative platform can generate, build, measure and learn in a continuous cycle, which can greatly improve the speed of identifying and verifying targets and therapeutic drugs. This will increase the specificity of the generated protein's engagement targets and reduce the time and cost of identifying and developing clinical candidate therapies. At present, ARCH has invested in nearly 10 AI pharmaceutical companies, including Dewpoint Therapeutics (AI+biocondensates); Erasca (AI+oncology precision medicine); Neumora Therapeutics (AI+brain science), Vilya (AI+macrocyclic peptide molecules), LifeMine Therapeutics (AI+fungal drug discovery), etc., of which Erasca and Neumora Therapeutics have successfully IPOed and gained recognition from the capital market.

As a well-known and established early-stage investment institution in the field of life sciences in the United States, ARCH has never been stingy in investing in top scientists and technology platforms. ARCH Venture was founded in 1986 by Steven Lazarus and Robert Nelson, Keith Crandell and Clint Bybee at the University of Chicago, and launched its first fund, ARCH Venture Fund I, in 1989 with a fund size of US$9 million. The fund was initially positioned to assist the University of Chicago in the transformation of scientific and technological achievements. Among the 12 startups it invested in, 4 achieved IPOs and 4 were acquired.

In 1992, the founding team established ARCH Venture Partners, a market-oriented fund management entity, independently of the University of Chicago, and completed the launch of the second fund the following year. This fund was very successful, investing in 22 companies in total, 6 of which continued the companies invested by the first fund. It was also during this period that they gradually realized that ARCH was becoming a seed fund and early venture capital fund. At the same time, the fund also invested in its own companies in the later stage, which not only reduced the overall risk level of the investment portfolio, but also shortened the time to recover the investment.

The success of the second fund also made ARCH famous, and its investment scope moved from laboratories to companies, opening the way to invest in new technology startups. Since then, ARCH has raised a new fund in a three-year cycle. An industry analysis has summarized ARCH's investment style. First, it prefers platform-based technology and general technology that can be used in multiple fields. Second, it incubates companies and participates deeply in post-investment. Third, it is bold to make progress and dare to take risks.

This investment style can be seen from its representative investment projects. ARCH is the original investor of DNA sequencing giant Illumina. Over the years, it has invested in many leading companies in the biotechnology field, including RNA drug leader Alnylam, cell therapy leader Juno, autoimmune drug development company Receptos, antibody drug company Vir, gene editing leader Beam, and DNA synthesis leader twist, etc. It has also spent a lot of money to acquire global leading biotechnology companies such as Grail, the leader in cancer early screening, and Vividion, the leader in chemical proteomics. Although ARCH also has a large number of mid- and late-stage project investments, ARCH is earlier than other funds in the early investment field. ARCH's investment strategy is to evaluate opportunities and science first, and then consider how to start a company. Different stages of technology maturity and different industry development situations require different company establishment times and time and energy to invest.

Among the many newcomers invested by ARCH, many started in the academic circle. ARCH allows scientists to take up management positions while developing new technologies. They believe that having knowledge of the pharmaceutical industry and working in the academic circle has great advantages. ARCH's judgment criteria are mainly novel technology, target market size and team strength. Through early capital investment, ARCH will continue to make additional investments after assisting the founding team to verify the reliability of the mechanism and the drugability of the target, and help the company complete team building and pipeline design until the company is pushed into the public capital market.

For the CEO shortage problem often encountered by professors in entrepreneurship, ARCH chooses to work closely with the industry to solve it. ARCH usually invites senior industry experts from different directions to become ARCH's Venture Partners or consultants to jointly participate in the establishment and project evaluation of start-ups. When the project develops to the right time, willing experts may change their identities to CEOs to assist in the implementation of the project. Investment in the pharmaceutical field often presents the significant characteristics of high risk and high return, especially for investment in early projects. ARCH has broadened the way for scientific research results to enter the market through unique evaluation criteria and investment concepts. This method has also had a far-reaching impact on the entire venture capital industry.

In addition to ARCH, many pharmaceutical venture capitals have successfully obtained new funds this year. In July, Flagship Pioneering raised up to $3.6 billion in funds and is expected to support 25 companies. In June, Foresite Capital disclosed a $900 million fund. In addition, Sands Capital raised $555 million in May, Scion Life Sciences raised $310 million in February, and TCGX announced that it had received $1 billion in new funds in January.

At the same time, domestic investment in the biopharmaceutical field is gradually "coming out of the trough". Among them, in January, Huimei Capital officially announced the completion of the final closing of a new RMB venture capital fund with a total scale of 1.5 billion yuan; in March, Sequoia China successfully raised 18 billion yuan in funds, which is also the largest fundraising by Chinese venture capital institutions in the past year; in June, Decheng Capital disclosed that the fifth fund plans to raise $700 million; in July, LongRiver Jiangyuan Investment announced that it has completed the fundraising of the first US dollar fund with a scale of nearly $400 million, and so on. Signs of recovery seem to be emerging, and even A-shares have shown an upward trend. If this momentum of recovery can continue and get more responses, it may not be a dawn in the economic winter.

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