AVP: sniffing around in the ivory tower
ARCH Venture Partners has school spirit, but not in the sense of pom poms and sophomoric jokes. In comments to Fortune, managing director Steven Lazarus noted: "We've found most of our projects by walking the halls at universities." Indeed, perhaps more than any other venture capital fund, AVP's investments are linked to academia. The origins of ARCH's university connection begin in 1980, when Congress passed laws to encourage more technology transfer from universities and labs to the private sector. Faculty resistance to the programs led to the failure of several high profile funding initiatives. In response to this type of resistance, the University of Chicago set up the ARCH Development Corp.
Led by Steven Lazarus, ARCH Development enlisted dozens of U. Chicago MBA students to work with university scientists, and, in doing so, developed a successful model for cooperation between university departments and VCs. In 1989, ARCH Venture Partners parted ways amicably with University of Chicago. Since then, AVP has taken its model nationwide to schools such as Michigan, Washington, City College of New York, and federally funded laboratories such as Oak Ridge and Argonne National.
Investment strategy: 7 step program
Now with $325 million in investment capital under management, ARCH Venture Partners has "built" over 60 companies in accordance with seven investment principles. First, the company focuses exclusively on seed and early stage ventures. The company will even "invest in an idea described in a laboratory notebook." Second, AVP concentrates on a broader range of ventures in three areas: life sciences, IT, and physical sciences. Third, the firm seeks to maintain a national presence and to provide funding in areas traditionally underserved by the venture capital community. Fourth, AVP is dedicated to its academic focus. Fifth, the company sticks to the model it developed under ARCH Development Corp. Sixth, AVP plays an active role in the development of its portfolio ventures. Finally, the partners collaborate on investments. While many aspects of the firm's investment strategy sound unorthodox, there are rewards. As Fortune notes: "In the off-beat places ARCH looks, commercially promising ideas are harder to find. But making seed investments in them is cheaper, potentially yielding higher returns."
Portfolio: don't forget the planet earth
As a result of its seven-pronged investment strategy, AVP's portfolio distinguishes itself as unusually broad in scope. As noted, investments break down into four areas: Internet/e-commerce, IT, life sciences, and physical sciences. The Internet/e-commerce portfolio includes e-commerce (such as Camden Gifts and GreaterGood.com), infrastructure (such as Appliant and Nimble.com) and information companies (such as cancerfacts.com and Teach.Com). ARCH has invested in four sectors of information technology, including information and e-commerce (as mentioned previously), electronics and hardware (such as Malibu Networks and Xtera Communications), and infrastructure and software (such as NewMonics and Callisto Software). The life sciences portfolio includes firms specializing in biotechnology, informatics, medical devices and pharmaceuticals. Finally, within physical sciences, ARCH has invested in chemicals/materials, electronics/instrumentation, and medical device companies. In this area, Arch has received special recognition for its investment in Bell Geospace, a developer of technology to locate oil and other mineral deposits using gradiometry.
Partners: A collegiate group
AVP is led by a team of six managing directors with Steven Lazarus at the head. Other partners include Keith Crandell (specialty materials, IT, communications), Robert Nelsen (life sciences, Internet software), Clinton Bybee (IT, physical sciences), Karen Kerr (IT, specialty materials / chemicals), and Alex Knight (IT).
AREAS OF INVESTMENT
Internet/E-Commerce; Information Technology; Life Sciences; Physical Sciences
PORTFOLIO INCLUDES; Appliant; Apropos Technology; Bell Geospace; deCode Genetics; Nimble.com; Teach.com; Xcyte Therapies
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