Wednesday, January 11, 2012

Flagship Ventures $270M fourth VC fund, biggest yet

By Kyle Alspach, Boston Business Journal

Cambridge’s Flagship Ventures said Wednesday it’s closed its fourth venture capital fund — its largest to date — at $270 million.

Flagship — focused on investing in early stage life sciences, energy and materials sciences companies — had initially targeted the fund at $250 million. But in the announcement Wednesday, Flagship CEO Noubar Afeyan said the firm was able to bring in additional funds thanks to several new limited partners and strong support from existing LPs. A report from VentureWire in the summer of 2010 pegged the fund at $300 million.

Founded in 2000, Flagship Ventures has aimed to stand out among area VCs for its Venture Labs, which incubates companies started from scratch in ultra-secrecy. Among the Flagship-founded companies are Waltham-based BG Medicine Inc., a developer of cardiac diagnostic tests that went public last February; Joule Unlimited Inc. of Cambridge, which says it has developed a novel method for creating renewable fuels through combining sunlight, C02, water and microorganisms; and Affinnova Inc., which applies genetic algorithms to the world of consumer product marketing.

The firm was founded by Afeyan and Ed Kania, who serves as chairman. Flagship’s previous fund closed in 2007 at $260.5 million, according to an SEC filing. The firm had reported in November that it had raised $136.7 million toward the current fund.

In an interview last summer, Afeyan said Flagship — and especially Venture Labs — has been “an experiment in institutional entrepreneurship” from the start. What that has meant is that Flagship doesn’t operate like the vast majority of VCs, which support entrepreneurs who come up with an idea and then seek funding. The majority of the ideas for the Venture Labs companies are conceived by Afeyan and the firm’s other partners, most of whom are also scientists and inventors.

“We tend to start what we call proto-companies,” he said. “These are not companies, but they are, if you will, hypotheses that we are testing.”