Just as Nick Naclerio and his team at Illumina Ventures set out to raise a second fund backing life sciences startups, Covid-19 hit.
The firm decided to halt fundraising temporarily due to the pandemic, but Naclerio, the firm's founding partner, didn't necessarily mind the interruption. It gave him a chance to do what he loves most — invest in up-and-coming companies.
The independent firm — launched five years ago by biotech tools giant Illumina Inc. (NASDAQ: ILMN) — had already invested in roughly a dozen companies through its first fund of $233 million, including gene therapy startup Encoded Therapeutics Inc. and health care genetics company Genome Medical Inc. What's more, it had collected commitments from returning investors in the first half of last year on the initial funding for the second fund as the pandemic strangled the economy.
Instead of waiting around to finish fundraising, Naclerio's team started deploying some of the capital it had already raised in the second fund. It ultimately raised $325 million for that fund, the firm disclosed Monday. Although Illumina anchors it, the majority of the new fund's capital comes from a collection of limited partners, including the Ireland Strategic Investment Fund.
Illumina Venture's decision to move forward with making investments out of its second fund gave its incoming limited partners a chance to judge not only the first fund's results but also the types of companies the firm planned to target with the new investment vehicle, Naclerio said. The firm has already invested in 10 companies through the new fund and has the capital to add another 10 or so to the portfolio, he said.
Illumina Ventures reactivated its pitches this summer to additional prospective limited partners for the second fund.
The new fund's investments so far include LetsGetChecked, a direct-to-consumer home testing company that pivoted to Covid during the pandemic; antibiotics susceptibility testing company Pattern Bioscience; and Walking Fish Therapeutics, a new venture from Rusty Williams, the founder of Five Prime Therapeutics.
Illumina Venture's funds focus on startups that are capitalizing on advances in genomics, the field that looks at the complete set of genes and genetic material in a living thing. That field has made huge advances since the turn of the century that have started to pay off in the last 18 months in such developments as Moderna Inc.'s Covid vaccine and Grail Inc.'s early cancer detection test. Genomics' advance can also be seen in the emergence of noninvasive prenatal testing, cell therapies and gene therapies.
"In the past five years, it's really starting to blossom," Naclerio said. "It's an exciting time to invest in this space."
Illumina Ventures has primarily concentrated on making $5 million to $10 million investments in Series A and Series B rounds in companies in the genomics and precision health areas that are developing tools, treatments and diagnostic tests or — to a lesser degree — are working on digital health products, Naclerio said. The firm anticipates its portfolio companies will need at least five years before they will be mature enough to be sold or go public.
Its new fund will allow Illumina Ventures to also pursue a few more-competitive Series C investments of roughly the same size, Naclerio said. But most of the firm's initial investments will continue to be earlier-stage bets.
"We know that space really well," he said.
Despite being well into investing the firm's second fund, Naclerio isn't ready to start raising funds yet for a third one.
"We're not in any rush" he said. He continued: "The time spent building companies is a little more of what I really look forward to."
