ARCH IV Wraps on $175 Million

With strong support from existing and new limited partners, ARCH Venture Partners in early May wrapped its fourth fund on $175 million, 40% oversubscribed and more than 60% larger than its previous effort.

ARCH Venture Fund IV, focused on seed- and early-stage information technology, life sciences and physical sciences deals, welcomed back a host of returning LPs including Ewing Marion Kauffman Foundation, Falcon Technology Partners, John Deere Pension Trust, Allstate Insurance Co., State Farm Mutual Automobile Insurance Co., TIAA-CREF, Wellcome Trust, University of Washington and Tredegar Investments.

“Basically, we could have raised the entire fund from our existing LPs,” said Robert Nelson, an ARCH co-founder and managing director in the firm’s Seattle office.

ARCH Venture Fund III closed on $107 million in September 1997.

However, the firm complemented its original lineup with a list of new university endowments and institutions, such as Massachusetts Institute of Technology, Howard Hughes Medical Institute, University of Southern California, University of North Carolina at Chapel Hill, the Washington University and Frank Russell Capital Inc.

ARCH concentrates on very early-stage companies, making investments of as little as $100,000 and backing companies through an initial public offering or sale.

“Ninety-five percent of all our investments are in the seed or first venture round,” Nelson said, adding that the firm’s typical deal size is between $3 million and $7 million.

The firm at press time had closed about six deals since the initial close in January, including undisclosed medical device, telecommunications hardware and e-commerce deals. ARCH in June co-invested with Waltham, Mass. and Seattle-based Polaris Venture Partners in Syncronex Inc., a Bellevue, Wash.-based developer of directory-guided software that helps businesses manage their corporate information, formerly known as InteleSoft.

ARCH IV is expected to fund between 25 and 30 deals. The firm generates most of its deal flow in and around the areas where it maintains offices, including Seattle, Chicago, New York, Albuquerque, N.M., and Austin, Texas, its newest satellite office.

The firm has promoted two new managing directors for its fourth fund, Karen Kerr, who joined ARCH in 1996 as a vice president specializing in information technology and specialty chemicals and materials companies, and Alex Knight, who joined the firm in 1997 as a specialist in Internet software and IT applications.

Knight does not believe his promotion will significantly affect his day-to-day responsibilities with the firm. “The challenge as always is picking the right ideas and the right teams to back,” he said.

Knight and Kerr are ARCH’s fifth and sixth managing directors, joining the firm’s four founders Steve Lazarus, Keith Crandell, Clint Bybee and Nelson.