Canaan closes $650m venture fund

The US firm’s eighth fund will continue its 20-year investment strategy, targeting early-stage tech and healthcare companies, with an increased focus on Israeli and Indian deals.

Canaan Partners has closed its eighth fund on $650 million (€441 million), bringing the venture firm’s assets under management to $3 billion.

The Silicon Valley-headquartered firm did not employ a placement agent, and quickly garnered commitments from existing limited partners, general partner Brent Ahrens told PEO.

From initial marketing to final close, he said, “it was a pretty compressed time frame” consisting of “only a couple months”.

Roughly 95 percent of the fund’s investors were existing LPs and are a mix of endowments, pension funds, fund of funds, and others “typical of what you’d see for a US venture fund”, Ahrens said.

Brent Ahrens

Investors in the firm’s predecessor vehicle, which closed on $450 million in April 2005, included Pantheon Ventures, General Motors Investment Management, Abbott Capital Management, the University of California Regent’s Endowment Fund and the State Universities Retirement System of Illinois, according to sister data provider Private Equity Connect.

Fund VIII, like predecessor funds, will target early stage companies in the healthcare and technology sectors, with a particular emphasis on digital media, communications, enterprise, cleantech, biopharmaceutical, medical device and diagnostics industries.  Roughly two-thirds of the fund’s capital will go to tech deals, Ahrens said.

The fund will also increase its international exposure, devoting approximately 25 percent of its capital to deals abroad, up from 10 percent in Fund VII, Ahrens said.

“It’s natural growth,” he added. “We think it’s incumbent upon us to make sure we’re seeing the best deals and [the] best deals can come from anywhere.”

The firm is likely to focus its international efforts in India and Israel, where it has opened offices in the past two to three years. Ahrens said the firm is “mindful” of opportunities in other countries, including China, but at present it has no plans to open additional international offices.
 
Canaan will start investing Fund VIII this year, and Ahrens said prospects are good, despite downward economic trends affecting some industries and private equity players.

“We think the venture end looks pretty good, particularly because we’re focussed on early stage deals,” he said.

Canaan typically takes double-digit ownership stakes in companies. It has backed companies including online dating service Match.com, online advertiser DoubleClick, sold last year to Google for $3.1 billion, and biotech firm Cerexa, sold to Forest Laboratories in 2006 for $480 million in “one of the largest private biotech acquisitions in history”, the firm said.