Financing Round Research Articles

Compass launches with $132 million

Compass Therapeutics has raised a total of $132 million in its first formal round of financing. The Cambridge, Mass.-based biotech firm was formed in 2014 to capitalize on a bispecific antibody screening platform that allows it to probe the activity of combinations of immune cells. It also boasts a discovery platform that swiftly yields therapeutics—either monoclonal or bispecific antibodies. Compass has more than 70 employees and expects to begin clinical studies of its most advanced drug candidate, an antibody against an undisclosed immuno-oncology target, in the first half of 2019.

Competition, Rating Shopping and Yield Spread: Evidence from Chinese Enterprise Bond Market

Booming markets are a time of high returns and high risk, including the risk of misrepresenting the quality of an investment. The Chinese bond market has recently been going through a boom period, and we document evidence of ratings shopping in the enterprise bond market. Our evidence shows that some firms get higher credit ratings than they should, resulting in a lower cost of debt financing. We also find that investors become aware of this after multiple financing rounds and punish all clients of the ratings inflators, resulting in a lemons market in bonds for certain firms.

NuMat raises funds to advance MOFs

NuMat Technologies, a developer of products based on metal-organic frameworks, has completed a $12.4 million financing round, bringing its fundraising to date to about $20 million. Participants included OS Fund, Osage University Partners, and Tin Shed Ventures, Patagonia’s investment arm. NuMat, which was one of C&EN’s 10 Start-Ups to Watch in 2016, says it will use the funds to boost manufacturing and expand high-throughput experimentation.

The dynamics of switching between governmental and independent venture capitalists: theory and evidence

In this paper, we study the switching dynamics between independent VCs (IVCs) and governmental VCs (GVCs) by means of a theoretical model and an empirical analysis. By assuming that (i) VCs of higher reputation are more selective in terms of venture quality and (ii) IVCs are mainly motivated by the desire to maximize the economic return of a venture, while GVCs also care about the social repercussions, we have obtained two results. First, low economic return ventures are more likely to be adopted by a new lead GVC that is more reputable than the IVC that drops them. Second, when switches from a GVC to an IVC are considered, a low economic return increases the likelihood that the venture dropped by the incumbent GVC will be re-matched with a less-reputable IVC. Our theoretical predictions match evidence that has emerged from a sample of 9610 rounds of VC financing in the USA between 1998 and 2010. Overall, our analysis sheds light on the puzzling evidence that GVCs seem to be more inclined to drop low return ventures than IVCs, but, at the same time, they are also more willing to adopt them.

Cerahelix secures US$2mn in Series B funding

Cerahelix has closed a US$2 million Series B financing round led by PureTerra Ventures, an investment firm focused on disruptive water technologies with a positive social impact.

Hydrogenious strategic China partnership with Broad-Ocean Motor

German-based Hydrogenious Technologies has entered into a collaboration agreement with Zhongshan Broad-Ocean Motor Co Ltd in China, as part of the successful third round of financing in the Liquid Organic Hydrogen Carrier (LOHC) based hydrogen storage specialist. The new strategic partnership will accelerate production of Hydrogenious’ LOHC hydrogen refueling stations, and establish a large-scale hydrogen mobility infrastructure in China starting in 2019.

Gain or pain? New evidence on mixed syndication between governmental and private venture capital firms in China

I investigate the performance of mixed syndication involving both governmental and private venture capital firms (GVCs and PVCs) in the context of China. Using the data on the investments in start-ups between 1995 and 2011, I find that start-ups backed by mixed syndication in their initial financing round are less likely to survive to the next round to obtain refinancing, compared to those backed by syndication solely among PVCs. I present evidence consistent with two possible explanations of the underperformance of firms backed by mixed syndication: a potentially lower criterion of selecting portfolio companies when led by PVCs and less complementary resources but higher coordination cost in mixed syndication. The empirical results continue to hold when using instrumental variables, propensity score matching analysis and the quasi-maximum likelihood estimation method for mitigating the potential selection bias and endogeneity problems.

Tmunity is formed for cellular therapies

Tmunity Therapeutics, a biotech firm cofounded by cellular therapy pioneer Carl June, has raised $100 million in its first formal round of financing. Ping An Ventures, Gilead Sciences, and the Parker Institute for Cancer Immunotherapy are among the investors in Tmunity, which was launched in 2016 by June and other University of Pennsylvania researchers. Led by Usman Azam, former head of Novartis’s cell and gene therapies unit, the firm is working on T-cell immunotherapies for cancer. The funding is one of several recent large series A rounds. Earlier this month, Gossamer Bio and BioNTech raised $100 million and $270 million, respectively.

Disagreement and Optimal Security Design

We study optimal security design when the issuer and market participants agree to disagree about the characteristics of the asset to be securitized. We show that pooling assets can be optimal because it mitigates the effects of disagreement between issuer and investors, whereas tranching a cash-flow stream allows the issuer to exploit disagreement between investors. Interestingly, pooling and tranching can be complements. The optimality of debt with or without call provisions can be derived as a special case. In a model with multiple financing rounds, convertible securities naturally emerge to finance highly skewed ventures.

Negociando con Ángeles: términos, cláusulas y otras condiciones legales clave para la estructuración de un term sheet de levantamiento de capital semilla

The authors present legal aspects of startups, specifically the term sheet that the entrepreneur uses in negotiations with investors in the equity financing rounds. They also analyze the different forms of capital raising focused on angel investors, which have been implemented in other jurisdictions or have managed to adapt to local legislation.

Provivi, NBD get investment from BASF

BASF is among the investors in two chemistry-based start-ups. Along with DuPont Pioneer and venture capital firms, BASF is participating in a $31.5 million series B funding round for Provivi, which is developing pheromones for pest control. Provivi was one of C&EN’s 10 Start-Ups to Watch in 2015. Separately, BASF is leading an $8 million series B financing round in NBD Nanotechnologies, a developer of additives and coatings that modify surfaces with properties such as repellency and adhesion.

Three new Boston biotech firms emerge

A trio of Cambridge, Mass.-based biotech start-ups unveiled themselves last week, all boasting impressive first rounds of financing. Leading the pack was Flagship Pioneering-funded Kaleido Biosciences, which is designing orally available compounds to modulate the human microbiome, improve health, and treat disease. Founded in 2015, the start-up remained in stealth mode within Flagship VentureLabs until its Sept. 18 emergence with $65 million in series A and B funding, more than 60 employees, and 100-some patent applications. Newly positioned at Kaleido’s helm is Mike Bonney, former CEO of antibiotics developer Cubist Pharmaceuticals, which Merck & Co. purchased for $9.5 billion in 2014. That acquisition led to an exodus of several antibiotics experts from Cubist to Kaleido, including Jared Silverman, Kaleido’s first employee and previous vice president of discovery biology at Cubist. “We’re creating a new category of chemistries that are the opposite of antibiotics,” says Flagship Pioneering partner Geoff Von Maltzahn.

New Evidence on Mixed Syndication between Governmental and Private Venture Capital Firms in China

I investigate the performance of mixed syndication involving both governmental and private venture capital firms (GVCs and PVCs) in the context of China. Using the data on the investments in start-ups between 1999 and 2011, I find that start-ups backed by mixed syndication in their initial financing round are less likely to receive refinancing, compared to those backed by syndication solely among PVCs. I present evidence consistent with two possible mechanisms in explaining the underperformance of firms backed by mixed syndication: a potentially lower quality of portfolio companies due to the distorted risk premium, and less complementary resources but higher coordination cost in mixed syndication. The empirical results continue to hold when I use instrument variable method, propensity score matching analysis, Heckman treatment method, and endogenous switching regressions in mitigating the potential selection bias and endogeneity problems.

Start-up Enterin raises $12.7 million

Enterin has raised $12.7 million in a series A financing round. The Philadelphia-based biotech firm says it will use the funds to complete a Phase II study of its lead product, ENT-01, as a treatment for Parkinson’s and other neurodegenerative diseases. ENT-01 is a derivative of squalamine, an aminosterol discovered in the tissues of the dogfish shark by Enterin cofounder and Georgetown University professor Michael Zasloff. According to Enterin, the compound can slow the progression of Parkinson’s by preventing the accumulation of α-synuclein.

Online R&D provider raises more funds

Science Exchange, an online research outsourcing venture launched in 2011, has raised $28 million in a new financing round led by Norwest Venture Partners. The Palo Alto, Calif.-based firm offers its users access to more than 2,500 R&D service providers, primarily in the pharmaceutical sector, including contract research and manufacturing firms as well as government and academic labs. It claims 10 of the top 20 drug companies as customers. Science Exchange added Covance’s nonclinical science services—including lead optimization, safety assessment, drug metabolism, and bioanalytical research—to its site last month. In June, it partnered with the Alzheimer’s Drug Discovery Foundation to connect researchers working on central nervous system diseases with a network of contract research organizations. Science Exchange has raised $58 million since its inception. It plans to use the new funding to expand to other sectors, including agriculture, cosmetics, aerospace, and industrial chemistry.

Indi Molecular scores first funding round

Indi Molecular has secured $11.5 million in series A funding to support the development of small peptides that act like antibodies. This first formal financing round was led by the venture arm of Merck KGaA, Legend Capital, Sabey, and earlier investors in the biotech firm. Indi Molecular was spun off of Integrated Diagnostics in 2013 with roughly $1.8 million in seed funding. The company’s core technology comes from the labs of a cofounder, Caltech chemist James R. Heath, who used click chemistry to develop a new class of compounds dubbed “protein-catalyzed capture” agents. PCCs are synthetic peptides that nestle into their protein targets with the specificity of antibodies but have small-molecule-like properties allowing them to access previously undruggable targets. The seed money, along with a partnership with an undisclosed big pharmaceutical company, allowed the biotech firm to develop its platform and intellectual property to a point where they can be

Biotech firm Rubius raises $120 million

Rubius Therapeutics, a Cambridge, Mass.-based developer of red-blood-cell-based therapies, has raised $120 million in a financing round that included its founding investor, Flagship Pioneering, as well as other investors. Rubius engineers red blood cells to express enzymes, agonists, antagonists, and other proteins. Launched in 2014, the company says its lead programs include enzyme replacement therapies and therapies targeting cancer. It expects to start human trials in 2018.

Stem cell specialist takes steps forward

Magenta Therapeutics has advanced its stem cell transplantation efforts on three levels. It completed a $50 million series B financing round intended to fuel development of products in areas including patient preparation and stem cell harvesting. It in-licensed a Novartis product, MGTA-456, designed to expand the number of cord blood stem cells used in transplants. And it formed a partnership with Be The Match BioTherapies in which it will use Be The Match’s cell therapy delivery platform, clinical trial design, and industry relationships in research efforts.

Forge scores $15 million in venture funding

Forge Therapeutics has closed its first large round of financing, securing $15 million from MagnaSci Ventures, Evotec, and other investors. The tiny biotech firm, founded on technology developed in the labs of University of California, San Diego, chemist Seth Cohen, will use the proceeds to push forward its Gram-negative antibiotics program. Forge was the subject of a C&EN story in early 2016 about what it’s like to be a young biotech firm looking for financing and partnerships during the annual JPMorgan Healthcare meeting. At the time, the company had a goal of raising its first round of funding to support development of metalloprotein inhibitors—in particular, compounds that block LpxC, a zinc-containing enzyme found in bacteria. Forge’s goal was to raise the funds by the end of 2016. CEO Zachary Zimmerman attributes the delay to two developments. The first was the creation in July 2016 of the Combating Antibiotic Resistant Bacteria

Squaring Venture Capital Valuations with Reality

We develop a financial model to estimate the fair value of venture capital-backed companies and of each type of security these companies issue. Our model uses the most recent financing round price and the terms of that financing to infer the value of each of their shares. Using data from legal filings, we show that the average highly-valued venture capital-backed company reports a valuation 48% above its fair value, with common shares overvalued by 55%. In our sample of unicorns – companies with reported valuation above $1 billion – almost one half (52 out of 116) lose their unicorn status when their valuation is recalculated and 11 companies are overvalued by more than 100%. Overvaluation arises because the reported valuations assume all of a company’s shares have the same price as the most recently issued shares. In practice, these most recently issued shares almost always have better cash flow rights than the previously issued shares, so equating their prices significantly inflates valuations. Specifically, we find 53% of unicorns have given their most recent investors either a return guarantees in IPO (14%), the ability to block IPOs that do not return most of their investment (20%), seniority over all other investors (31%), or other important terms. Online Appendix is available at https://ssrn.com/abstract=2968003.