Dive Brief:

• Atlas Venture, a prolific creator of biotech startups, has raised $450 million to form and invest in new drug companies, announcing Thursday the closing of its 13th fund.

• The new fund, which Atlas said brought in more money than expected, follows a little less than two years after the firm raised $400 million with the goal of backing about 15 companies.

• Biotech venture capital firms like Atlas have reloaded in recent years, bringing in billions of dollars in funding to pour into startups working to translate cutting-edge research into new medicines. Over the past year, however, biotech stock prices have plunged, making the path to public markets more difficult for emerging companies like those backed by Atlas and other VCs.
  

  Dive Insight:

  Atlas is closing this fund amid one of the most severe biotech downturns in years, a retrenchment that’s constrained the options of private drug companies seeking to make the jump to public markets. Few biotechs are now pricing initial public offerings, breaking sharply with the pattern of the past few years, which featured record numbers of early-stage startups going public at high-dollar valuations.

  But for companies just starting out, there is still large amounts of cash available elsewhere. Many venture capital firms that specialize in creating new biotechs raised new funds in 2020 and 2021. With this latest fund, Atlas joins Arch Venture Partners, Versant Ventures and Flagship Pioneering in closing funds since the COVID-19 pandemic

  “We’re still starting new companies and they’re financing very well,” said Jason Rhodes, a partner at Atlas, in a recent interview before the fund closing announcement. “I’d say certainly for the portion of the market that we participate in, which is really creating our own companies, there really has not been reduced demand for them.”

  Atlas has formed or invested in more than 50 biotech companies since 2015, including the more recently launched Third Harmonic, Chroma Medicine and Scorpion Therapeutics. Another Atlas-backed startup, Vigil Neuroscience, recently priced an IPO, one of four that have raised more than $50 million so far this year.

  Depending on when those companies launched and how they were financed, they may not need to brave a bear market in the near-term either. “Many of our companies have multiple years of capital,” Rhodes said, “so they shouldn’t have to go and raise money anytime soon at current valuations.”

  But there are signs that the biotech downturn may be starting to affect early-stage startups as well as those looking to IPO. Some investment rounds are taking longer to complete, while companies might seek to stay private for longer. In a more challenging investment environment, meanwhile, company differentiation becomes more important, potentially raising hurdles for startups in highly competitive fields.