Home Venture Capital Why CalSTRS and Family Offices Love This Life Sciences VC Firm

Why CalSTRS and Family Offices Love This Life Sciences VC Firm

14
0

October 5, 2023 was a busy day in Chicago’s hip Fulton Market neighborhood. Leaders from the Chan Zuckerberg Initiative, the multibillion dollar philanthropic foundation of Meta founder Mark Zuckerberg and his wife Priscilla Chan, along with Illinois Governor J.B. Pritzker and representatives from the state’s top-flight universities gathered to celebrate the official launch of the CZ Biohub Chicago.

The state-of-the-art space in the Fulton Labs tower will be dedicated to researching inflammation-related diseases and is part of the foundation’s growing network of similar facilities and the beginning of its 10-year, $250 million grant to fund the one in the Windy City.

“We’re now one step closer to starting our labs and diving into the research we’ve been preparing for — to ultimately create new technologies to understand inflammation in the growing biotech industry right here in Chicago,” Shana Kelley, CZ Biohub Chicago president, said that day.

Half of all deaths can be attributed to inflammation-related diseases, such as ischemic heart disease, stroke, cancer, and autoimmune and neurodegenerative conditions. But to better prevent and treat those things, scientists require an improved understanding of inflammation and need to measure three-dimensional living tissue interacting at cellular and molecular levels — capabilities that do not currently exist. That’s one of the feats the CZ Biohub Chicago hopes to achieve, so the roughly 28,000-square-foot lab will soon be filled with highly specialized rooms, equipment, and researchers. Visitors might also notice a private staircase leading to a neighbor on the floor above.

That’s where they’ll find John Flavin, CEO of Portal Innovations, a life sciences venture capital firm he founded in 2020. Flavin was on the team that recruited and convinced the Chan Zuckerberg Initiative to open CZ Biohub Chicago where it did. They were such an ideal neighbor that Portal is also going to occupy 6,000 square feet on the same floor as the biohub so they can easily share equipment and participate in each other’s events.

Portal helps startups in more ways than just cutting them a check. Alongside its VC business, Portal is building labs across the U.S. for its portfolio companies and other organizations to share, creating local life-science ecosystems with infrastructure and a concentration of peers to help foster and pursue the best ideas — some of which might be investable for Portal. The VC firm knows that companies need all the help they can get. Most scientists lack the experience that Flavin and his team of 31 employees have navigating the life sciences industry. Before Portal, they collectively took several startups public and raised more than $750 million in venture capital.

CZ Biohub Chicago wanted “to be in and near places like Portal and Fulton Labs where not only do they have the physical infrastructure, but it’s a dense part of the ecosystem. The partnership is about shared goals around building science-based innovation in the biotech field. Some just for the sake of science and some, as it relates to Portal, on commercializing technologies through company startups,” Flavin explained. (The foundation is not an investor in Portal.)

Flavin argues that bringing together the process of raising capital with building shared resources, such as labs, can create drug and treatment breakthroughs and potentially tremendous investment opportunities. That’s why Portal has taken a particular interest in creating similar hubs, and not just in the most likely places like Boston, the San Francisco Bay Area, and increasingly Chicago.

Flavin says there are talented scientists with promising commercial ideas in many cities. But especially outside the cities synonymous with biotech, scientists need more than just the capital VCs can offer them. Founders lack the infrastructure and support that would give them the best chance of success. Even though a lot of commercial real estate is sitting empty right now, it can’t easily be transformed for people in white coats. Wet labs designed for experiments require special zoning, HVAC systems, exhaust hoods and electrical power for heavy-duty machines.

So Portal is working closely with real estate developers, including CBRE Group’s Trammell Crow Company, on separate investments that will fund the construction of labs for its portfolio companies that other startups and researchers can share. It already has them up and running in Boston and Chicago and it plans to open labs in Atlanta and Houston this year. Intertwining those VC and real estate investment opportunities has also helped make Portal appealing to some of the most prominent and sophisticated investors.

“It became vital to have the ability to fuse the capital with the lab space, and the know-how, to kind of build these companies,” he said.

The California State Teachers’ Retirement System, the second largest public pension fund with $327 billion in assets, is the lead investor in four $25 million city-specific pools of capital for startups that Portal has raised. The money allocated to Portal’s model is part of a life-sciences real-estate and VC strategy at the pension fund. The pension was attracted to getting exposure to early-stage startups that can also grow into buildings in which it has equity.

“Partnering with Portal has allowed us to quickly and efficiently maximize our real-estate assets through tenant placement, and we believe growth will continue in established and emerging ecosystems driven by academic innovation, venture capitalists, and their startups,” said Chris Preston, a real estate investment associate portfolio manager at CalSTRS.

Other institutional investors include the University of Michigan endowment, the University of Chicago office of investments, and the venture arms of some healthcare companies. Portal has also spoken to the venture groups at Eli Lilly and other pharmaceutical companies.

But family offices have been especially drawn to Portal’s model, Flavin said. They love knowing that they are investing locally and keeping scientists and companies where they came from. In the past many of those researchers and professionals might have left for Boston or the Bay Area — or worse, not pursued what could have been a drug or treatment — and a thriving business — with huge implications.

“Where we have the most participation so far is around what I’ll call these local pride investor family offices that made their money in other industries, but very much want to support biotech in their hometown,” Flavin said.

In Chicago, Joe Mansueto, the founder and executive chairman of Morningstar, is a Portal investor, as well as John Rogers, the founder and co-CEO of Ariel Investments. Walder Ventures, the Chicago-focused, mission-driven investment arm of Joseph and Elizabeth Walder, and the Clark family behind the local construction firm Clayco, have also invested.

“It’s just the next level of promoting Chicago, promoting biotech, medtech, healthtech, all in one place. That definitely helps raise our excitement if it’s in our backyard,” said Evan Wood, a principal at SkyDeck Capital, the investment office of Michael Polsky, the founder and CEO of Invenergy, and his family.

Portal’s “secret sauce” is the real estate play mixed with Flavin and his team that make the model work, Wood said. Skydeck invests in real estate but not usually in buildings with the same scale or commercial purpose.

“The exciting thing for me is to say the experts built out this space. They know what they’re building, how they’re building, and other institutional investors look to invest in medical buildings and biotech hubs,” Wood said. “I don’t think that trend is going to stop anytime soon.”

Source link

LEAVE A REPLY

Please enter your comment!
Please enter your name here