SR One set to deploy $500m fund following GSK spin-out

Founded in 1985, SR One was formerly the venture capital arm of pharmaceutical company GSK. The firm invested via an evergreen corporate fund prior to its recently completed spin-out.

SR One Capital Fund I held a final close in November 2020 on $500m, coinciding with the completion of SR One's spinout from GSK, as reported by Unquote. The fund was registered in July 2020 and is domiciled in Delaware.

The fund was able to reach its hard-cap in spite of the challenging environment. SR One CEO Simeon George, who is based in the firm's San Francisco office, says: "We formally started the fundraising process at the beginning of 2020, targeting a $400m fund. Given the level of investor demand, and oversubscribed nature of the fundraise, we were able to upsize and hit our hard-cap of $500m."

"It also helped that we were still able to do our work in a seamless coordinated fashion, in spite of remote working," says George. "But there's no getting around the fact that it was a challenging time to come to market as a first-time fund; it is harder when you can't sit down and develop a personal connection with potential new investors."

The spin-out and fundraise had been in the works for around two years prior to this month's announcement, says George. "The initial discussions within our team and with GSK started about two years ago. Our intent from the start was to ensure a win-win outcome for both SR One and GSK, in how we could come to market and to maximise the probability of success. We then spent a great deal of effort on the structuring of the fundraise and ultimately this level of preparation and alignment between SR One and GSK led to the successful spin-out and fundraise."

"Doing a spin-out while raising third party capital during a pandemic was not an easy process to navigate," says George. "We were not sure where this would go in March, but the SR One team believed in ourselves and in our strong performance over the last decade of working closely together."

Innovation in life sciences
SR One's connections with GSK will remain key to its strategy, George says; while the fund has 15 LPs, GSK is its cornerstone investor. "Our relationship with GSK continues to be really important. In addition to GSK being our anchor investor, we were also keen to keep the continued access and relationship on the R&D side, for them to be able to provide insights on the opportunities we are actively evaluating."

George also emphasises the importance of life-science investing against the backdrop of the pandemic: "What this year and the challenges associated with the pandemic has taught all of us is the critical need for continued investment in innovation in life sciences. Whether it is vaccines, diagnostics or treatments, our industry will need to play a key role in resetting the world order. It is an incredibly powerful time to be messaging around investing in life sciences innovation."

The new fund will allow SR One to continue its strategy of making both early-stage foundational and later-stage investments, but the firm can now write larger equity cheques. From 2009 and as part of GSK, SR One was able to make initial investments of several hundred thousand dollars up to $15m.

SR One has made around 60 such investments since 2009, George says. "For the new fund, we will target roughly 20 investments in total, investing approximately $20-30m per company, depending on the stage at which we enter. For companies that we are starting or getting in early we might invest up to $30m over the lifetime of the company. Tickets for later-stage companies could be closer to $20m in total."

"A quarter to a third of the fund volume will be focused on company formation, starting from scratch or working with founders, but the majority is for investing in established companies, leading or co-leading rounds," says George.

Transatlantic approach
The fund will continue to target companies in both the US and Europe, in line with SR One's previous investment focus, and the firm has offices in San Francisco and London. "We will split our investments between the US and Europe, investing around two thirds in the US and the remainder in Europe," says George.

Alongside the announcement of the fund close and spin-out, SR One announced the hiring of Rodger Novak and Eliot Charles as venture partners. Novak and Charles were involved in the founding of SR One's US-based portfolio companies Crispr Therapeutics and Principia Biopharma respectively.

"With the addition of our new venture partners, we aim to get in early, providing leadership for startups, to create the next crop of outstanding companies coming out of Europe and the US," says George. "It is an advantage that we have a European footprint and presence to be able to source these sorts of opportunities."

SR One has invested in a number of US-based companies in 2020. Its most recently announced investment in Europe was a £27m round for UK-based autoimmune disease therapy developer MiroBio in October 2019, as reported.

The firm continues to have a busy deal pipeline of later-stage and early-stage investments, George says, including in Europe, and has already invested on the continent this year. "We currently have a UK-based seed investment, which is still in stealth mode, working with two of the Crispr Therapeutics founders on a novel cell therapy platform technology.

"We are also actively speaking to UK and European companies that are further along in their technology development. We are seeing high-quality dealflow and we expect to see even more now that we have announced the fund, from company creation opportunities through to later-stage deals."

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