Markets are slowing, but Canaan, a 35-year-old early-stage venture investing in both technology and healthcare, isn’t slowing down. With two new funds, he signed $850 million in capital commitments. A $650 million flagship fund – the 13th – and another of his $200 million funds to support segregated portfolio companies.
This amount is slightly above the $800 million Canaan raised for its 12th flagship fund in October 2020, bringing the company’s assets under management to $6.8 billion.
It is somewhat counterintuitive that Canaan has closed an opportunity style fund in the current market. Some institutional investors have personally complained that they don’t like late-stage funds hosted by early-stage investors.
A growing number of early-stage investors are also deciding to forego dedicated late-stage funds for markets with few exits and even rarer IPOs. For example, Lux Capital is raising a single fund after previously raising multiple funds at once. Her Felicis, another early-stage investor, recently made the same decision.
But Mahaibrahim, a longtime general partner who joined Canaan 23 years ago, says there are many reasons for the second funding. First, she points to a subset of the company’s portfolio companies, both in technology and healthcare, that need more capital. She also said the new fund would give Canaan a “great way to support companies and gain more ownership” as many investors are now “holding their hands in the late stages.” Ibrahim further claimed that the flagship fund was “oversubscribed” and that the team “wanted to make room for supporting LPs”.
I can understand why a regular backer would want a reupload. According to Canaan, in the past five years the company has gone through 10 IPOs, 4 listings and 8 of his M&A exits, generating returns of around $1.7 billion. These accomplishments include Day One Biopharmaceuticals in May 2021, his TheRealReal in June 2019, and his IPO of biopharmaceutical company Arvinas in September 2018.
Canaan was also an investor in customer service software company Kustomer, which Meta acquired for $1 billion in February 2022, but Meta is now exploring various divestment options as part of a broader cost-cutting plan. It is said that Meanwhile, another of his portfolio companies, Axis Security, was acquired by Hewlett Packard Enterprise last month on undisclosed terms.
Ibrahim also stresses that Canaan is a “really early-stage focused fund” and wants its main fund to reflect that. “It’s cleaner for us,” she says.
As for where that capital could end up, Ibrahim said areas that have “very strong market traction right now” include cybersecurity. Canaan is 8-year-old Outfit Snyk (currently valued at around $7.4 billion) and his Dragos, an industrial cybersecurity company whose valuation will reach his $1.7 billion in 2021.
“It’s our intention to back winners at a reasonable price,” she says. I don’t think it’s a valuation of
The company also continues to have specific areas of interest in healthcare, such as immunology, neurobiology and cardiopulmonary function. Canaan even fosters such companies, such as co-founding Day One Biopharmaceuticals.
I thought, ‘We’ve found an opportunity to focus on oncology, so why should we have someone else start it when we can?’ says Ibrahim.
