Venture debt firm Runway Growth Capital is expanding its reach into life sciences with its first deal in the sector and a new San Diego office focused on the business line.
Runway earlier this year tapped Rob Lake from Bridge Bank to grow its footprint in life sciences, which it sees as a fertile ground for future investments, particularly during the coronavirus pandemic.
“I started my first day in late March… obviously we didn’t plan it this way,” said Lake. “But if you look at the first half of 2020, data that shows there’s been more venture investment in life sciences than the first six months of any year to date. I think this may be the best time to launch into the life sciences sector because there’s so much capital coming into the space.”
The firm founded in 2015, is helmed by CEO David Spreng. Since inception, the firm has funded 37 companies and made loan commitments totaling $645 million.
In 2016 Oaktree Capital Management made an initial $125 million capital commitment in Runway, which was later boosted to $139 million. Oaktree provided Runway with a $112.5 million commitment in June 2019.
Investing Up to $75M
In particular, the fund will look to support companies that have already received early stage investment and seek additional growth capital. Runway will provide senior term loans of $10 million to $75 million to fast-growing companies in the U.S. and Canada.
Investing in primarily mid-to-late stage companies, Lake said the firm lends to businesses that have already achieved proof of concept, offer significant enterprise value and already have significant traction.
“Our ideal investment would be a company that can demonstrate a lot of traction and growth,” he said. “Whether they have had some very strong clinical data, received FDA approval, or are collaborating with big pharma or larger strategic medical device companies which have invested some time and money into their company.”
In late June, the firm made its first deal in the sector by providing medical device developer Intact Vascular Inc. with a $30 million loan. The financing will help fund the commercialization and future development of Intact’s system for arterial dissection repair.
Former success stories who were recently purchased after obtaining a loan from Runway include Mobius Imaging (acquired for nearly $500 million in 2019), Drawbridge (acquired by LinkedIn in 2019) and eSilicon (acquired by Inphi and Synopsys in 2020).
Choosing San Diego
The firm decided on San Diego because it’s one of the largest life sciences markets in the country alongside San Francisco and Boston, said Lake.
Looking forward, Lake said the firm will eventually seek to invest in larger biotech and biopharma opportunities.
Emphasizing that despite the coronavirus slowdown, the firm is open for business and is actively looking for great investments to deploy their capital into.
Over the next two years, the firm expects to deploy between $100 million to $250 million between the technology and life sciences sector.
“It’s a good time to borrow, especially when you have capital, the terms are better and it’s a healthier credit because your runway is longer,” said Lake. “It wasn’t planned this way but we’re going to take advantage of the current market conditions.”
Runway Growth has offices in New York City, Silicon Valley, Chicago and now San Diego.
Spreng said he was impressed with how quick and efficient the San Diego team has been to help expand the firm’s newest business line.
“I couldn’t be more pleased with how quickly and efficiently San Diego has ramped up its support of health and life sciences, in addition to the efforts from our teams in Chicago, New York, and Silicon Valley, as we continue to grow our base of knowledge and expertise in these sectors,” said Spreng. “It’s a testament to Rob’s wherewithal, smarts and determination to underwrite, close and support new life sciences investments, that in turn will become the backbone of the San Diego office.”