Last Monday, we announced a new $600M fund.  The press release is here.  We were thrilled with the press coverage that we received (partial list below).

CNN Money: “Canaan raises $600M VC fund
San Francisco Chronicle: “One of the Valley’s Oldest VC Firms Just Closed A $600 Million New Fund
San Francisco Business Times: “Canaan Partners raises $600M fund for tech, health care
Xconomy: “Canaan Partners Survives VC Turmoil, Raises $600M New Tech/Biotech Fund
San Jose Business Journal: “Canaan raises $600M fund
Bloomberg: “Canaan Raises $600M Fund for Technology, Healthcare Investments

Our strategic announcement of Canaan IX on the first day of the JPMorgan Healthcare Conference provided ample opportunity for us to celebrate alongside respected entrepreneurs, portfolio company executives and VC comrades.

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Thank you to all who worked behind the scenes to help ensure a fabulous evening at the Weinstein Gallery!  To those who stopped by, we were honored and delighted to be in your presence and raise a glass to the next generation of healthcare companies.

Happy 2012!

We’re back to work and our team is making final preparations for the JPMorgan Healthcare Conference next week in San Francisco.  For our Menlo Park office, this means a simple drive north to the Nikko Hotel, where we set up shop for five days.  For our Westport office, this means another cross-country flight to the west best coast.  (Our East Coast team used to look forward to this trip to the tropics in the middle of winter, but now that global warming has lead to temperature parity across the country, we can’t boast about the weather this year.)

I thought it would be fun to offer a day-by-day of what “goes on” during the busiest week of the healthcare investing year:

SUNDAY – The team gets together for a working dinner (usually involving the hotel “room service” menu) of going through our existing portfolio companies and discussing the 3 or 4 things that will be most critical to accomplish during the first calendar quarter of the year.

MONDAY – The first “official” day of meetings and presentations.  We have 4-6 group presentations for our whole team and 2-3 smaller group meetings.  The group presentations are typically 60 minutes each and the day moves like clockwork.  On Monday evening, we migrate over to our favorite gallery in Union Square for our always anticipated (and well attended) networking reception.

TUESDAY – Day #2 of meetings begins early, often with invites to corporate breakfasts, sponsored by the large pharmaceutical companies.  Then it’s back in the conference room for another marathon of listening to brilliant entrepreneurs tell their story.  In the evening, we take our pick of dinner and cocktail invites.  It’s fun to look forward to seeing former colleagues at the evening events, which (as long as you’re not hosting) are always more relaxed.

WEDNESDAY – Our final full day of presentations and the last evening for group dinners, corporate cocktail parties, and hanging out in the Westin St. Francis lobby (hoping to rendez-vous with old friends and acquaintances).

THURSDAY – At the end of the week, we have a working breakfast where we complete scorecards for all of the new deals.  Basically this is as simple as each person ranking their favorite prospects from 1 (best) to ## (least favorite).  Each company receives a score (lower = better) and the companies are all ranked.  We debate any discordance in scores and assign specific follow up and diligence items.  In the past years, our high quality deal flow has usually translated to new investments.

This year, we will also use our time on Thursday to discuss personal plans for 2012.  The discussion will revolve around our specific strategies for new deals in biopharma, medical devices, and healthcare delivery/IT.  During a time of many challenges for our healthcare investing peers, Canaan is committed to sourcing and nurturing the best new healthcare companies.  We’re making sure to spend plenty of time being thoughtful about how to navigate the ever-evolving landscape of FDA reform, narrowing reimbursement, and a shrinking syndicate universe.

Then we’ll bid our farewells and head back to our respective offices, thankful that the following Monday (MLK Day) is a holiday.  After JPM, everyone benefits from an extra day to recuperate!

Last week our global team gathered in San Francisco for our annual meeting with our Limited Partners.  We were fortunate to have some great accomplishments to highlight, including the $750M acquisition of Advanced Biohealing and our IT colleagues’ recently announced acquisition of Sandforce for $400M.  We ran footage of our bell ringing ceremony at the NASDAQ and had the privilege of hearing Sal Kahn discuss his vision for education over dinner at the Westin St. Francis.


One of the sessions that I helped put some material together for was a chance to pull back the curtain and shine the light on some of the “numbers” regarding deal flow.  This provided the backdrop for a longer conversation with Brent, Steve, and Tim (moderated by Wende) regarding the strategies that we use in building successful companies.  We consider ourselves lucky to be in business at a time when so many other venture firms are struggling to raise funds or are being forced to slowly wind down their operations.  As a result, there are more healthcare companies than ever that are competing for a limited pool of capital.

In an average week, we are following over 50 healthcare deals across biopharmaceuticals, medical devices, diagnostics, and IT/services.  We estimate that of the NVCA/MoneyTree healthcare deals completed through the third quarter of 2011 that we’ve had access to nearly two-thirds of them.

I did some surveying of calendars and other e-mail records and determined that in a recent four-week period we received 46 new deals in our California office, and 58 in our Connecticut office.  Our west coast team hosted 4 introductory calls (meaning we set up a conference call with a management team to let them pitch us over the phone), attended 3 conferences, participated in 14 networking events (lunches, and other invited events we hosted or attended as guests), and listened to 11 presentations in our office.  Our east coast team clocked in with similar metrics: 12 introductory calls (slightly higher due to the strong scientific and technical talent that do more early screens), 1 conference, 8 networking events, and 12 office presentations.

To extrapolate from these numbers, we estimate that we see 1,000+ deals a year.  By, “see” I mean have access to, via an unsolicited e-mail, a conference we attend, a personal intro or connection, or a referral from someone in the ecosystem (like a VC, banker, lawyer, accountant, consultant, PR firm, etc.).  Of the five deals we’ve completed so far in 2011, three were personal connections, one was from a conference at Stanford, and one was a referral from another VC firm that we’ve co-invested with.  I suppose it sounds bad to say “personal connection” so I ought to clarify.  One team was a group of repeat execs that we’ve invested in (and made money with) on three previous occasions.  The other was through a former connection of one of our healthcare team members in Connecticut and the other was an introduction from one of our IT partners on the east coast.

As for what all of this means?  The bar is obviously very high.  If you’re an entrepreneur, your odds of having your cold call or e-mail make it through our screening and diligence process are slim.  The statistics would suggest that your odds improve if we connect at a conference (we’re very active on the conference circuit) but it’s probably best to find someone who can introduce you to any of us (even if it’s someone on our tech team; the deals eventually make it to the right place!).

I attended a small SVB-sponsored seminar today with the chair of the Medical Technologies Advisory Committee (“MTAC”) of NICE. I think I was the only VC invited (or that bothered to show up) and there was a captive audience of small device companies. The slides are available here and below.

Any device with a new procedure MUST go through the Interventional Procedures committee before a NICE technology appraisal can occur. An IP review can take 6 months. Devices should be CE marked at time of review. New procedures can be submitted by hospitals, clinicians, or manufacturers. Seldom are procedures denied (only about 2 in 350 cases), but often times procedures without strong evidence will be given special arrangements. Such arrangements take the form of governance (telling the hospital), consent (telling the patient), or research (reviewing the outcomes). Evidence considered by the Interventional Procedures committee includes published studies, questionnaires completed by medical advisors, questionnaires completed by patient commentators, committee members’ knowledge, and public consultation.

Technology appraisals by MTAC occur after the procedure has cleared the Interventional Procedures committee. These are confidential reviews of the evidence and economic models presented by the manufacturer. MTAC carefully studies patient outcomes or experience, use of resources (facilities, staff, tests), cost, and sustainability. Manufacturers can continue to market product during this period. If a resolution is put in place, the device is not “mandatory” in the UK, but it is economically advantaged. If a technology is not accepted, then the manufacturer will receive a letter with reasons why and advice. The goal of MTAC is to boost adoption of novel and useful technologies.

I was most surprised to learn that the UK Trade and Investment office is available to offer FREE assistance with navigating all of these processes. While these processes seem complicated, difficult to manage, and highly ambiguous, there is actually outstanding support available, even for US-based medtech companies.

September’s Health 2.0 Conference brought together 1500 attendees for two days of hour-long panels punctuated with a flurry of 3½ minute demos by young, ambitious technologists hoping to “save the world” with the latest and greatest iPhone app.  In general, I found the event to be disappointing, or at least lacking in investable ideas.  There were dozens of companies creating “social” and “mobile” communities with “game mechanics” to fight obesity or encourage “wellness.”

In a session called “Employers, Payers, and the Great Health 2.0 Awakening,” Aetna’s CEO remarked that the company is becoming a healthcare IT company that “dabbles in insurance.”  Kaiser’s CEO talked about having 190 accounting systems… and the need for unifying solutions.  Yet there was quite a noticeable disconnect between these bigger picture themes and all of the noise around iPad apps and telemedicine.  It’s clear that the big guys are beginning to experiment with some of these new technologies, but as we all know, it’s hard to make things happen quickly inside of these huge machines.

I sat through a lunch with Rick Gilfillan from the CMS Innovation Center, though again, didn’t come away with many specifics except that there is $10B being directed into new models of payment and care delivery.  During the Q&A, many entrepreneurs expressed frustration with the lack of transparency about how to tap into this funding.  Rick repeatedly referred them to the website for online submissions and said that there were “a few people” evaluating the proposals, but couldn’t provide much detail on what was being rolled out.

During a Tuesday afternoon session called “Launch,” 10 companies did demos:
•     Basis – A pulse & health monitor on your wrist
•     Clarimed – Ratings and info on devices, diets, and much more
•     CareCoach – Recording, sharing & improving what happens in the doctor’s exam room
•     GLU – Revolutionary new social network and research tissue bank for people with type I Diabetes
•     GoodRx – Shows you the best price on drugs by retail location
•     HealthPer – Improving employees’ health engagement and productivity using incentives and techniques from gaming
•     Medify – New style of health search and information sorting engine for consumers
•     Numera|Social – Completely Facebook-based social health management platform
•     1 + 1 Labs – Lab results explained visually according to Thomas Goetz’s feedback loop
•     WellnessFX – Complete health management system based on mass customization of personalized testing and treatment

Canaan has seen Basis, Medify and WellnessFX, which were all in the top 5, by audience voting.  I think this demonstrates that Canaan IS in the deal flow of the higher quality Health 2.0 companies.

I’m not sure there would be much benefit from attending the conference in future years as it is a costly event and the actionable items were few.  However, it does bring several people to town, and Canaan used the opportunity to host a small group dinner with several of our portfolio company CEO’s, friends of the firm, and guests from the Dept. of Health and Human Services.