On May 14, when venture capitalists and sovereign wealth funds announced the largest first round venture financing in the history of biotech, $217 million for Denali Therapeutics, my “bubble alarm” went off. On its face, this is exactly the kind of extravagant financing that happens at the peak of a market. It felt a bit like the IPO of DrKoop.com all over again.
But once I got over my initial shock, I realized that the financing, while risky, in fact makes logical sense from several different vantage points. I came up with three reasons – beyond “because it could” – why the company raised so much money.
Denali will use what it says are novel approaches to find treatments for heretofore nearly untreatable neurodegenerative diseases such as Alzheimer’s and Parkinson’s. Denali certainly has the pedigree for its ambition to be taken seriously. The team members announced so far are all superstars from Genentech. The investors include Fidelity, Flagship and Arch, as well as the Alaska Permanent Fund.
Here is a teaser version of my four reasons that this round could become so big.
1. Prior success with a similar strategy. Case in point: Juno.
2. Prior success at Genentech.
3. “If there is money on the table…”
4. It’s the biology, stupid.
To read the details about why this financing became so massive and to learn more about Denali’s challenges and its strategy for overcoming them, read my latest post on Forbes here: