In the 37 years since co-founding ARCH Venture Partners, Bob Nelsen has built a reputation for placing head-turning bets on ideas that carry huge amounts of risk and reward.
His latest — on AI startup Xaira Therapeutics — is both the biggest bet of his career and in ARCH’s history for a new company. Xaira is launching with over $1 billion in committed capital, Endpoints News exclusively reported Tuesday, and ARCH will contribute over $200 million, Nelsen said.
So, why now — and why so much money?
“We’ve all been kind of waiting for the moment where we could rethink this fairly inefficient, some may even argue broken, industry that has low single-digit success rates and sometimes makes medicines that are curative, but a lot of times doesn’t,” Nelsen said in an interview with Endpoints.
“What we don’t want to do is change just one little vertical silo,” Nelsen said. “We can think, and have the resources to think, horizontally about the whole system.” By raising a historic amount — only Altos Labs’ $3 billion haul ranks higher in biotech — Xaira will have the balance sheet to take on that scope.
That level of ambition has occasionally led to bets that fell flat, like EQRx’s questionable-from-the-jump plan to radically lower US drug prices. But many of Nelsen’s other shots have netted runaway successes like Illumina, Alnylam and Juno that have grown ARCH into a VC powerhouse overseeing what is now $12.1 billion in assets.
“In a way, the money is like the last thing we thought about and the easiest part of this,” Nelsen said. “The hardest part is getting the thesis right, getting the right people to nucleate it. And the easiest part is the money, even though it’s a lot of money.”
Foresite Labs, an incubator affiliated with the VC firm Foresite Capital, joined ARCH as the co-founding partner (the investment is Foresite’s biggest-ever commitment to a new company as well). Xaira is led by Marc Tessier-Lavigne, formerly Genentech’s chief scientist and Stanford University’s president, with hopes of reinventing the drug R&D system with artificial intelligence.
Nelsen declined to provide specific funding details, such as any milestones or contingencies required to convert committed capital into cash on hand. Other investors backing Xaira include F-Prime Capital, Sequoia, NEA, and Lux Capital, among others.
“It’s a billion dollars, or more, of what I would call hard money,” Nelsen said. “It’s committed money. When ARCH does things, we tend not to put a lot of like unreachable milestones in things. The idea is to be able to have that money available in as certain a manner as you can get it for the company to do its big plans.”
Nelsen also suggested $1 billion-plus is just the beginning, calling it a “starting number.”
“It’s not our ultimate aspirational number, so we’re kind of mid-process,” he said.
He compared Xaira’s growth to other startups centered on specific themes that multiple groups were thinking about, like Vir Biotechnology with infectious diseases or Juno with CAR-T cell therapy. Ultimately, Xaira was able to compile several key leaders under one roof, including Nelsen, Foresite’s Vik Bajaj, a Seattle-based AI group out of David Baker’s lab, and scientists from Illumina and Interline Therapeutics.
“I’ve seen a lot of companies over 37 years,” Nelsen said. “You can tell when they’re going to be really cool, because the smartest people start self-selecting into them.”
Xaira stands out to Nelsen in that he didn’t need to place many calls to make it all happen — including in attracting board members like former FDA head Scott Gottlieb.
“It’s the first time I’ve ever gotten a call from Scott Gottlieb, where he asked to be on the board,” Nelsen said. “There’s all these little signs you look for when you’re trying to judge like, ‘Hey, are we crazy or not?’”