Wednesday, November 29, 2023

Hatteras investment fund attracts a stellar lineup

Hatteras Venture Partners is led by some of the Triangle’s best-known drug-development executives. Partners include Clay Thorp, Doug Reed, John Crumpler, Christy Shaffer, Bob Ingram and Ken Lee.

By David Ranii

East Carolina University chemistry graduate Robin Smith has founded or led three life-sciences companies that relied on venture-capital funding. Each startup obtained money from Durham’s Hatteras Venture Partners, which has invested in 61 companies since its founding in 2000, including G1 Therapeutics, a cancer drug developer that went public in May. Smith keeps returning to Hatteras not only for much-needed cash — his latest venture is Boston DNA-testing company Orig3n — but also for advice provided by Hatteras co-founders Clay Thorp and John Crumpler. “They are great mentors,” he says. “They help make our businesses a success.”

Smith’s Durham-based Synthematix was the first startup funded by Hatteras in 2000; it was sold for $13 million five years later. Smith is especially impressed by the partners that Thorp and Crumpler have attracted. The latest addition, former GlaxoSmithKline Chief Executive Officer Andrew Witty, joined as a part-time venture partner in September. In an email, Witty praises Hatteras for its “quality of science and people that they have chosen to invest behind.”

Witty supplements a leadership group that includes General Partner Bob Ingram, a former CEO of GSK predecessor Glaxo Wellcome, where he was Witty’s boss and mentor; Ken Lee, who previously co-led the international life-sciences practice at Ernst & Young; and Christy Shaffer, former CEO of publicly traded Inspire Pharmaceuticals. (It was acquired by Merck in 2011.)

Hatteras invests in drug and medical-device makers and health care information-technology companies. “We are entrepreneurs at heart and operators at heart,” says Crumpler, who started a computer-systems integration company that was sold in 1996. “It takes a certain breed of human being that loves the opportunity to work with all that uncertainty.”

Before Shaffer joined Hatteras, she got an inside look while serving on the board of directors of a startup funded by Hatteras. “I saw when there were issues, they very quickly rolled up their sleeves and wanted to help,” she says.

Hatteras’ strategy requires its general partners to unanimously agree on an investment, or the firm walks away. Fortunately, it’s apparent that the team members “genuinely like each other and play well together,” says Joan Siefert Rose, former CEO of the Durham-based Council for Entrepreneurial Development who is now a senior partner at a consulting firm.

“We don’t have a Bob Ingram deal, a Clay Thorp deal, a Christy Shaffer deal, a John Crumpler deal,” Ingram says. “We have a Hatteras deal.” Adds Thorp, “We want high-fiving, not finger-pointing.”

While the firm doesn’t disclose investment returns, it keeps raising larger sums. Its first fund raised $3 million from individuals and institutional investors. Its fifth and latest fund, which closed in January 2017, raised more than $150 million. The company now manages about $450 million.

Of the 61 companies in which Hatteras has invested, 26 were based in North Carolina or had significant operations in the state. That’s key for many startups because the dearth of N.C.-based venture-capital firms poses a significant hurdle. Hatteras also provides riskier seed funding for raw startups, something many VC firms avoid.

Eight companies that Hatteras has backed have gone public, while another 16 have been acquired. The latest public company, Durham-based G1 Therapeutics, could be one of the firm’s most profitable investments. After the May IPO, Hatteras was G1’s biggest shareholder with its 15% stake then valued at $63 million. Previously, the fund had invested a total of $13.8 million.

The firm’s collective decision-making isn’t foolproof: Although it has enabled the company to avoid some bad deals, it also has kept it out of deals that turned out to be winners. “Our job is not to do every good deal, it’s to make sure that every deal we do is good,” Thorp says.

The gestation period for a deal can be extended. Thorp met with Ned Sharpless, the UNC Chapel Hill professor who co-founded G1, numerous times over three or four years “before we ever got serious about writing a check.” In October, Sharpless was sworn in as director of the National Cancer Institute.

The partners at Hatteras are upbeat about the firm’s prospects when it next raises money, perhaps in 2019. “If we have the success that we hope to have for our investors, when we raise Fund VI it should be in the $200 million range,” Ingram says.

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