SAN FRANCISCO – A day after Canaan Partners disclosed a $600 million fund – a third of that dedicated to the life sciences – Flagship Ventures closed a $270 million round, well above its $250 million fundraising goal.

Such exuberant venture fundraising to start the year is almost enough to make one wonder whether reports of venture contraction – Prospect Venture Partners failure to close its latest round, for example – have been greatly exaggerated.

"There has been a flow of confusing news, particularly for early stage companies," acknowledged Noubar Afeyan, Flagships' managing partner and chief executive. "It's been pretty worrisome to innovators and entrepreneurs."

The contraction is real, Afeyan said. But money is not impossible to find.

Flagship's fourth fund includes investments from pension funds, foundations, fund-of-funds, corporations and individuals. "Essentially, all our existing LPs [returned], and we added another half-dozen to the mix," he told BioWorld Today.

Canaan general partner Brent Ahrens told BioWorld Today earlier this week that convincing limited partners (LP) to back health care investments for the firm's ninth round took some doing, and Canaan faced "a lot of trepidation." But Canaan was able to sway those LPs with an impressive track record. (See BioWorld Today, Jan. 10, 2012.)

Flagship can say the same. The Cambridge, Mass.-based venture firm, which has a total of about $600 million under management, has a portfolio of 65 firms. Of those, about 20 have found exits. Recent such successes include the buyout of Yale University spinout CGI Pharmaceuticals Inc. for $120 million by Gilead Sciences Inc. and initial public offerings by BG Medicine Inc. and AVEO Pharmaceuticals Inc. (See BioWorld Today, March 15, 2010, June 29, 2010, and Feb. 8, 2011.)

But what sets Flagship apart from a lot of other life sciences venture firms is that it really focuses on early stage companies.

"We look for breakthrough technology, strong IP and the potential for generating multiple products," he said.

The particular therapeutic area is less important. But Flagship steers clear of those firms that are created to in-license and develop only one product. "We don't subscribe to the virtual model," he added.

An example of a Flagship-backed company is Eleven Biotherapeutics Inc., a start-up that boasted a promising protein engineering technology but was still far from the clinic. In 2010, Flagship co-led a $35 million Series A financing for Eleven, along with Third Rock Ventures, another firm known for early stage investments. (See BioWorld Today, Feb. 17, 2010.)

Flagship usually leads or co-leads its investments. And, in some cases, even helps found the company.

Afeyan said there's been a lot of interest in Flagship VentureLabs, an entrepreneurial unit of the venture firm aimed at establishing firms around promising emerging technologies. Firms such as AVEO and CGI Pharmaceuticals emerged from that program.

With the latest fund, Flagship anticipates backing roughly 20 firms, Afeyan said, with about half of the investments going into drug development. The remaining half will be split among medtech, diagnostics and sustainability firms.

He added that Flagship typically invests between $10 million and $20 million in each of its portfolio firms, "over the life of the company."

Whether this latest fund will help boost venture dollars for the industry in 2012 is anyone's guess this early in the year.

BioWorld Insight recently reported that private biotechs raised $4.5 billion globally in 2011, holding steady to 2010 figures. Many experts expect similar numbers for 2012.

In addition to investing in early stage firms, Flagship will dedicate a portion of its fund to late-stage value investing opportunities resulting from the current capital-constrained environment.