Good day. After selling Arizona-based behavioral-health and primary-care firm Bayless Integrated Healthcare, entrepreneur Justin Bayless has launched Bayless Ventures, a new venture firm formed to invest in digital-health startups and to take limited partner stakes in venture funds.

After starting his career with Morgan Stanley in 2006, Bayless joined his father’s psychology practice in 2008 and became chief executive in 2010. He expanded the firm, which focused on children’s mental health, to offer mental health care for all ages, plus primary-care services and telehealth. He sold 70% of the business to Magellan Health in 2020 and, after healthcare company Centene purchased Magellan in 2022, sold the remaining 30% to Centene that year.

Now he is investing the proceeds of the sale through Bayless Ventures, a Phoenix-based firm focusing on startups in areas such as women’s and elder health. Its initial investments include Prickly Pear Health, which focuses on women’s cognitive, emotional and neurological health, and Joiful Health, which connects low-income communities to preventive-health and social services.

Bayless said he intends to build a portfolio of 10 to 20 direct investments in startups and to complement that with investments in venture funds. Its LP positions so far include one in Emmeline Ventures, a venture firm that invests in female founders.

And now on to the news...

New venture firm. New investor Arsenal Bridge Ventures is raising a $150 million fund to build biotechnology startups around science emerging in areas outside Boston and San Francisco, expanding a model the team has previously executed through a nonprofit.

• Biotech venture capital clusters in established life-sciences hubs. Through Sept. 11, 188 biotech venture deals had closed this year in California, 126 in Massachusetts and six in the Midwest, according to market tracker PitchBook Data.
   
• The Arsenal Bridge team sees opportunities in the Midwest and other areas outside conventional clusters. It aims to close its debut fund in the first half of 2025.
   
• The firm intends to build a portfolio of eight to 10 companies with the fund and is scouting potential deals.

All seven independent directors of DNA-testing company 23andMe resigned Tuesday, following a protracted negotiation with founder and Chief Executive Anne Wojcicki over her plan to take the company private, The Wall Street Journal reports. It is the latest challenge for 23andMe, which has struggled to find a profitable business model. The stock price rose a penny on Tuesday to $0.35 per share. At that price, 23andMe’s valuation is just $7 million more than the cash on its balance sheet. That represents a 99.9% decline from its $6 billion peak valuation just after going public in 2021. In a letter addressed to Wojcicki, the directors wrote that “after months of work, we have yet to receive from you a fully financed, fully diligenced, actionable proposal that is in the best interests of the non-affiliated shareholders.”

Health investor RA Capital Management has hired two senior managing directors to lead a new team focused on structured capital deals to help cash-hungry healthcare companies cover their costs as they bring products to market, WSJ reports. The team will be led by Jeremy Lack, who is joining from Athyrium Capital Management, and Adam Kaye, who joined the firm earlier this summer from Sixth Street Partners. RA Capital didn’t disclose the target size of investments or how they would be made. Typically, firms launching a new investment strategy set up a fund dedicated to it. It is the latest strategic expansion for Boston-based RA Capital, which last year launched a “planetary health” team that targets sustainable world investments, building on the thesis that human health closely depends on a healthier planet.

Venture capital industry cheers Fed rate cut. Venture capitalists applauded the Federal Reserve’s decision to cut interest rates by a half percentage point, saying the move was a long-awaited step toward kick-starting a slumping venture industry, WSJ Pro reports. Investors said the cut on Wednesday isn’t likely to have an immediate effect on the venture market, but that over months lower interest rates could improve access to capital for startups and spur more initial public offerings, a key way investors cash out of startups. The IPO market has been in the doldrums for the better part of two years.

Funds

Aeroflow Health, which facilitates access to medical equipment and supplies covered by insurance, has launched a venture capital arm. Alongside the launch, Aeroflow Ventures co-led a $3.7 million seed round in Canopie, a maternal health startup.

People

Aegis Ventures, a New York-based venture studio, said Murray Brozinsky joined the firm as a partner on its leadership team. He was previously chief executive officer of Conversa Health.

Abata Therapeutics, a developer of therapies for severe autoimmune and inflammatory diseases, appointed Joanne Beck to the post of chief technical officer. She was most recently chief technology officer at Aerium Therapeutics.

Deals

Healthcare technology company Fabric acquired virtual care provider TeamHealth VirtualCare for an undisclosed amount. Fabric is backed by investors including General Catalyst, Thrive Capital and GV.

Serán Bioscience, a provider of development, analytical and manufacturing services to pharmaceutical and biotechnology companies, picked up more than $200 million in strategic growth funding led by Bain Capital Life Sciences.

Nura Bio, a South San Francisco, Calif.-based developer of treatments for a broad range of neurological diseases, added $68 million in Series A funding. The Column Group led the round, which closed with more than $140 million.

Arzeda, a Seattle-based protein design startup, closed a $38 million funding round from investors including Sofinnova Partners.

• Can AI companions help cure the loneliness epidemic?
   
• Cigna demands FTC retraction in escalating drug-price fight
   
• The battle brewing over blood tests for cancer
   
• Her ‘skinny’ videos divided TikTok. She says they’re ‘what the viewers want.’

• In race to make gene therapy for age-related blindness, 4D Molecular reveals positive results (STAT)
   
• Arkansas’ governor says Medicaid extension for new moms isn’t needed (KFF Health News)
   
• Roivant dermatology subsidiary to be acquired by Organon (BioPharma Dive)
   
• Ethical challenges associated with pragmatic and cluster RCTs (New England Journal of Medicine)

This newsletter was compiled by Matthew Strozier, Zachary Cole and Brian Gormley. 

WSJ Pro Venture Capital is a premium service of The Wall Street Journal. We cover venture capital and the global startup ecosystem. Share your tips, comments and questions: vcnews@wsj.com

The Team: Matthew Strozier, Yuliya Chernova, Brian Gormley, Angus Loten and Marc Vartabedian.

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