Oxford’s research commercialisation experts are encouraging alumni to help University start-ups — and themselves
Isis Innovation, Oxford University’s research commercialisation arm, has recently teamed up with investors Parkwalk Advisors to change the way it funds its projects. The idea behind the Isis Fund is simple: alumni get to help some of the University’s most exciting research become a commercial success, and, with any luck, see a handsome return on their investment in the process.
It’s a tempting prospect, not least because 2014 is already shaping up to be a stellar year for University’s spin-outs. In January and February alone, Isis created three new companies — in fields of ophthalmic gene therapy, ultrasound cancer therapy and secure mobile payment — raising a total of £15 million of new investment. One of these, Nightstar, received £12 million from the Wellcome Trust’s new venture arm to fund further clinical trials of a treatment for an inherited form of blindness called choroideremia. The therapy, developed by Professor Robert MacLaren at Oxford’s Nuffield Laboratory of Ophthalmology, showed extremely promising results in a clinical trial published in the Lancet in February.
But it’s Oxford’s “spin-out alumni” who have really grabbed international headlines recently. In early February, gaming pioneer NaturalMotion stunned the financial community when it was acquired by US social games company Zynga for more than $527 million. The University, as a NaturalMotion shareholder, will benefit to the tune of around £30 million in cash and shares from the deal. “It’s a great example of how important early investment can be for a promising company, and how rewarding it can be for the early investors,” says Tom Hockaday, Isis Innovation Managing Director. “We first heard about the technology when it was an exciting project in the Zoology Department. We worked with the founders to protect the IP, develop a business plan, and made an initial award of start-up capital from the University Seed Challenge Fund. We also introduced first-round investors.” Elsewhere, Oxford Immunotec, which recently completed a successful Nasdaq listing, raised $64m in its IPO. The tuberculosis diagnostic company expects its revenues for 2014 to be in the region of £30m.
So where will the new University of Oxford Isis Fund fit in to the spin-out process? “Seed investment is absolutely key to the whole process of commercialising new and disruptive technologies,” explains Andrea Alunni, Isis Innovation Seed Investment Manager. “And as Parkwalk already manage nine EIS funds, including two with Cambridge Enterprise, they were an obvious partner for us.” There is an amplification effect of seed investment funding. Historical figures show that when £1 is invested at concept, it can attract £8 at the seed funding stage, and £10 at Series A. “The more money we invest at seed, the more we can attract in the future, for the benefit of the University’s technology,” explains Alunni. “There is a virtuous cycle there.”
Parkwalk’s existing EIS funds have now made investments in 27 companies and all of the fully invested funds are currently valued well above investment cost. It’s portfolio is brimming, and includes Xeros, a University of Leeds spin-out which has launched a near-waterless washing machine and is currently considering an IPO, and Aqdot, a Cambridge spin-out developing unique chemistry for encapsulating, storing and releasing drugs and other chemicals.
The University of Oxford Isis fund will invest across all areas of technology and intellectual property from Oxford. “One of the most exciting areas for investors in the University of Oxford Isis Fund is the Isis Software Incubator,” says Alunni. “The incubator was launched in 2010 to support software entrepreneurs from across the University and alumni. It has graduated 11 companies and is currently working with a pipeline of 26 ventures. Companies from this programme can apply to the Fund for early stage capital.” Of the traditional University spin-out companies Isis are currently working with, Alunni says the cohort from the mathematical, physics and life sciences division is still the largest. “The University Chemistry department is famed within Oxford as being a source of spin-out entrepreneurs, and that is still the case. But Medical Sciences and the Institute of Biomedical Engineering are now also very strong.”
Despite there being so many startups, the journey for each is similar. It begins with Isis Innovation and an academic identifying which technology has the potential to become a spin-out. With intellectual property protection,due diligence on the technology itself and the development of the business plan, the story is then transformed into something with numbers and milestones. “It is at this stage that Isis will bring a proposal for funding of a new company to the investment committee of the University of Oxford Isis Fund,” says Alunni. “The Parkwalk fund is a fantastic way to take advantage of tax breaks, and to allow more alumni and high net worth individuals to invest in technologies from Oxford. We see this as the first in what will potentially be a series of similar Funds, all aimed at progressing Oxford spin-outs and start-ups.”
For more information about investing in the Isis Fund, please contact Andrea Alunni, Seed Investment Manager, Isis Innovation at email@example.com.
Images by Isis Innovation and Oxford University Images.