Alumni investors are flocking to the second Oxford technology spin-out fund, launched this week, Richard Lofthouse reports.
Some of the savviest Oxonians have been eyeing this moment for months — as far back as February when the University launched its first public-facing technology spin-out fund, the University of Oxford Isis Fund I. The £1.6 million fund was promptly over-subscribed despite the fact that not a penny was wasted on advertising.
The second such fund, the University of Oxford Isis Fund II, opened to investors on December 1, and fund manager Parkwalk Advisors has already seen much interest in the fund, reflected in a capacity crowd at the launch event held last week at the London office of the funds’ legal advisers Brown Rudnick.
There are two stories around the fund, one concerning speculative gains — or ‘can I get rich from this?’ — the other concerning the terrible lack of investment in UK R&D, both historic and ongoing, and how Isis Innovation and the University are trying to do something about it both for their own benefit and society’s. That’s before we even reach the individual technologies and researchers involved here, some of which showcase life-changing medical inventions, among other societal goods.
Prioritising the first question, Enrico D’Angelo at Parkwalk told me at the launch event that Isis I has performed very well, but that its last investment had only just been made. In other words, it remains early days. The aim of each fund is to commit its capital over a 12–24 month period, the anticipated life of the fund being 5–7 years.
Seed funding is the hardest to come by because it is the riskiest. Individual patrons, or ‘angels’, are not enough. Get it right, however, and the rewards are commensurately handsome. The biggest Oxford example to date is NaturalMotion, acquired by social gaming firm Zynga in January for £320 million, and responsible for games including Clumsy Ninja (illustrated here). Its co-founder and CEO Torsten Reil has a biology BA from Oxford, and had founded NaturalMotion on the back of DPhil research originating from Oxford’s ever-stellar zoology department.
According to the House of Commons Business, Innovation and Skills Select Committee, the United Kingdom is already suffering from decades of underinvestment in technology and science research, spending just 1.72 per cent of GDP in 2012, versus 2.8 per cent in the US and more than two per cent in France and in Germany. Chairman of the Committee Adrian Bailey specifically alluded to UK university research and the need for greater investment.
This is where the Oxford story goes centre-stage. Whereas everyone thinks quirky dons and Brideshead plotlines, the relative outperformance of Oxford’s wholly owned tech-transfer company Isis Innovation is far less widely understood.
First of all, Oxford is the largest research-based university in the UK, with a research expenditure of £542 million per year (2012–13). Secondly, Isis Innovation, established by the University in 1987 to help commercialise Oxford research, is currently ranked the top technology-transfer office in Europe (Global University Venturing).
The purpose of the University of Oxford Isis Fund II, like its predecessor, is explicitly to address the funding gap between doing the original research under a university banner, and obtaining bigger funding five to seven years downstream, typically from private equity companies or the financial markets.
‘This gap needs to be filled to continue to enable the progression of the most exciting innovations from all departments within the University to market. The University of Oxford Isis Fund II seeks to help fill this gap with Isis Innovation acting as the portfolio advisor [and Parkwalk Advisors the fund manager].’ (UOIF II Prospectus)
For more information about the fund: http://parkwalkadvisors.com/pw_uoif/
Image from Clumsy Ninja courtesy of NaturalMotion.