Corporate venture capital is now a common sight on the cap tables of university spinouts.
Marc Singer, managing partner of Osage University Partners, one of the largest US investors in university spinouts, says most of the more than 150 companies it has invested in have a corporate on the cap table.
Corporate investors, traditionally married to investing in startups at series A and later, are now not only committing capital to startups based on university research at earlier stages, they are also taking a more active role syndicating these deals.
“It used to be [that corporates] never went early. And it used to be that they never led deals. Now you see them going earlier and you see them leading transactions as well,” says Singer.
Corporate interest in university research is part of the evolution of corporate venture capital. The fact that CVCs are investing at earlier stages, not just in university spinouts but in pre-seed and seed stage startups more broadly, is a result of companies wanting to be more connected to the startup ecosystem. “They want to learn, find startups to partner with and acquire. Some corporates just want to be customers of startups,” says Singer.
Set up in 2009, Osage University Partners has $800m under management and invests from its fourth fund launched in 2023. It partners with more than 100 universities, mostly in the US but also abroad. Investing between $1m and $20m at all stages and in all sectors, 33 of its investee companies have gone public.
Its exits include quantum computing IonQ, a spinout from Duke University and University of Maryland, which went public in 2020; Evolv, an AI-enabled security technology spun out of Duke University, which listed on Nasdaq in 2021; and Dice Therapeutics, a Stanford University biotech spinout acquired by Eli Lily in 2023.
University-corporate funds
Corporates are also participating in sector-specific spinout investment funds. Osage University Partners recently partnered on a $50m venture fund with the University of Pennsylvania and German biopharmaceutical company BioNTech. Osage University Partners manages the fund, which invests in early-stage life science companies based on the university’s intellectual property or founded by Penn researchers.
It is the first time the VC firm has partnered on such a university-corporate partnership fund structure. Singer says he wants to do more such arrangements. Osage University Partners often advises universities on setting up their own funds. Managing the UPenn fund is a natural step for the VC, he says.
“We have a very close relationship with Penn. They were one of our first partner universities, and so it was a very natural extension for us to run that fund for them,” says Singer.
The fund allows BioNTech to strengthen its longtime partnership with the University of Pennsylvania. The company licensed mRNA technology from the university, which formed the basis of its Covid-19 vaccine. “They have a very close business relationship, and they were interested in strengthening that relationship. It was natural for the three of us to come together,” says Singer.
He is upbeat about investment opportunities in the US university spinout sector despite the pullback of US federal support for science and research. The lower funding levels instigated under the Trump administration last year have not yet translated into fewer spinouts, he says.
“Some universities have seen an increase in startups over the last year, partly because professors are worried about funding, and they’re more interested in startups. Other universities have seen a slight decline. On balance we haven’t seen a negative change in the amount of startup activity out of universities.”
A steadily growing number of US universities have set up venture funds to finance their spinouts at the earliest stages, with a recent spurt of fund launches possibly partly driven by the lower amount of federal funds to support scientific research.
Singer welcomes the increase in university venture funds. “There continues to be a lack of first-time funding for startups. The more capital you can bring to get more startups out the gate, the better the whole system will be.”
Osage University Partners works with technology transfer offices at its partner universities to identify potential investments before the team invests. It gets to know founders and their research to understand which gaps in the market the technologies can address.
“Our goal is to get to know the startups in those ecosystems right as they are starting operation and stay in touch. We’re often guiding startups before we invest,” says Singer.
One of the biggest challenges in university venturing, he says, continues to be creating a commercial product from a technological breakthrough.
“Universities start with the technology and then go find the problem to attach to it. So, learning how to find that problem, how to build product that really solves a market need and then take it to market. That is a challenge,” he says.
