Oxford can rarely be accused of failing to think big. Number one in the UK for its research impact and consistently scoring at the top of global rankings, the institution produces some of the best research and academic spin-outs in the world. In the past year and a half, Oxford saw 2014’s largest university spin-out exit of gaming firm NaturalMotion in a $527m acquisition, a $104m series A for its immunotherapy spin-out Adaptimmune which subsequently floated in April 2015 raising $191.3m in its IPO, and has supported the launch of two seed funds at Isis Innovation, the university’s technology transfer office (TTO).
Now, the university is partnering with Isis and several big name investors to create Oxford Sciences Innovation (OSI). OSI is the largest single university venturing fund yet recorded by Global University Venturing, with the possible exception of the Stanford Start X fund depending on whether you believe calling an endowment-fuelled fund “uncapped” automatically makes it bigger than any fund with a stated size.
With a fundraising target of £300m ($474m) – £210m of which is already secured – the size of OSI is bound to change the course of debate over university venturing as the institution puts all its chips on a financial model it hopes will support its spin-outs for the foreseeable future. To put it in perspective, OSI is raising nearly double UC Ventures’ headline grabbing $250m fund launched to cover all of the University of California campuses last year, and in one swoop has come £46m shy of the total £346m collectively raised by Imperial Innovations – Imperial College London’s TTO and the UK’s biggest university venturing unit – since 2005.
The fund’s history can be traced back fifteen years to the formation of commercialisation firm IP Group when founder Dave Norwood, now chairman of OSI, secured £20m from investment bank Beeson Gregory to give to Oxford academic Graham Richards for a new chemistry research lab in return for 50% of the university’s stake in chemistry spin-outs in a deal that ran for a decade and a half.
“We’ve always kept in touch with Dave Norwood and seen the sector grow and institutional investors getting involved,” said Tom Hockaday, managing director of Isis, who said that the fund was a product of people in Oxford talking with Norwood, institutional investors, and looking to do something really big for Oxford.
What’s crucial about OSI is that it can afford to take a long term view on its investments over a 15 year life cycle, necessary for the development of life sciences and other long-term commercialisation projects. It is granted this ability by the sort of institutional investors involved, which include Invesco, Lansdowne Partners, IP Group, Oxford’s Endowment Fund, charity investor the Wellcome Trust, and Woodford Investment Management (WIM). Both Invesco and Lansdowne are investors in Imperial Innovations and Cambridge Innovation Capital (CIC), the £50m university venturing fund launched by the eponymous institution in 2013, and have taken this long term view on both investments, while IP Group, WIM’s founder Neil Woodford, and IP Group are veteran investors in the university innovation space and thus understand the time requirements involved.
“One of the aspects is its [OSI] size, and its intent to invest from the very start of spin-out companies through the many rounds a spin-out might require,” said Hockaday, adding that one of the real attractions is that through the institutions investing, OSI “brings the network and connections into some of the most powerful and sophisticated investors in the UK, both in terms of sources of money and in terms of expertise and capability.”
OSI is going to be targeted solely at the spin-outs of Oxford’s various sciences departments as well as the Harwell and Culham laboratories situated within Oxford’s tech cluster. This does raise the question of whether Oxford University will provide sufficient deal flow to sustain such a large fund when Cambridge Innovation Capital, which invests across all companies within its technology cluster with a smaller fund, and Imperial Innovations, which has secured investment opportunities at Cambridge, Oxford, and University College London to sustain itself.
“Absolutely,” said Hockaday. “When we look at the deal flow pipeline now, we’ve got some fantastic opportunities ready to go. So I have no doubt whatsoever that there will be opportunities over the coming years, let alone the next fifteen. You can tie that back to the continuing growth of the research base at Oxford. You can look at the mathematical, physical and life sciences division or the medical sciences division which are steadily growing, and they are such a huge research engine. I have no doubt about the researchers and academics there and their ability to come up with new and exciting ideas.”
The news was welcomed by Hockaday’s peer Tony Raven, CEO at Cambridge’s TTO Cambridge Enterprise and non-executive director at CIC, who said it was “great news that there’s more capital deployed into the research of the UK’s top universities. With Cambridge, Imperial College London, and Oxford, it reinforces the growing value and appreciation of university research that can really grow our knowledge economy for the future.”
Outside of the Golden Triangle of Oxford, London, and Cambridge, OSI has the potential to act as a leading example of how to construct a fund. However, Tom Hockaday believes this is very much happening already:
“When you look across at European universities and US universities, there are lots of different funds of different shapes and sizes appearing. Some of these are philanthropic proof-of-concept funds, some are more traditional venture funds, others are following a hybrid model. I’m sure that all research based-universities will be looking at bringing together the financial resources that are required to grow strong spin-outs or strengthen existing spin-outs in whatever way they can.”