Atlantic Bridge connects Irish spinouts to the world

When University College Dublin (UCD) and Trinity College Dublin selected growth equity firm Atlantic Bridge in 2015 to manage a €60m ($68m) fund to back spinouts from Irish institutions, it was clear this would put the country on everyone’s radar.

This was not just because Atlantic Bridge maintains a global network of offices and promised to help spinouts scale internationally, but also because it marked the first time that Ireland gained such a fund – and thus also the first time that EU-owned European Investment Fund (EIF) had an opportunity to provide €30m in matching funds. In fact, the EIF’s cheque made it a “catalytic investor,” Helen McBreen, the investment director at Atlantic Bridge responsible for University Bridge Fund, told Global University Venturing.

You would not suspect that this was the first time such an initiative was launched in Ireland, however, if you consider the efficiency at which it all came together and how much has been achieved less than four years into the investment period.

McBreen said the origins of the fund were “a highly collaborative effort between a number of different entities. Chief among these were UCD and Trinity College Dublin, “which had a desire for their own seed fund and to have it managed by a professional fund manager.”

Through a highly competitive process, Atlantic Bridge was chosen as that fund manager “based on its model that would allow Irish business to scale globally and at a more accelerated rate through Atlantic Bridge’s global connections,” McBreen explained.

Atlantic Bridge wasted no time fundraising and, apart from signing up EIF, also attracted financial services firms Allied Irish Bank and Bank of Ireland, as well as the government’s enterprise support agency Enterprise Ireland.

EIF wired such a large sum because it “knew the strength of Irish research was there” and what they needed was to partner Ireland’s leading universities, McBreen said.

Ireland is a small country in terms of population (the 2016 census counted just under 4.8 million citizens) and in terms of third-level education entities: there are seven universities, 13 institutes of technology and approximately 50 research centres. Combined, those institutions offered a robust pipeline and showcased the opportunity that was underlying in Irish research.

“UCD and Trinity are punching high globally and they would have seen peer funds operate around other universities, allowing those spinouts to benefit from having an institutional seed fund in the ecosystem,” McBreen said. “The two were strategically focused on building a culture of entrepreneurship within their universities and build on the successes that they had had up until that point, but the missing part of the jigsaw was this fund.”

To source deals, Atlantic Bridge does regular pipeline assessments with tech transfer offices across the country to triage opportunities and work with teams to shape inventions into investable propositions.

Kathy Kelly, an investment associate of University Bridge Fund, added: “We have a very strong network with corporate partners, customers and other universities internationally. A lot of the dealflow would come through our proprietary network.”

Once a spinout has received capital, it benefits from Atlantic Bridge’s global platform and network: the firm, which has seven funds under management with a combined €950m in firepower, operates from five locations, including Dublin, London, Palo Alto, Munich and Paris It is also a multi-stage firm and while University Bridge Fund invests at seed, with capacity to follow, portfolio companies stand to benefit from later-stage growth funds.

Notably, Atlantic Bridge manages the €150m China Ireland Growth Technology Fund that invests in companies seeking to expand into China or vice versa, McBreen explained.

“Our typical ticket size in spinouts has been around €600,000 as part of a syndicate up to €1.5m to €2m for the seed round,” McBreen said. “We have invested in 24 portfolio companies so far.”

The capacity to follow on was one of the key motivators behind the large size of the fund, McBreen continued. “We are not just a small seed fund; we are a significant investor, typically leading deals. We are one of the largest seed funds in Ireland.”

One area that Irish universities, in particular, are really good at is spin-ins – companies that were not founded by an academic but that are now collaborating with researchers to jointly develop intellectual property and relocating to incubators on campus.

McBreen said: “While we lean towards investing in spinouts from across the research base in Ireland, we can also invest in spin-ins,” and this “has allowed us to bring international companies to Ireland as well.”

University Bridge Fund also had a portion set up to provide proof-of-principle investments – this was from the same pool rather than having a dedicated portion of the fund set aside – with small commitments made to catalyse a spinout before being formally established.

However, McBreen said: “Enterprise Ireland has an excellent funding model for proof of principle, the Commercialisation Fund.

“Instead of making dozens of proof-of-principle investments, we have worked more closely with Enterprise Ireland on their commercialisation fund projects, to help those projects increase their chances of being investable. That works much better for us and the academics.”

The move made sense, even more so because Enterprise Ireland was a partner anyway. McBreen specified: “The program is very focused on setting up your company, working on the commercial aspect and fundraising and delivering key technology milestones. It also enables co-founding, so we can build out teams if there is a gap commercially.

“We have invested in several companies that have gone through the commercialisation fund first, and I think we have increased their chances of receiving seed investments because we have been working with them, in some cases, for one or two years prior to them actually spinning out.”

For a venture firm to come in one or two years before a spinout is incorporated is unusual, but McBreen explained that she and her team were giving projects a lot of feedback early on.

“We are not waiting for a spinout to come out, we are getting in there and helping the projects form as companies so that they are doing the right things in the right order,” she said.

There is always a danger that an outsider coming in to explain to tech transfer offices how to do their job could backfire, but any such fears would have been misplaced. McBreen noted that the reaction had been “very positive” even if there was, understandably, a learning curve on all sides.

Above: Helen McBreen

“We had to figure out a way of working together but we all went in with a spirit of being collaborative, and we are still operating that way. We have a strong partnership with the universities, and we have worked hard to build those relationships.

“Tech transfer staff now understand what we are looking for, but they are not afraid to ask for feedback either because the pitches do not have to be perfect. We have a high level of feedback loops going into the universities and their projects.”

McBreen continued: “We have done a huge amount of knowledge share on what VCs look for, how VCs work, why we may or may not invest, and we have tried to better skill people within tech transfer offices on what the VCs’ role is. We have moved away from this concept of everything being investable to trying to find the highest quality things to invest in instead.”

With University Bridge Fund being such an obvious success, it is easy to imagine trying to replicate its collaborative approach elsewhere. But McBreen cautioned that every ecosystem was different and noted that the 40-odd tech transfer funds that EIF had invested in to date were all adapted to the unique local opportunities and challenges. The collaborative approach on a national scale worked so well because Ireland was a small country open to collaboration, McBreen underlined.

“But there is merit in these types of collaborative model,” McBreen said. “We have the advantage of location where nothing is more than two hours away. But it is also a function of dealflow. In our case, it makes sense to have a collaborative model.”

While University Bridge Fund is undoubtedly a success for spinouts, universities and Atlantic Bridge, its impact has been even bigger. There are the hard numbers, McBreen said: “Our investments have generated a huge amount of jobs, in Dublin and regionally. Half of our portfolio are collaborating internationally or exporting internationally.

“We have approximately 30 different co-investors and the companies have in total raised some €120m – including our initial investment, follow-on investment, other investment coming into the company, and non-dilutive funding through Horizon 2020 and other European non-equity funding routes. These are pretty significant numbers in a short space of time.”

But there was also fact that the fund and portfolio companies were progressing against milestones in the way they were, which was almost more important, McBreen said.

“That is down to our bridge model, where we are giving companies access to a sophisticated and extensive global network of partners, talent, other investors, customers, potential acquirers, and so on.

“It is a hugely cross-border approach and that is the DNA of Atlantic Bridge. The companies in the university fund are given the same access as other Atlantic Bridge portfolio companies to that network.”

Having a seed fund managed by a firm that also has later stage vehicles under management is a great benefit to spinouts – and it is a recipe that has worked well elsewhere too, such as the Albion Capital-managed UCL Technology Fund (see our October 2018 issue for an in-depth profile).

McBreen explained: “Founded by experienced serial entrepreneurs and operators, namely Elaine Coughlan, Brian Long, Kevin Dillon, Mark Horgan and Gerry Maguire, Atlantic Bridge now has 22 investment professionals in the firm. Our companies get access to all of that operational and investment expertise. It has been a huge benefit to the spinouts. We take a very hands-on approach across Atlantic Bridge, we take board or observer positions, work with the company to advise them on their strategic plans might be.

“We partner with the company and that is a philosophy that has been happening in the university fund as well – and we have dozens of examples of the companies benefiting from that kind of connectivity platform.”

All the talk about a global network might sound like a marketing spiel, but actually, such international connections are crucial to Irish companies because the domestic market is so small that scaling locally quickly hits a limit and entrepreneurs have to think globally from the get-go.

Thinking globally can be a daunting proposition for any entrepreneur, but even more so when it has to be a consideration from the very beginning. Having Atlantic Bridge by their side was therefore very attractive to founders, McBreen said.

“We ask entrepreneurs who their customers are and, within minutes, they realise that most of the customers are international. We ask them for their global strategy and there might be some head-scratching in some cases, but then they say: ‘actually our strategy is that Atlantic Bridge can help us access that particular market,’ because they have researched our success rate and our track record. We can open those doors, we can connect the companies to customers, potential acquirers, partners and so on.”

McBreen added: “Equally from a diligence perspective, one of the interesting things is that our network is sophisticated enough to do diligence across all sorts of sectors at very senior levels and corporates to get those insights.”

Another challenge, though not unique to Ireland, is that of an experienced management team. McBreen explained: “We will back teams that are academic founders or technologists, but they will know that the management team has to be built out commercially. In most cases, we will invest in companies once we have worked with them to put the commercial leadership in place.

“We have networks of commercial talent, where we are introducing and placing people in vice-president of sales, chief operating or chief financial officer positions, and we are building out the depth and bench of the early-stage company.

“Our network has been really important in allowing us to do that – had we not had that, we would not have the strength of management teams and a lot of the portfolio companies that we are working with. That is something that is not necessarily unique to Ireland, but the way we have tried to fix that problem is unique to Atlantic Bridge.”

Much of Atlantic Bridge’s expertise, built over the nearly two decades that the firm has been operating, is thanks to the founding partners who had all scaled Irish companies before achieving international mergers and initial public offerings.

All of this makes it easy to forget that University Bridge Fund is less than four years old and has deployed roughly half of its capital to date. However, McBreen and her team are already working on a second fund, intending to achieve a first close by the third quarter of 2020.

McBreen is, unsurprisingly, optimistic about the prospect of a second fund: “We are going into the second fund investment period with a very strong pipeline and ready to invest in new spinouts.

“Our ambition and the plan is to make sure that we do not have a capital gap in the Irish market.”

This has become even more imperative in the current economic climate, McBreen explained. “Like almost all early-stage companies affected by this crisis, this is an extraordinarily challenging time and as investors we are focusing our efforts on supporting companies in weathering the storm, ensuring they can preserve capital and continue to make progress as fundraising will be challenging.”

Above: Kathy Kelly

And the fund already has a range of spinouts working on relevant technologies and services in its portfolio, such as anti-microbial surfaces technology developer Kastus (Dublin Institute of Technology), event and risk detection platform Aylien (UCD, Trinity and National University of Ireland Galway) and online medical education platform iHeed (Trinity).

Siren (NUI Galway), a contract tracing service for health services and ministries, Manna (UCD), a drone delivery service of medicines, and Latch Medical, a vaccine delivery platform (UCD) are similarly among Irish companies, and spinouts globally, who have taken on the fight against Covid-19.

Looking ahead at the second fund, McBreen revealed that she is optimistic to see existing limited partners returning and additional universities are supportive.

As to whether she would do anything differently next time, she said: “We have been very encouraged that universities have taken on board a lot of our feedback and have brought startup development people into their units, who bridge the investor with the tech transfer offices. I would encourage other universities to look at the model that Trinity and UCD have developed over the last few years.

“The thing that we could do differently is bringing more international partners to Ireland. The fund is hugely attractive to early-stage companies who want to land in Ireland. I have just spent the day with a US company that wants to not set up their technology operation in Silicon Valley but in Ireland, because they have found significant intellectual property here and they have a number of key technology customers that are the gateway to their European operations here in Ireland as well.”

She added: “That international model is one that we can leverage more in Fund II – collaborate with international universities, with our colleagues and other technology transfer funds across the UK, Europe and the US.

“There is a lot of scope there to find really interesting dealflow and build new companies. If you come up with the premise of crafting new opportunities to invest in and if you have this collaborative approach, then why not extend that internationally if it plays to the advantage of the fund.”

It is easy to see why McBreen decided to join Atlantic Bridge when she did: right at the start of University Bridge Fund. Indeed, she revealed: “My first day on the job was fundraising and I was there for the pitch to UCD and Trinity for Atlantic Bridge to be the fund manager.

“It was a significant opportunity for me from a career perspective, to join a top-tier global firm that is headquartered in Ireland, and to be part of the journey of a new fund literally from day one. My ambition was to build a career in investment and Atlantic Bridge and the university fund itself has absolutely given me the platform to do that.”

McBreen also made sure to acknowledge the work of her team, including Kelly as well as Alison Crawford, Eimear Gleeson and Gerry Maguire, the general partner who has executive responsibility for University Bridge Fund.

“What I am proud of is what we have achieved in four years, which is getting a new fund up and running from literally two universities having an idea to fundraising €60m, deploying the capital, building the teams and applying the model.

“There was some negativity at the beginning, from stakeholders in the system asking if the IP was strong enough and if our model would work. But the signs are there and the ultimate sign will be returns – but it is a seed fund and we have to be patient.”

She added: “We see the strength of the pipeline, we see the model working, we see our companies achieving their milestones and achieving success. It is high risk. But if we partner in the right way with companies, we can navigate that risk. The model is certainly showing the right signals at this point in time.”

Kelly said: “When I joined Atlantic Bridge, I initially worked on our growth funds and then moved across to the university fund. It was a really great opportunity to see companies from a much earlier stage, compared to what I previously worked on. I have had the opportunity to work very closely with the founders and companies at an operational level. And the university fund being the first of its kind in Ireland was a great opportunity.

“We have seen a lot of interesting and exciting companies coming out of the third-level sector. Then in terms of the Atlantic Bridge team – working alongside the partners every day, investment directors like Helen and some of our other directors on our growth-stage funds – you see the value that Atlantic Bridge brings to both early and late-stage companies. Seeing how that model works on a first-hand basis is very valuable from a career perspective, as is learning from an associate level what it takes to scale a company internationally.”

McBreen said: “It is worth making a final point here that Atlantic Bridge – as much as it invests in companies – also invests, at a very senior level, in the development of its investment professionals. That has been hugely important how we are growing from within. Kathy has been on a huge amount of training over the last five years with BVCA and Invest Europe, and I was fortunate enough to partake in the Kauffman Fellows program over the last two years in class 22. That opens up that global network of investors.”

She concluded: “It is a brilliant firm to work with to develop your own professional investment career and have that voice of experience behind it thanks to people who have been in the game a lot longer and, more importantly, have built and scaled their own companies very successfully, which is hugely valuable to us.”

Clearly, Atlantic Bridge’s model is working well for Ireland. That may not be surprising, but it is heartening nonetheless that a small nation can punch above its weight on the global stage with the right support. It can be challenging to feel excited about the future in the current crisis, but Irish spinouts certainly have every reason to be optimistic.