Big Deal: UC Ventures

It’s been a busy summer for the University of California system (UC) since announcing a policy reversal on a self-imposed ban on direct investments into its startups. The institution is creating a $250m fund, called UC Ventures, to invest in research commercialisation across its sites and partners. There are currently 10 campuses, five medical centres as well as three national laboratories by affiliation. California is also affiliated with more than 20 incubators and accelerators.
The policy which stopped its network of campuses from making direct investments in spin-outs had been in effect for 25 years. The ban was established in 1989 as part of UC’s Guidelines on University-Industry Relations Policy.
Despite the policy, the university has had some high profile spin-outs, not least Kite Pharma which celebrated a $128m initial public offering in July 2014, surpassing expectations and its target of $115m. As of September 19, 2014, the company’s market cap on Nasdaq is more than $970m.
UC Ventures will be independent and draw no money from tuition fees or the Californian state. Instead, it will draw its cash from the system’s endowment, and will take a long-term view on return on investments. The Office of the Chief Investment Officer (CIO) will hold certain key governance rights. The CIO, Jagdeep Singh Bachher, will also assist the fund in developing its own resident expertise to mitigate risks.
UC Ventures will be able to support a startup pilot programme, announced in June, which will allow campuses to take equity and directly invest in companies or services that UC has supported, including through campus incubators or other facilities.
In addition to the fund itself, and in co-operation with UC’s campuses, medical centres and affiliated labs, incubators and accelerators, an independent advisory board for will be set up, welcoming industry experts from Silicon Valley and other Californian business leaders. The composition of the advisory board, called Innovation Council, will only be announced in the coming months, but its aim will be to provide UC with industry advice and insight.
Largely responsible for the changes is the university system’s new president, Janet Napolitano, who joined the institution in September 2013. She had previously been pursuing a career in politics, during which time she was governor of Arizona and then had a tumultuous four years leading the US Department of Homeland Security. There, she oversaw the introduction and cancellation of intrusive body screening technology at airports across the country, was responsible for the Federal Emergency Management Agency responding to natural disasters such as hurricane Sandy, and was a polarising figure in the immigration debate (being criticised both for being too harsh and too lenient by the opposing sides).
During the announcement of the policy reversal in June, Napolitano said: “These measures are key to supporting and expanding the entrepreneurial culture on our campuses, and enhancing the innovation ecosystem at the University of California. The technology and companies incubated at UC have a direct and critical impact on the state’s economic growth, and our continued support is integral to our university’s public mission.”
Jagdeep Singh Bachher, the university’s chief investment officer, commented: “UC Ventures is the result of careful evaluation of best practices to develop the most effective investment vehicle to capture the economic value the University of California is creating through its pioneering research. Our goal is to build upon the technology commercialisation efforts at UC while carefully managing potential risk exposures. We are confident an independent UC Ventures will achieve this.”