Cambridge sets the standard

Cambridge’s £50m ($80m) Cambridge Innovation Capital (CIC) fund, announced earlier this week, is a new direction for university tech transfer. Joining similar funds at Kyoto and Stanford announced over the past month, the three universities are raising the bar in terms of support for fledging companies and their cutting-edge technologies. In the case of Cambridge, the fund adds the catalyst to Europe’s largest tech cluster that could spark the next ARM or Autonomy, the university’s top valued spin-outs.

One of the most important points about the CIC is the flexibility that it will offer spin-outs. It fills the void left by the drying up of traditional venture capital, and goes a few steps further in putting itself forward as the ideal replacement. The fact that the new fund will be managed by those close to Cambridge’s commercialisation efforts will ensure that the fund meets the requirements of its spin-outs. One obvious indication of this is that investments won’t be strictly tied to a 10-year cycle, allowing spin-outs the breathing room they need to develop naturally and raising the odds on longevity of the company. Another is that the CIC won’t be afraid to get in early to support a promising idea, thus helping to bridge the valley of death gap at which so many fall.

The fund also supports Cambridge’s entire cluster, which has encouraged other venture groups to invest, including Imperial College London-backed Imperial Innovations (which shares as its shareholders many of CIC’s) and Invoke Capital. While spin-outs will undoubtedly gain from having the CIC in their corner, other Cambridge-based firms which may not have gone through the university’s commercialisation route will also be able to benefit from the fund. Conversely, it also opens up new investment opportunities for the university itself, allowing it to pick from the wider mass of start-ups in the cluster.

The clumping of the cash squarely on Cambridge’s cluster companies also gives them a critical mass backing, ranging from £2m up to £10m depending on the firm, which may not come from other sources. The CIC plans to have invested all £50m within three years with a view to raise a further £50m through an IPO at the end of the period. The fund is also evergreen, which will bring the profits from Cambridge’s success back into the university and ready to support the next spin-out rather than diluting the cash over time.

Peter Keen, chief executive at CIC, said: “The £50m is just the start. If we’ve got to support companies over a seven to 10 year period, it’s a limited fund. I’m sitting here in the west Cambridge University site and see all the investment in resources and physical infrastructure the University is making and I think Cambridge is going to continue to grow. I think in three years’ time there is going to be more opportunities than there are today so I will be looking to invest in new opportunities in three years’ time as well as invest in existing ones, so I certainly will be hoping to raise at least another £50m.”

The move all but guarantees Cambridge’s retention of the top spot for tech transfer in the region for the foreseeable future. This success breeding success will also undoubtedly attract even more brilliant minds to the region, especially those with entrepreneurial blood in their veins.

Outside of the University, the fund could also mean brighter days ahead for UK tech transfer. While Cambridge is not the first UK university to raise such a fund (for example, Manchester is backed by the £32m UMIP Premier Fund, as well as Imperial), it is an indication that universities can find other ways to support their spin-outs. Should others follow suit, university-led investment may not only lead to more ARMs and Autonomys in Cambridge, but across the whole of the UK.