Oxford Science Enterprises has tapped the credit market to boost its capital as it anticipates an uptick in exits over the next few years.
Oxford Science Enterprises (OSE), an independent, £1.1bn ($1.45bn) investment company that backs University of Oxford spinouts, has raised £175m ($232m) in venture debt, one of the first early stage VCs of its kind to raise capital from banks.
The venture debt, in the form of a net asset value (NAV) facility which allows investment funds to borrow based on the value of their investments, is priced at SOFR plus 4.5%. Goldman Sachs and Deutsche Bank led the financing.
“We’re more or less the first early-stage VC to have managed to obtain a secured NAV facility. We are the first company that has really gone to market and completed this. So it is groundbreaking,” says Jim Wilkinson, chief financial officer at Oxford Science Enterprises.
Typically, banks lend to private equity firms that have more mature assets. While some venture capital firms have borrowed from banks, it is unusual for a very early-stage VC investor like Oxford Science Enterprises to do so.
Oxford Science Enterprise invests in spinouts and startups from the UK’s Oxford cluster at the pre-seed and seed stage. It writes cheques between £50,000 and £25m, and will do follow-on financings for portfolio companies all the way to exit. The new capital will ensure its investments are fully funded.
Wilkinson says it was much less expensive to tap venture debt than equity, which has a comparable cost of between 15% and 20% for riskier assets.
“This venture debt is cheaper than equity. So, it’s probably going to be a permanent part of our capital structure going forward,” says Wilkinson.
He does not rule out continuing to access venture equity to raise capital. UK financial services company Aviva and Fulcrum Asset Management have invested in the firm, for example. Aviva has been an active investor in spinout VC firms in the UK. It recently invested in Northern Gritstone, an investment company that finances spinouts from the northern England universities of Leeds, Manchester and Sheffield. Aviva has also invested in Cambridge Innovation Capital, an investor in spinouts associated with the UK’s University of Cambridge.
The venture debt financing signals a maturing of Oxford Science Enterprises, which was launched almost 10 years ago. It has the largest amount of capital of any university spinout investment company and has around 40 companies in the deep tech, life sciences and health tech sectors in its portfolio.
Its exits include Latent Logic, an AI platform that creates simulations for autonomous vehicles, which was bought by Waymo in 2018. Another portfolio company, DJS Antibodies, a pre-clinical biotech company, which was bought by AbbVie in 2022.
The firm expects to see an uptick in exits in the next few years. “We are 10 years old on the first of June. We are getting into a position where we can start selling companies in the next three years. That is when we will become completely self-financing, because we’re a permanent capital vehicle,” says Wilkinson.
The turbulence in the financial markets caused by the US administration’s global imposition of tariffs could hamper the future run of exits, however. Several startups have already delayed initial public offerings as a result of stock market volatility.
“There are obviously a lot of moving parts going on in the world geopolitically. That affects M&A, investments and co-investors, so we’re monitoring everything at the moment,” says Wilkinson.
