Anne Dobrée, head of Cambridge Enterprise Seed Funds, talks to editor Thierry Heles about the unit’s work and the evolution of university venturing over the past two decades.

Headshot of Anne Dobrée

Countless tech transfer offices now have an internal funding mechanism to help spinouts get off the ground. Cambridge Enterprise Seed Funds, led by Anne Dobrée within University of Cambridge’s wholly-owned commercialisation arm, Cambridge Enterprise, is among the most intriguing.

Dobrée, who gained a PhD in immunology from Cambridge in 1999, joined the university’s tech transfer team in 2001, and has been involved with Cambridge Enterprise since its formation in 2006. She joined the Seed Funds team in 2008 and became the unit’s head three years later.

Seed Funds has a unique structure – while it is a business unit of the tech transfer office, it actually invests off the university balance sheet and thus its shareholder is University of Cambridge. Seed Funds is a ringfenced account on the university finances and currently has £10m ($13m).

This is a decent pot for early-stage investments, but Seed Funds did not start out with that much cash. Dobrée said: “The money came from a mix of different sources. The first money was provided in 1995, when the then treasurer of the university sold some shares in utility Anglian Water and put £2.4m into a venture fund for early-stage tech companies. At that point, the finance committee made all the decisions on investments. Then, in 1999-2000, the UK government formed the University Challenge Funds. Cambridge and its Babraham Institute had a £4m fund under that scheme.”

Seed Funds added another £1.7m in 2008. “We raised philanthropic money under what was then the university’s 800th anniversary campaign,” Dobrée continued, “because our funds were quite fully invested by that point.”

Since then, the initial £8m has grown to £10m in cash and another £20m in investment holdings. The portfolio currently consists of 86 companies – 51 have received capital and 35 are backed on an equity-for-intellectual-property (IP) basis.

In 2012, Seed Funds was joined by Enterprise Funds, a co-investment vehicle that relies on UK tax relief program the Enterprise Investment Scheme. Enterprise Funds is operated by Parkwalk Advisors, a fund management subsidiary of commercialisation firm IP Group.

Dobrée explained: “Our investment committee makes a decision and Parkwalk comes in alongside our money, which works quite well. They use that same model in Oxford and Bristol.”

Explaining how Seed Funds invests, Dobrée said: “We have a limit from our university money of £1m per company. We typically invest in £250,000 increments over two to three rounds.”

The remit includes support before a fully-fledged company is formed. Dobrée added: “We can also put in a bit of money before that main investment. We have Pathfinder, where we invest up to £20,000 to help put a business plan together or get the company started. We also have a program called Fast50 that, perhaps confusingly, invests up to £75,000. It is, again, a pot of cash that we can access more easily and is lighter touch than a full-blown investment.”

Apart from capital, Dobrée and her team provide active support. She said: “We take a seat on the company board in the early days – approximately the first three years, depending on how the company evolves.”

Not every company will require significant university support. “For example, with cancer treatment developer Carrick Therapeutics we have an observer seat, as the company has four major heavyweight VCs involved,” Dobrée said. “On the other end of the scale we have companies such as Pysomics, which has relied on Seed Funds and Parkwalk for funding and where we are much more active.”

Dobrée remains chairwoman of Psyomics’ board. The company focuses on mental health, combining digital profiling with biological research to help prevent and diagnose disease, and to provide fast access to the right support.

While many tech transfer offices focus exclusively on spinouts, the fact that Seed Funds invests off the university balance sheet means its remit is significantly wider – student startups are also eligible.
Dobrée explained: “Our dealflow comes through a mixture. About a quarter is a team with an idea who want to launch a company, even if it is not fully formed yet. Another quarter is a technology sitting in tech transfer that is nowhere near being a company, but we have decided we will spin it out – these obviously need more work to get them ready. About another quarter comes from Cambridge University Entrepreneurs, a student business plan competition. The last quarter is cold calling, and we rarely invest in that.”

Dobrée revealed that the majority of investments involve technology transfer and companies being formed within the university in need of investment to get off the ground.

“Because the fund was set up as its own entity,” Dobrée continued, “it has always had a mission of investing in anything Cambridge-related, though obviously, we may choose not to back a company. Typically, our deals will be IP-based and involve a professor who has spent decades developing a technology.

“But they also include businesses such as genomics company Horizon Discovery, and Cytora, which uses artificial intelligence (AI) to facilitate commercial insurance, which have Cambridge-related people but where the IP was not owned by the university. In Horizon’s case, it actually came from University of Washington.”

While the remit is wide, Dobrée said the Cambridge connection had to be strong. “If you have an entirely independent startup that has just pulled in an academic as an adviser, that is not within our remit. The university person has to be a founder rather than just working for the company. Beyond this, we do not approach spinouts and student startups differently at all.”

While Dobrée’s job is making investments with university money, financial returns, she said, were a secondary concern. “Our main ethos and the main mission for the fund is to start companies. The financial return is secondary in that we need to maintain our pot or grow it, so that we may do more of what we do. But that makes us very different to a VC firm. Really, our mission is a societal one – how can we change the world in some way?”

In one key aspect, Seed Funds does act like a VC fund – the unit does not offer physical space or resources to portfolio companies. But, Dobrée noted, there was a lot of additional support around Cambridge and portfolio companies were encouraged to rent space in the university’s innovation hub, IdeaSpace, and to tap into the ecosystem’s offerings, such as its many accelerators.

However, financial success has followed. Dobrée said this had been an intriguing effect of focusing on impact first. “Our cash return on realised investments is 4.3 times, and if we include unrealised investment it is 2.5 times, which, compared with traditional venture capital, is a great financial return. We do think that is, bizarrely, because we are not actually focused on financial returns.

“Whereas a VC investor might be much more driven by risk assessments and will not invest because a company is deemed too risky or too early-stage, we are much more relaxed on that side of things. We are not going to try to protect a certain shareholding, we are not going to try to put in a certain amount of money, we are simply going to do our best to make a company successful.”

More universities are moving towards an impact model, and this was a core theme at the GUV Summit in November 2018, voiced by Dobrée’s peers – near, such as Matt Perkins, chief executive of University of Oxford’s tech transfer office Oxford University Innovation, and far, such as Koji Murota, president and chief executive of university venture fund Kyoto University Innovation Capital.

Dobrée said: “It has taken universities a while to evolve to this stage. In the early days of tech transfer there was much more of an emphasis on financial returns across many different universities.
“But if you look at what we do within the grand scale of university finances, we are a drop in the ocean. Our fund is £10m and the university’s annual turnover is in the realm of £400m – we are really not going to be impacting them financially as an investor. The societal impact is a much higher value to the university and to the UK taxpayer.”

Seed Funds has no sector focus. Eligible companies need only to be commercialising a technology of some description. Dobrée added: “Despite our societal mission, it is still a financial investment, so it has to have those characteristics – we hope to get some money out in due course.”

An example is Jukedeck, offering music-generating software developed by a music student. Global University Venturing previously interviewed Patrick Stobbs, a co-founder, in 2016. The company employs artificial intelligence to generate royalty-free music tracks within user-set parameters, such as genre and tempo.

Dobrée continued: “We have also been doing a pilot with Cambridge Social Ventures, an accelerator in the Judge Business School, where we put bits of money to work in social ventures such as Netwookie, an Africa-focused networking tool for informal employment.

“We will do more unusual things. Cambridge Enterprise has had someone join recently in a new role who will look at humanities and social sciences and consider how we can offer more help in that area because it is not the traditional process of a technology that can be patented.”

Asked about recent trends among the portfolios, Dobrée first pointed towards Cambridge’s large research base before noting that several technologies were becoming more prominent. She said: “In physical sciences, we have all the AI-enabled tech, such as deep learning and big data. At this stage, people are using AI for diagnosis, such as having computers review CT scans. On the life sciences side, Cambridge has been really strong on biotech, and there are particular threads in that field around oncology and the microbiome.”

Social sciences are an emerging area Dobrée is keen to keep a close eye on, saying it could become “the next stage of entrepreneurship”. She said: “We have reached this stage now where entrepreneurship is much more a given that people think about compared with 10 years ago. Social ventures are following that. Now that entrepreneurship is well understood, people are thinking about how they can put their idea to good socially. It is a secondary wave that I am trying to make sure we are able to help people with, hence the aforementioned pilot with Cambridge Social Ventures.”

Being well equipped to deal with future challenges is important, but without exits that question would become moot. Seed Funds has celebrated many notable exits.

“We have had quite a few successes,” Dobrée said. “I am most proud of anticoagulant drug developer XO1. They were bought by pharmaceutical group Johnson & Johnson in 2015 and that was a real highlight. It was a technology that Cambridge Enterprise had nurtured from the start. The tech transfer team did a lot of work on it, we got life sciences investment firm Medicxi involved, and we invested. The founder of XO1, Jim Huntington, has since gone on to create another four companies. His co-founder, Trevor Baglin, has switched from research to venture and is using his skills there.”

Huntington, who continues to be a professor of molecular haemostasis at Cambridge, is currently most involved with Apcintex, which is developing a treatment for haemophilia, serving as the spinout’s chief executive. Baglin joined Medicxi as a venture partner in 2017.

Another impressive exit involved Cambridge CMOS Sensors, a gas and infrared sensor technology producer acquired by sensor technology group AMS, in 2016.

“Cambridge CMOS Sensors is one of my favourite exits,” Dobrée revealed, “because that is a company with which I was involved pretty much all the way through, and it experienced, like any tech company, some difficult times.”

Those times were so difficult, in fact, that the spinout was in danger of folding at one point – making the AMS deal an even more impressive conclusion.

A third success story highlighted by Dobrée is VocalIQ, which was working on AI software to facilitate complex interactions between a computer and the user. The spinout was bought by technology company Apple in 2015. Having a portfolio business acquired by a company with such clout – Apple became the world’s first trillion-dollar company in August 2018 – is a nice stamp of approval, but, Dobrée explained, it was also a reflection on founder Prof Stephen Young.

“He had already sold one company to internet company Google and one to software producer Microsoft. He is now retired from the university, but remains involved with the investment committee and is helping guide the next generation.”

Dobrée added: “There are many areas in which university technology can make a difference and what I would like to see is them getting a chance to do so.”

She said Psyomics was an example of technology that would help improve people’s lives. “Mental health diagnosis is so complicated, and it can take many years to get to the right diagnosis for your disease, particularly if you are bi-polar, so getting that technology out to market can make a huge difference to people’s lives.”

She added: “That is the best bit of my job – interacting with all these technologies that will make a massive difference to our lives once we get them to a product.”

With macroeconomic factors both globally and in the UK in flux, there is always a question of whether companies will find enough support once they leave the capable hands of Dobrée and her colleagues, but Dobrée showed no pessimism. “Cambridge is still a hotspot for investors. That has to be put into context – the number of investors that will back an early-stage biotech project before it is even a fully-fledged company can be counted on one hand, particularly now that commercialisation firm Touchstone has merged with its peer IP Group.

“But there is still an active flow of people coming to the university wanting to invest, and we have not seen any impact from Brexit so far. My feeling is the more immediate impact of Brexit is going to be in starting companies and talent flow. It will be interesting to see how that evolves, but I think that is the biggest issue. There is a lot of non-UK interest in investing, particularly from China at the moment, so that will not be affected by Brexit. The impact on UK funds is going to come when funds try to raise their next round, if they were dependent on European capital as cornerstone investors. But the British Business Bank seems to be doing a good job of stepping into those. Firms like IQ Capital are receiving funding from them rather than the EU, so we have not seen an impact on people raising new funds.”

Dobrée struck a more cautious tone about the global financial cycle, however, noting: “If people move away from risk and want to do more later-stage deals – and just the typical ebb and flow of financial markets – that probably has far more of an impact on cash and venture than anything Brexit-related.”
Dobrée knows a thing or two about surviving those financial cycles, having been around since the boom and bust. “Yes, I have been here forever,” she said, laughing. “But I was really lucky. I joined tech transfer back in 1999 when it was really just emerging as a thing in universities and as a profession. I was at Imperial College London for a year and a half and then I came to Cambridge.”
She continued: “University academics, students, postdocs – their attitude to commercialisation has changed immeasurably. When I started there was still a bit of an attitude, particularly around academics, that commercialisation was not what was done in a university, that this was a place for pure research and commercialisation was done by the outside world. But for increasing numbers of students and graduate students, entrepreneurship is a possible career. Many career academics have also reached a stage where they are asking themselves: ‘What is my next goal?’ Professors start companies with as much of that in mind as the need to change society. That is another thread that has completely evolved.”

It helps that policymakers’ understanding of tech transfer has also evolved. Dobrée said: “Governments have realised that it is more about the bigger picture than just financials, and they are starting to realise what they can do to support this. They have also been helping throughout this entire time of transition.”
Dobrée cited work spearheaded by her colleague Tony Raven, chief executive of Cambridge Enterprise, who, with the support of UK Research and Innovation, invited Lesley Millar-Nicholson, director of Massachusetts Institute of Technology’s technology licensing office, and Karin Immergluck, executive director of Stanford University’s office of technology licensing last month to confer with UK policymakers. She said: “The government is also realising that the UK is not less than the US – that our programs are world-leading.”

Not just attitudes have changed, Dobrée said, but also how universities deal with technologies. “Back in the early days,” she recalled, “it was about patenting, protecting and licensing technologies. Arguably, we did not have as much understanding of the gulf between what is held in a university and what is licensable.

“Now, when a technology comes into the office, there is a lot more support and programs available to help researchers develop their project further within the university before trying to license it out.
“Biotech is a classic example – 10 years ago, we would have probably tried to license targets to pharma companies, when all we had was some knowledge about where a drug might hit. That is not really something pharma companies can do anything with. Now we have programs such as Wellcome Trust’s Seeding Drug Discovery or Apollo Therapeutics, where we can take that knowledge and develop it all the way up to a drug candidate.”

Dobrée concluded: “Obviously, that increases the value of the asset, but it is much more about ensuring we are successful in finding a commercial route forward rather than having all these failures when trying to reach out earlier.”

She also welcomed professional association PraxisAuril’s phenomenal growth over the years, saying: “One thing that has changed since I was more actively involved is the number of people in tech transfer. PraxisAuril has always been a peer learning organisation, so the fact that the network is growing and there are more resources to access is a good thing.”

The number of people now needed in tech transfer has posed an interesting challenge for Dobrée, and Cambridge Enterprise in general. Acknowledging that she did not yet have a solution, Dobrée asked: “How do we grow professionals? PraxisAuril obviously helps with that, once people are in. But we still find, when we are recruiting, that it is quite hard to find the people we need. Particuarly with Seed Funds, people from a pure investment background are often financially-driven rather than mission-driven, and it can be difficult to switch between the two.”

Several universities have now formed student-led venture funds, and Dobrée noted that this could be an interesting route because some of them have a strong social venture angle. “Maybe I should keep my eye on some of those,” she said, revealing that she had also been considering internships to train staff.
Whichever route Dobrée pursues to grow her team, those joining her at Cambridge Enterprise Seed Funds would be in for a rewarding career. Years of work by Dobrée and her colleagues has ensured that university venturing is at an inflection point – following a record-breaking 2018 – and that there has never been a more exciting time to join the profession.

Thierry Heles

Thierry Heles is the editor of Global University Venturing, host of the Beyond the Breakthrough interview podcast and responsible for the monthly GUV Gazette (sign up here for free).