Beyond the Breakthrough: Jim Wilkinson

We talk to Oxford Sciences Innovation’s chief financial officer and interim chief executive Jim Wilkinson about the world’s largest university venture fund to find out how they are supporting spinouts through the pandemic and why they got into real estate.

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Transcript

Please note, the intro and outro have been omitted.

Hello, Jim. Thank you very much for joining us on the podcast today, glad to have you. To start us off, can you maybe give us a brief overview of how Oxford Sciences Innovation came to be and what its purpose is?

Yes, so we started five years ago and we were built on quite a successful track record from Oxford University that had spun out around about four or five companies a year over the previous 15 years, which was pretty good in UK terms, and European terms, and of those companies there have been some pretty big successes, like Immunocore, Adaptimmune, and that was very comparable or better than anything in the UK.

However, when you compare with MIT, which is spinning out 20-plus spinouts a year, maybe they have created £50bn companies over the last 25 years, it left Oxford looking a little bit like the poor relation.

Given Oxford’s status in the world as the number one research university, according to the Times Higher Education Supplement and more importantly, spending about £750m pounds a year on research and development. So, it was felt that Oxford was not getting its science out into the world in an optimal manner, and the main reason was deemed to be lack of capital. So, OSI was created as a company rather than a fund.

We were set up with an agreement with the university, so the university owns a portion of OSI and OSI in return received a portion of each company it span out from the university, whether we invested or not, and that allowed us to raise £600m to invest in spin out from the university, which is about the biggest single university investment fund in the world by a factor of three or four times, and more importantly brought in great shareholders. So, we have world renowned names like Google, Sequoia, Temasek amongst our shareholders. Then that enabled us to get into the university, find the IP, and start spinning companies out. The success has been 20 spinouts a year.

We have invested about £500m over the last five years, which is about the same as over the previous 20 years in total. We have been bringing new people into the ecosystem and the aim is to try and get closer to MIT.

Awesome. Following on from that maybe, what is your long-term vision for OSI or maybe the Oxford ecosystem?

I think we have got two visions. First of all, we are a commercial enterprise, and we have got to make a return, so for our shareholders. The second thing is there is some absolutely brilliant world leading science in the university that should make a global impact. If you look at the university’s history, I think it was synthesised penicillin, created the lithium-ion battery in your iPhone or Android phone, the blood glucose test came out, so it has a long history of world world leading science that became very useful to the world. So, we are trying to a) get that science out in the world and then b) build up an ecosystem.

So, we want to attract to Oxford lots of corporate venturing arms, lots of VCs, lots of people who understand technology, who can understand what IP is in the university, take it out, attract the management, attract the investment funds and build great companies, which then by their very nature should also then feed back into more research in the university, attracting even higher quality people to Oxfordshire and building up an ecosystem with all the infrastructure that entails, including things like wet labs that we can show the world what science is here. So very much build up a big ecosystem.

A nice virtuous circle then as well. You have already mentioned, I think you said Google is one of your LPs. I think it tells quite an interesting story just looking at the list of LPs. I think you have Tencent as well, and a few others, you said Sequoia. How important was it to have corporates among your LPs? Are they actively helping your portfolio development? Are they looking to co-invest?

Yes, it is extremely important in what we set out to do because what we are trying to do is build big companies and build them as fast as we can. We do not want to spend 20 years trying to build a company and the thing is, you need the management, you need great technology, you need funding coming in, but you also need the ability to reach out across the world.

So, we have got about 70 shareholders and if you take Google or Temasek, or Tencent, what they can actually help us do is they help us understand our science before we spin out a company. Once we spun it out, they will help us with strategy, management, commercial contacts so that we can develop the company as fast as we possibly can. So, the aim is to go from an idea to a very large company in 10 years. Whereas in the UK, you can look and say it normally takes 15 to 20 years in the university venturing sector. So, corporates with the expertise they can bring are extremely important to our plans.

Amazing. You have said as well, OSI is the largest venture fund, pretty much a large fund by any measure, unless we are talking SoftBank Vision Fund, which is in a world on its own. Obviously, that brings with it a certain air of prestige. You have got the Oxford brand behind you as well. I imagine with that much money come a lot of opportunities, maybe even challenges. Are there any particular opportunities that a fund such as £600m affords you? Any possibilities that you could not do with a £20m fund?

I think it is a bit of a debate because after five years we have invested half of it and certainly, there is some thought process that maybe we raised too much, but I think we reject that because actually we were offered far more and actually took a small amount from each shareholder relative to what we could have taken. But it has given us the ability to withstand things like coronavirus. It has given us more importantly the ability to attract academics who, certainly in the Oxford environment, and I suspect the European environment is, there has not been much growth capital around.

So, if you can actually talk to an academic and say, Yes, we can spin your idea out, but we will properly fund it at the start and we will fund it in each subsequent period along with others, providing it is working, it gives them a surety and certainty that we can actually do it. So, we have had the ability to spin out far more interesting ideas because when we are talking to academics, it does not look such a painful process to them that they have to spend a long-time raising money.

I also think that there are definite examples where we have invested more at seed level than has ever been done before in the UK, a £10m seed round, which has enabled us to bring in world class management from day one and have multiple shots at target rather than just one go based on a sort of £1 million effort. So, that has definitely been a big plus.

The other thing we have got is that we want to be able to fund all the way through. So, if we own 20% of a company that is worth £200m pounds and it goes and raises a significant sum, we want to be able to hold onto our percentage if we want to. So, sitting there with the cash has helped. I think the other thing is has been a slow burn in terms of getting the companies investing relatively small amounts, very small amounts of money and then making those companies bigger. We are just five years in, beginning to see much bigger cheques being.

So, cheques for 20 or 30 million pounds as the companies develop are going to become more common, and therefore we need more resources.

Obviously you are halfway through a 10-year cycle here. Are you already thinking about raising more money? I am guessing it is always a possibility.

It is always a possibility, and the board will keep it under continuous review. But I think where we stand at the moment, we have £300m pounds in the bank, and I think we need to prove a little bit more and get a few of the companies a little bit further down the road.

Makes sense. You joined us at our Digital Forum two months ago in June. I was very glad to have you on our university round table as well and seeing some of your portfolio companies showcase as well. There was one comment you made that I thought was quite intriguing, which was, I think you said OSI is “pretty half good at buildings” because you need wet lab space and you have added real estate to your remit, which was not in it originally. What has that process been like? Where are you at? How big?

I think one of the things that we have learned is that we start off with a patent and an academic. The academic might be giving us 30 days a year or might be a bit more full time and we have to turn that into a company.

So, every one of the spinouts we have done has been, it is not a cookie cutter model. Everything has to be tailored for that company and everyone has given us challenges and an issue we have to overcome. One of the things we have found is that because the medical science division is very large in Oxford and world leading, we have ended up doing more therapeutics and life sciences than we originally planned.

There is very little wet lab incubator space in Oxford. In fact, there is very little across Europe. To give you a statistic, I think in Oxford, thankfully the Bioescalator incubator was set up, and that that has 15,000 square feet. And that is it in Oxford. If I compare that with MIT, Harvard, Cambridge corridor, they have 10 million square feet of wet lab. So, as we were spinning out more and more wet lab companies, we ended up in a position of going,

Well, we have nowhere to put them for them to actually do their experiments. So, in common with solving whatever problems thrown us at us from whatever company, whatever sector, we have converted offices into wet labs and it is a continuous process.

We would love to get wet lab operators into Oxford that can do that for us, and I can start concentrating back on the companies and less on property. But I think we are still one or two years away from having piqued the interest enough that people will actually do wet labs for us. But it is one of the examples where, as the ecosystem builds up and you have got an issue, what the £600 million has done is enable us to actually go and solve some of those issues.

Okay. I know Oxford is quite a small city, a beautiful city, but quite small. Are companies sticking around in Oxford? Is there a lack of office space? Is there enough?

It has been fascinating actually. So, I think we are on 82 companies that have spun out. We have got about six based in London, we have had one base in San Francisco and the rest are in or around Oxford. There are science parks that are building up. I actually think there is a fair amount of land. Getting the land used for the right things from our perspective is difficult.

Actually, the demise of retail is giving us a whole new load of opportunities in the centre of Oxford at the moment. So, we would have to see what we can do. But just the quality of the companies that we are beginning to see, and their potential global impact is really beginning to shift people’s opinions about what Oxford should be doing in some respects. So, there are a lot of challenges. There is also a lot of space around if you utilise it correctly.

You have mentioned that there are great companies. I always like asking people if they have any favourites and then they try and wriggle their way out of that. But maybe not asking if you have a favourite, but are there any that you have seen come out and you personally thought, This is something really cool or something fascinating?

So, I am going to say all of them, which is not a proper answer. To give you some ideas, I think we have got in YASA, we have got a fantastic electric motor. It is half the weight and twice the power of anything else in the world. We have got drones from Animal Dynamics, which are 300% more efficient than any other drone in the world.

We have got Evox, which is the world’s leading exosome platform, which is how drugs hopefully will be delivered. We have First Light Fusion, four quantum computing companies. We have got a whole host of companies doing different things that each one of them is very fascinating.

I think agtech is a particular interest just because I think it is an area where I am not sure there has been a huge amount of development and we have a new herbicide discovery company that is making great progress technologically speaking. So, I do not think of a more interesting job than sitting here and listening to what is coming in from the academics.

Amazing. It is quite interesting. Even if you do not have any favourites, and no one ever does, it is quite interesting to hear that it is a very broad range. I know we have talked a lot about lab space, but then you also talk about drones and Ag Tech. So, it is quite a varied amount of research that is coming out. That is really cool. Has the pandemic had any impact on the types of spinouts that you have seen coming out?

No. I think the pandemic, we started working from home in mid-March. The team has been very efficient. We have seen more deals happening, more funding rounds happening. We have not slowed down at all. In fact, anything we have sped up. Oxford has been very well highlighted in the coronavirus dynamic because we have got the Oxford vaccine, and we are involved in that with Vaccitech. We have another vaccine company called SpyBiotech.

We have two or three testing companies, we’ve got ONI and Osler, which is a heart echocardiogram AI company. So, we have actually found quite a lot of our companies are making for an impact, which actually is very pleasing from the point of view that if we had not been around these companies probably would not exist. Certainly, some of the firms. It is a pity it has happened now because in three or four years’ time, the companies were bigger and further advanced.

But I think largely it has been quite an exciting period from advancing some of the technologies and showcasing to the world. And if I look at vaccines, when we span out Vaccitech, the world was not really interested in vaccines from a commercial viewpoint. We have hit the wave on that one at the moment. That is a good one. Amongst the other companies, we have seen, I suspect this is what everyone has seen, there has been a slow down in developments as fewer people can get into the labs at one time.

We have seen quite a lot of repurposing of or readjusting the milestones, but nothing has been a fundamental issue to the majority of companies. We have actually coped with this pretty well.

Okay. There is no risk that you a company might get left behind because it is not working on the vaccine, which is kind of the flavour du jour I guess?

I think we try to look after all the companies, whether they are hot at the moment or not, and yes, companies often go through hot phases. I think the funding from the government has been pretty impressive. We are very grateful to them for the Future Fund, which we have utilised. We continue to concentrate on the companies that excite us.

Amazing. On a slightly more personal note, you came to OSI in 2015 as the CFO, you were CFO at a few companies before that. What brought you to Oxford? What brought you to OSI specifically?

Well, first of all, I live near here, so that saved me from commuting on First Great Western, which is the most horrible company in the world. And then second and probably more seriously, I knew the people behind OSI and I know that they are very incredible people with a very good track record and therefore I knew this was going to be a very exciting opportunity. So, I was thrilled to be able to be part of it.

Is there anything else that you would like to mention that we have not covered?

I think one of the other things we are trying to do is bring in co-investors. So, given the breadth of our portfolio where we are going for small molecule therapeutics and fusion, and it is all world leading science, that one company definitely cannot cover all that, the experts in it. Our expertise is in finding the world leading idea and getting this out and turning it into a company with a management team and some sort of product. But then we also need an awful lot of expertise brought in. So, I think we have managed to get about 38 investors, really high-quality investors, into Oxford that have not invested in the ecosystem before. That is only a small portion of what we are going to need over the next five years. So, we are continually on the lookout for people that have got expertise in areas, or VCs or corporates, expertise in areas where we can just have a dialogue with them, bring them into the Oxford Ecosystem, showcase what is here, and then hopefully at some point they find an investment they want to make and coming alongside us.

I do not want to end on a depressing note, but is there any risk that the UK leaving the European Union is going to impact OSI?

I do not think so. Our risk is to make sure the university continues to be funded and that we can get visas for the experts in. A lot of the academics in the university and a lot of our spinouts are done with overseas people. So, that is the biggest risk I see around, So, no, I think Brexit is quite low down the worry list compared with coronavirus at the moment hopefully. So, we will have to wait and see. But no, that is not the big concern at the moment.

That is good to hear. Thank you, Jim for taking the time to talk to us today.

Thanks. Lovely.