Q3 data review: an unexpected uptick

Something intriguing is afoot in the world of tech transfer: despite the pandemic, the third quarter of the year has seen the highest dealflow since June 2018 (when GUV tracked 119 investments). Notable, too, is the fact that June has tended to be a month of heightened activity, but the 108 deals actually occurred in July – a delay caused, most likely, by the challenges that working remotely caused for a few weeks before researchers and tech transfer staff had adapted.

Something else is noteworthy about 2020 thus far, too: three months have seen more than 100 deals: April, June and July. It has brought the number of deals for the year to 715, compared with the 954 for all of 2019. Activity dropped off slightly in August and September year-on-year, but the numbers confirm what several heads of units have told GUV on its podcast: the pandemic has had less of an impact than one might expect – bar obvious factors such as clinical trials having been put on hold, for example.

University of Oxford, one of the most prominent institutions in the mainstream news for its vaccine programme in partnership with AstraZeneca, even celebrated the milestone of 200 spinouts in Q3 when its TTO Oxford University Innovation (OUI) launched augmented reality-powered email security platform PhishAR. OUI’s portfolio attracted $1.1bn from external investors in the 2019-20 fiscal year – more than double the $536m raised during the previous period. Disappointingly, especially with regards to the editorial in this issue, OUI only generated two social enterprises during its past fiscal year, substantially short of its target of 10.

ETH transfer, the commercialisation arm of ETH Zürich, is on track for another record-breaking calendar year after launching its 20th company in 2020 – inching towards its 2019 high of 30 businesses (and almost certainly set to meet the 25 average for several preceding years).

It has, however, not been all good news in the world of tech transfer: although it happened a few days out from Q3, Johns Hopkins Technology Ventures, the commercialisation unit for Johns Hopkins University, was forced to lay off eight staff – the equivalent of 10% – amid wider cuts to the institution’s headcount as it struggles to cope with a revenue loss.

Returning to the charts, it might seem surprising that the month with the largest dealflow is not the month with the most capital invested. Indeed, July 2020 saw “only” close to $2.8bn of investment – though this still makes it the second most successful month since GUV’s records began. But long-term readers will know that the number of deals tends not to correlate to the highest sums raised and indeed it may be a while before June’s $3.3bn record is broken.

Consider this, too: with more than $16.5bn raised by spinouts this year so far, it is virtually certain that 2020 will be record-breaking: 2019, currently the most lucrative for spinouts, ended with $17.4bn overall. That, really, is not something that GUV would have predicted at the beginning of the pandemic but it is a jaw-dropping statement about the health of the innovation ecosystem.

What is almost more surprising still is the fact that exits have held steady through the pandemic. There have been 55 exits so far and notably 25 of these occurred in the third quarter. The number is tantalisingly close to the 67 exits celebrated in 2019; in fact, an average of at least four more exits per month in the fourth quarter does not seem too far-fetched a prediction to make at this stage.

As M&A agreements often do not disclose financial terms, it is always difficult to ascertain how much money is generated – and the Tableau acquisition in 2019 will likely continue to tower over everything else for the foreseeable future. But more than $4.8bn has been disclosed and with three months this year breaking through the $1bn barrier, it seems safe to assume this is a solid year, underlined, too, by the table of the biggest exits in Q3 showing that a total of nine were actually initial public offerings.

Calling 2020 a good year will give anyone a bad taste in their mouth, but in terms of spinouts alone it really has been remarkable. With another quarter to go (data-wise, at least), GUV cannot help but feel even a sense of optimism that tech transfer is in as strong a position as ever. With much of the capital invested – and generated through exits – in the life sciences, one of those deals may even save us from covid. That is a story not told by looking at bar charts – but as much as we like numbers, it will always be the more important story. GUV cannot wait to tell that story when the day comes.