Annual review: 2017
For the first time since 2014, Global University Venturing tracked 480 investments – up from 377 during 2016. Adding the number of exits, 2017’s activity surpassed 2014 with a total of 534 deals and exits, compared with 2014’s 529. The actual number of deals is likely to be even higher, of course, with many spinouts launching quietly or in stealth mode, or keeping their funding cards close to their chest.
In fact, the figures in this annual data review are already significantly higher as Global University Venturing added approximately 65 deals to its database at the end of the year from across the 12 months, which is why many of the following graphs will differ somewhat from those in our first-quarter, first-half and third-quarter analyses.
Despite the high number of deals, the total capital raised by spinouts in 2017 remained comparatively low. The final figure of nearly $4.9bn was not quite as sharp a drop from the previous year as that of 2015 to 2016, but it remains a far cry from the $7.3bn and $9.4bn in 2014 and 2015 respectively.
Hearteningly, the number of deals last year went up across both North America and Europe compared with 2016 and it is arguably a small beacon of hope to European spinouts to learn that they received more cash in 2017 than in 2016, whereas North American spinouts raised less – though in absolute terms, the US and Canada still outperformed Europe by more than $1bn.
Here is where it gets interesting, however. Exits experienced a remarkable uptick last year – so much so that it actually means 2017 outperformed 2016 by almost $2bn. The almost $2.9bn in exits barely scratched the heights of 2015’s $4.6bn – but more exits are undoubtedly good news for everyone in the university venturing world.
When combining deals and exits, 2017 indeed delivered a much stronger performance tthan the previous year, with nearly $7.8bn changing hands, compared with about $6.4bn in 2016. While that performance is dwarfed by 2015’s $14bn figure, it shows that, on the whole, university venturing is on the up again.
When drilling down into the performance of individual months, it becomes clear that 2017 had a slow start but soon sped up to more significant figures – though there was an unusual dip in April, which fell below even August’s performance. The summer holidays – usually expected to be a quieter period for the academic sector – actually performed very well. In fact, July was the second busiest month when it came to money changing hands, a sign, perhaps, of deals being signed off before everyone headed for the beach. December, too, proved busy despite the holiday season essentially shortening the month by a couple of weeks.
September, as we addressed in our third-quarter analysis last year, is skewed slightly due to universities disclosing a number of spinouts in their annual reviews without offering further details – leading to them being added to our database that month.
The number of deals correlates roughly with the total capital invested most months, but there are some exceptions. In the first quarter, for example, there was a steady decline of deals from 44 to 28, but the actual cash invested first dropped from $280m to $202m before shooting up to $465m. And in the second quarter, June gained a substantial number of deals while the total amount invested dropped slightly.
A similar thing occurred in the third quarter, when the number of deals rose from 40 to 69 – as mentioned, September’s figure is skewed – but the amount invested dropped more than $200m in August compared with the previous month.
Exits also experienced a slow start in 2017. Exits occurred from January, but no amounts were disclosed until M&As in March. Company decisions not to disclose how much they paid for spinouts is more notable in some months than others – in April, eight exits were inked but only $300,000 in deal value was disclosed.
Come the third quarter, activity picked up noticeably – illustrating that, in academic terms, September marks the start of a new year, leading a promisin, steady flow of activity that bodes well for the first half of 2018. At the time of writing, there has already been one acquisition in January.
Pure numbers often hide the interesting stories beneath. For example, the fourth quarter was also noteworthy for the $75m flotation of Nightstar Therapeutics, a developer of treatments for rare inherited retinal conditions that entered the stock market in October, less than four years after being spun out from University of Oxford – the subject of an in-depth analysis by Global University Venturing at the time. October, incidentally, also towered over the rest of the year in terms of absolute figures, with almost $1.1bn generated from exits.
Finally, looking at the universities that performed best across the year, it is no surprise to find the usual juggernauts such as Stanford, Cambridge and Oxford near top. In fact, there are hardly any surprises at all in the league table. While University of Minnesota might look like it had a bumper year, this leadership is due to the aforementioned skewed data – the institution disclosed a total of 18 spinout launches during the financial year in its annual report without offering precise dates for the majority of them, so not all of these spinouts will actually have been founded in 2017.
In conclusion, 2017 may not have been a blockbuster year for the amount of money invested, but the fact that the number of deals has been increasing again after 2016 is promising. University venturing might be missing the countless $1bn-plus news stories that have become commonplace in the corporate venturing world – see our special report on trends in the corporate venturing world – but 2017 was good news for the university ecosystem and, with all the changes seen last year – the subject of GUV’s qualitative review also in this magazine – we are likely to be looking at a stunning run as we approach the end of the decade.