Alumni-focused venturing in UK institutions
In recent years, UK universities have been working hard to develop their alumni networks with a view to raising their endowments, writes Charles Fletcher of Cambridge law firm, Taylor Vinters. They have had to do so in order to mitigate the very real risk of losing ground to competitors in the United States and elsewhere amid a gulf in funding levels.
At the same time, they have also had to develop their corporate relations, and this in turn has brought about improved and more systematic links between universities and industry.
One very positive by-product of this backdrop of reform is increased levels of more formalised involvement of alumni in University venture activity. The great benefit of this type of activity is that it allows multiple objectives to be achieved in terms of broader alumni and corporate engagement.
The outstanding example in Cambridge is the University of Cambridge Enterprise fund, which was launched in May 2012 to allow alumni and friends of the University to invest in new companies while benefiting from the attractive SEIS and EIS tax reliefs. In doing so, Cambridge was the first university to launch its own SEIS fund, and the first to combine the SEIS with the more established EIS. The fund is managed by London-based investment firm Parkwalk Advisors, and invests in new companies supported by Cambridge Enterprise.
Another example of alumni venturing in Cambridge comes from the Cambridge 800th Anniversary Campaign. The University of Cambridge Discovery Fund, launched in 2008, is an evergreen fund making proof of concept, pre-licence, pre-seed and seed investments, enabling young companies based on Cambridge research to succeed.
This fund was launched as a means for philanthropic support, from corporations and individuals, for the very early high risk stages of new company formation. It is essentially benevolent seed money which in the past would have come from central funds.
In Cambridge, the Judge Business School is on trend, having established “Accelerate Cambridge” as a start-up accelerator in May 2012, as a valuable new part of the ecosystem of support for entrepreneurs in Cambridge. With less of an emphasis on funding, the program draws on the JBS network to focus on venture creation by teams with a structured combination of coaching and mentoring.
Oxford too provides some great examples, including The Saïd Business School Venture Fund. This is a student-led organisation which provides investments to Oxford-related companies. The Saïd Fund was started in 2006 with donations from Sir Phillip Green and David Bonderman.
The Fund is currently in the process of expansion with a view to making investments in excess of £1million. Saïd Fund investments are made in the same manner as made by institutional investors, and also invests alongside venture capital and impact investment funds in club deals and syndicates. Student members of the committee are responsible for all parts of the investment process and work collaboratively on investment decisions and portfolio management.
By working with investment professionals, student members of the committee have a unique opportunity to interact with leaders in their fields and refine their investment knowledge and acumen. What a great way to leverage MBA talent and networks at every level and bring through the next generation of leaders in venture capital.
A similar model to the Saïd Fund has been set up by Cass Business School. The Cass Entrepreneurship Fund is a £10 million venture capital fund, providing growth equity to start-up and early stage companies. The Cass Entrepreneurship Fund finances a number of high-growth young businesses across the Cass Business School community, as well as providing general support and incubation facilities.
The Fund was established in 2010 with the support of Peter Cullum CBE, one of Cass’ most successful entrepreneurs and the Founder of Towergate Insurance. In contrast to the Saïd Fund, it is not student-run as such but it does look to leverage the Cass talent network similarly.
In the same vein, Sussex Place Ventures invests in earlier stage technology businesses using the London Business School alumni network. Sussex Place Ventures draws on the knowledge, expertise and experience it sees in the London Business School alumni network to help find, validate and invest in technology businesses looking to grow.
Its stated goal is straightforward: to create business wealth for entrepreneurs, superior risk-adjusted returns for investors and benefits for the London Business School, which shares in the fruits of the investors’ success.
There are other various other great examples of alumni-focused venturing across the UK in addition to those set out above, like the University of Herts enterprise fund and the seed investment clubs which are being fostered within the alumni communities of forward thinking Oxbridge colleges (e.g. Downing Enterprise). In this way, university investment activity in the UK, in many cases led by the business schools, has increasingly adopted an approach that goes beyond pure tech transfer and commercialisation of research. It is a means for institutions to engage with their alumni and provide them with investment opportunities/ sources of funding at the same time.
This approach is not without challenges, including that these venture funds increasingly find themselves competing with angel and institutional investors whose outlooks have been buoyed by the SEIS and EIS tax reliefs. However, to put the trend in international context, in 2012, the Shanghai-based China Europe International Business School (CEIBS) launched CEIBS-CHENGWEI Venture Capital, a venture capital fund of US$100 million which will only invest in early or growth stage businesses founded or managed by CEIBS alumni. In the face of this kind of heavy hitting approach elsewhere, we will surely see more from this relatively new investor class in future. • Charles Fletcher is a partner in the Taylor Vinters Tech Investment team who work on a diverse range of venture capital, early stage investment, technology transfer and University spin-out transactions. Taylor Vinters worked on 25 per cent of all University spin-outs reported in the most recent PraxisUnico Spinouts UK survey and in doing encounter the various different spin-out approaches adopted by the institutions who are most frequently carrying out venture activity. Charles Fletcher can be contacted on charles.fletcher [at] taylorvinters.com or +44 (0)1223 225059