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Barr Ellison Solicitors – commercial property
18 April, 2011 - 13:43 By News Desk

Cambridge University arm eyes more spin-outs

Teri-Willey-techms

Cambridge Enterprise, the university’s commercialisation arm, plans to leverage more software and therapeutic plays – building on traditional strengths in its portfolio – in a bid to roll more spin-outs into the marketplace.

Chief executive Teri Willey said dialogue would be stepped up with academics in key university research hothouses, such as the engineering department and computer laboratory, to ensure that future opportunities were optimised.

In an exclusive interview with Business Weekly, Willey said the enterprise regime within the university was ripe to break new frontiers.

Dialogue with best-practice tech transfer organisations in the United states and cross-fertilisation with other investment funds were also being stepped up, she revealed.

For example, Cambridge Enterprise is talking to the new Martlet angel investment vehicle founded by Marshall of Cambridge and whose investment director is local angel Peter Cowley.

Willey said: “The Marshall fund is fantastic news. Sure we are talking to them. We traditionally talk to other funds, working as a fund feeder to secure follow-on investment for our spin-outs.”

Cowley told Business Weekly that the Martlet fund – launched at the start of April – had received an excellent response. He said: “There has been lots of interest and expressions of support. A number of companies have applied for funding, including an exciting medical device company, a business from Ontario, one from London, and an Ideas Space Cambridge company. It is early days but we are already quite close to a couple of investments.”

Willey said Cambridge Enterprise was looking at all angles and a number of innovative models to secure more follow-on investment for the start-ups in its portfolio.

She said: “We’re seeing no downturn in the innovation emanating from within the university or the appetite of inventor academics keen to commercialise their bright ideas.

“As we prepare to put a new Business Plan in front of our client, Cambridge University, this summer we are looking at several areas of improvement – and we expect to push the boundaries a little more.

“One of the priorities is to do more in therapeutics and software. Looking at the companies in our portfolio that are growing it is clear that these are the two areas of outstanding success.

“Naturally, we want to develop more opportunities in the spin-out area and support commecialisation of even more software and therapeutics plays. We’re talking to two programmes in the US felt to be the best in this particular arena as we want to ensure we develop best practice.

“We intend to further improve dialogue with key groups within the university, such as the Engineering Department and the Computer Laboratory – those most likely to come up with the next big thing – and interact with them more.”

Willey says Cambridge Enterprise is thriving despite the ups and downs of the economy and “building on our successes year-on-year.”

“Whatever the economic landscape it doesn’t deter us. The interest in spinning out companies, licensing companies’ technology and leveraging expertise within the university doesn’t wane.

“We are intent on engaging with academics at an earlier stage of their research. I get the sense that more academics would like to conjure commercial successes from their research. Many want to take advantage of commercial opportunities that may present themselves but continue to focus on their research while someone else handles the tech transfer aspect.

“Others say they are keen to be very involved in the whole spin-out process. Our job is to support them and try to help them commercialise their inventions to everybody’s benefit – themselves, the university and future generations of academics that follow.

“At Cambridge University in our experience there are never are any barriers to academics who want to engage with the commercialisation of their inventions - and no conflicts of interest or engagement that I am aware of.

“We have to reiterate that we can play a key role in supporting the flexible culture that exists within the university and emphasising that we recognise the right of the inventors to a slice of their innovation. We are not the technology police.”

While the corporate start-up world generally bemoans the lack of investment cash in the marketplace, Willey says Cambridge Enterprise has learned to live without the presence of cash-rich VCs constantly on their shoulder.

Cambridge Enterprise’s three seed funds draw the bulk of their cash from a mix of friends and alumni, with a generous sprinkling of gold dust from angels and ringfenced Government investment allied to backing from benefactors such as the Wellcome Trust, Gatsby Foundation and Cambridge University itself.

Willey’s team is currently tying to conjure a £5m Discovery Fund out of friends and alumni which “we think is do-able.”

“In my lifetime I have never known raising finance for start-ups to be easy. Its tough but by no means impossible; in the current climate the funding model has to change – it has to come from different sources.

“Our portfolio companies don’t have any difficulty in getting follow-up funding – in fact, they get it consistently and usually on pretty decent terms.

“So that’s a key part of our role - to get them in a position to secure follow on investment. Our seed money puts them in a position to attract that.”

Cambridge Enterprise has 200 different investors from six countries in its Discovery Fund and Willey ventures that 100 of these may not be around any more.

Twenty-two of its companies raised over £60m in one year. “We have had to cast the net broader but funding is there for the right proposition,” says Willey.

The University Venture Fund, founded in 1995, the University Challenge Fund, founded in 2000, and the University of Cambridge Discovery Fund, founded in 2008 as part of the Cambridge 800th Anniversary Campaign, are set to be merged into one: “There are a number of administrative benefits for us through this strategy,” Willey said.

Since 1995, the three funds have made 55 investments, of which 52 were in new technology companies and three in other early stage funds. Companies from all three University evergreen funds have raised over £600 million in grants and follow-on funding to date, leveraging the original investment 75x.

In 2010, these companies had a turnover of £175 million and employed over 1,700 people. More than half of the companies now have products on the market.

Willey said: “The science and technology coming out of Cambridge is always excellent. When you analyse the risk profile of what we do there are always going to be risks surrounding the science & technology concerned – the Intellectual Property, financing, management, marketing and so on.

“But the lowest risk we have out of all of these potential concerns is the quality of the science & technology. The risk is so low it’s almost not worth looking at.”

Talk about Cambridge Enterprise raising a large fund is premature and at this stage largely fanciful, according to Willey, who says the interests of the university have to be paramount over “having a bit of fun.”

She said: “If there is a current effort or formal plan to raise £30m or so I’m not aware of it and neither is my chairman. We ARE exploring how we might do a follow on fund and how we would structure it so it would be an advantage for the University as opposed to just being a fun thing to do.

“We have been approached by various groups who have offered to invest in such a fund or otherwise help with it. However, we would only start work in earnest on it once the Discovery Fund has reached its goal and if there are clear benefits to the university.

“While we continue to look for ways to bring in operating expenses and increase returns to the university, a follow-on fund probably doesn’t check these boxes.”

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