Cambridge innovation helps Draper Esprit transform mega-VC investments
Gamechanging VC firm Draper Esprit believes Cambridge’s Science & Technology innovation brilliance is helping to transform the international investment paradigm.
CEO and co-founder Simon Cook is presiding over a golden age for the London-quoted investor and is escalating Draper Esprit’s ambitions just as Cambridge S & T trailblazers ramp their own fundraising expectations.
Cook, who cut his tech teeth in Cambridge as well as Canada and Silicon Valley, says the cluster’s top innovators are now raising much bigger sums – rounds at last commensurate with the potential of their propositions.
Having just exited from Grapeshot after its spectacular sale to US giant Oracle and led a $31 million round in Cambridge life science company Fluidic Analytics, Draper Esprit is perfectly primed to take the temperature of the global investment climate.
Cook says he is not surprised that brilliant Cambridge science and technology is finally realising optimum valuations. And he is convinced that major acquisitions creating new millionaires at companies like Arm and Grapeshot will lead to more exciting tech startups – and fresh opportunities to breed internationally influential unicorns.
Cook’s team intends to drive home those points at an exciting Cambridge event on February 6 at the Tamburlaine Hotel in Station Road at the heart of the city’s burgeoning tech quarter.
Cutting edge entrepreneurs will share their success stories and underline the unprecedented opportunities awaiting new generations of Cambridge startups. Among them will be John Snyder, founder and CEO of Grapeshot, Andrew Lynn (CEO of Fluidic Analytics), Sarah Bateup, chief clinical officer of Ieso Digital Health; Tim Brears, CEO of Evonetix; Kerry Baldwin, managing partner of IQ Capital and Dr Vishal Gulati, venture partner with Draper Esprit.
Cook told me: “Our heritage is Cambridge although we have not done anything quite like this event before. We were always very active in Cambridge but in a new and vibrant climate we felt it was a good time to reinforce the proposition.
“We back brilliant teams with global ambition. Building a business is tough and going global even harder. If you are a founder join us at the Cambridge event and meet entrepreneurs who are doing just that.”
Cook believes the days of Cambridge companies underselling their propositions are long gone and that CEOs of exciting new tech startups are starting to raise the kind of money their propositions warrant.
Giving the lead, Draper Esprit is willing to make investments that accelerate growth and make a difference on the world stage – injecting £20m-£30m sums rather than less effective amounts.
He said: “The ability to write bigger cheques and take more risks in order to build a bigger upside has changed quite a lot in Silicon Valley. Now Europe is catching up quite fast.
“We have seen major investments and acquisitions led from the US in the past and now Asia is becoming significant; especially China and Japan. Draper Esprit has been instrumental in starting a flow of Asian investment into the UK and Cambridge. We helped sell Neul to Huawei which is now investing heavily in the cluster.
“We recognised early on the interest from Asia in Cambridge. While the Neul-Huawei deal price in itself was not massive, the investment Huawei has since injected into Cambridge and the UK and the potential growth for the cluster as a result is proving highly significant.
“Until fairly recent times, Europe had seemed a better route for our companies looking internationally than Asia but a lot of relationships have developed over the last five years between Asia and Europe. They will not slow down.
“In all our years’ experience in Cambridge, the UK and globally no-one has done investments on the scale that we are witnessing and helping to drive right now.
“Entrepreneurship is better understood. Cambridge has always had some of the best science in the world but sometimes its entrepreneurs have not been able to explain the story effectively enough to attract the right amount of investment.
“Entrepreneurship is now embedded in younger businesses; science is a more recognised career path. There have always been one or two massive companies like Arm able to get the required uplift to grow internationally but now, with a lot more entrepreneurs on the scene, capital is really starting to flow in.
“And when you get a significant acquisition such as SoftBank’s of Arm it creates more entrepreneurs who are prepared to stay on the Cambridge scene and invest in startup opportunities.”
Cook says the situation is even more encouraging because it is no longer just the bosses who have entrepreneurial ambitions of their own; he has seen the spirit of entrepreneurship driven down to the most junior members of staff who are inspired by senior role models.
Cook believes that Cambridge entrepreneurs are also more prepared to build a global business in their own right rather than selling out short-term at the first sign of success – creating a pool of serial entrepreneurs helping to cross-pollinate new enterprises.
Draper Esprit’s strategy is to ramp up the size of its investments in truly exciting plays. Cook says: “We raised £160 million in June 2017 but you can never have too much money so our future fundraising plans remain flexible.
“Our plan is to get to a position where we are lending bigger and bigger amounts but are self financing. We invest in risk businesses so have to be prepared to lose money.
“VCs were once prepared to lose, say, £2-3m but are now willing to lose lots more. I am really excited that we can write £20-30m cheques and absorb it.”
Cook believes that good science & technology has a habit of finding its time and opportunity to shine. He says John Snyder and Grapeshot have always had excellent technology but the explosion of fake news and web trust issues had heightened its appeal to Oracle.
Similarly CSR’s Bluetooth technology was rubbished at the outset – particularly in the US where rival technologies were being promoted – but the unrelenting push for safe, hands-free communication in cars accelerated the Cambridge proposition into overdrive based on market forces. The end result was CSR’s acquisition by US chip maker Qualcomm for $2.4 billion in 2015.
Cook says opportunities to invest in ahead of the curve technologies have always been around – but he adds: “What has changed is the cheque sizes. “While $10 million Series As have been normal for a while, what haven’t are the $50 million Series Bs.
“The ability to write bigger cheques and take more risks in order to build a bigger upside has changed quite a lot in the Valley. And now, Europe is catching up quite fast.
“The funds that can break out from $150m to $500m are going to become market leaders for a long time.”