Investment trends 2013-18

Considering that, in 2013, only 209 deals were added to our database, that is a phenomenal number – is has grown 13-fold – and few would have expected the innovation ecosystem to achieve this in so short a time.
Even as Global University Venturing, in July 2018, put its money on university venturing achieving a spectacular run towards the end of the decade, what followed over the next six months broke all expectations and records – a key factor in why the numbers in this report have shot up from last year’s analysis.
The same is true, unsurprisingly perhaps, of the level of capital raised by spinouts last year compared with the previous five years. Nearly $11.85bn flowed into the innovation ecosystem to bring the six-year total to almost $40.5bn.

On a global scale, $11.85bn may not seem much, considering venture capital firms deployed almost $131bn in US-based startups alone during the same period, according to a report by deals database PitchBook together with the US trade body the National Venture Capital Association. But it is impressive for an area that remains relatively niche compared with the flurry of traditional startups.
The SoftBank Vision Fund – the near-$100bn vehicle formed by internet and telecoms conglomerate SoftBank – created a paradigm shift in the corporate venture capital world, contributing to countless $1bn-plus rounds. But its effect was also felt on university venturing, where the fund’s commitments included a $500m injection into Cambridge Mobile Telematics, a US-based technology provider spun out of Massachusetts Institute of Technology, in December 2018.
Despite this blockbuster number, the vast majority of deals in university venturing continue to be under $100m, so it remains likely that immunotherapy developer Juno Therapeutics securing a $1bn investment from pharmaceutical firm Celgene in 2015 will continue to tower over all else for a while. Admittedly a post-IPO deal, the cash injection gave Celgene only a 10% stake in the spinout from the Fred Hutchinson Cancer Research Centre, Seattle Children’s Research Institute and Memorial Sloan-Kettering Cancer Centre.
The Juno deal partly explains why 2015’s numbers continue to look relatively big compared with the 449 investments made that year.
That is not to say big numbers have been absent from university venturing – 2018 delivered here too, clocking up an astounding 63 exits, a respectable increase over 2017’s 55, and almost double the number achieved in 2016.

The more than $14.76bn reportedly generated by those 63 exits – corporates often keep quiet about how much they have paid to acquire a spinout, so the total will be bigger in reality – dwarfs anything that has come before.
More than half of that $14.76bn came from a single deal – Avexis, a US-based neurological disease treatment developer commercialising research from Ohio State University (OSU) and Nationwide Children’s Hospital, completed an acquisition in June 2018 with pharmaceutical firm Novartis for $8.7bn.
OSU’s remaining stake in the business was worth a relatively modest $2.7m by that point, but the acquisition in itself showed just how significant a player the university is in the innovation ecosystem. The licensing agreement the spinout had signed with OSU and Nationwide Children’s Hospital in 2013 forced Avexis to maintain a 3% stake for both until May 2015 – if retained this would have been worth $261m apiece at exit.
Avexis had floated on the Nasdaq Global Select Market in 2016 and raised $95m in its initial public offering after raising just $82.5m in equity funding. Its shareholders included Roche Venture Fund, the investment arm of pharmaceutical firm Roche, illustrating once again how corporate involvement can help drive a spinout to new heights – read more about corporate venture capital investments in spinouts in our special report in this issue.
To underline how significant the Avexis deal is, when Global University Venturing published its inaugural version of this report in 2016, Dezima Pharma, a Netherlands-based life sciences spinout of University of Amsterdam, was the largest acquisition deal by pharmaceutical firm Amgen for up to $1.55bn.
Dezima Pharma is now the third largest, having been surpassed last year by an acquisition of Mazor Robotics, an Israel-based surgical device maker based on research at Technion–Israel Institute of Technology, by medical device developer Medtronic for $1.6bn in September.
Mazor broke a local record – it was the highest sum paid for an acquisition in the Israeli medical sector, surpassing the $1.1bn paid by drug developer Mitsubishi Tanabe Pharma for Ben-Gurion University of the Negev-founded Parkinson’s therapy developer Neuroderm in 2017.
Mazor’s route to an eventual acquisition was a longer one than usual. The spinout completed two initial public offerings, one valuing it at $15.6m in 2007 on the Tel Aviv Stock Exchange, before a subsequent IPO on Nasdaq in 2013 which raised $46.9m.

Rigontec, a Germany-based RNA therapeutics developer spun out from University of Bonn’s Institute for Clinical Chemistry and Clinical Pharmacology in 2014, remains the only European spinout to feature among the 10 biggest exits over the past six years after its acquisition by pharmaceutical firm Merck in 2017 for up to $554m.
In tech transfer, ETH Zurich’s commercialisation arm ETH transfer is at the top of the league table, with 148 spinouts since 2013. That jaw-dropping success is a key reason the unit has received the GUV Tech Transfer Unit of the year award (see the Global University Venturing  Awards 2019).
With those 148 spinouts, ETH transfer even beat University of Oxford’s tech transfer arm Oxford University Innovation, which revealed a respectable 138 deals in its spinouts. Finding Stanford and Cambridge universities near the top, followed by notable institutions such as Massachusetts Institute of Technology and Imperial College London is a clear sign that most of the heartlands for spinout deals remain the same each year.
ETH transfer’s spinouts, however, have not reportedly raised huge sums, which may be due to a general scarcity of venture capital available to startups in mainland Europe. Here, University of Cambridge takes the top spot with an astounding $2.63bn raised by its spinouts over the past six years. And Tsinghua University appears in this table as the only Asian university, despite being missing from the top 10 in terms of number of spinouts.

The most successful investors in spinouts provide an interesting story. Firms affiliated with the state of Bavaria are the most successful when it comes to capital raised by their portfolio businesses, followed by internet technology conglomerate Alphabet and spinout-focused investment firm Osage University Partners – which may well move up this list after closing its $273m third fund earlier in March this year.
Institutional investors almost exclusively populate the top of the league featuring those involved in the largest exit values.
Last year also generated a record-breaking 130 new funds, including university-owned venture funds, student-led funds and third-party vehicles, although the amount raised by these funds dropped significantly from $19.9bn in 2017 to just $6.7bn. With just over a quarter gone of 2019, it is heartening to see that the 44 new funds raised already this year have collected almost $3.6bn in capital.
Let’s take a look at who backed the spinouts from some universities in more detail. Oxford, whose university venture fund Oxford Sciences Innovation remains a powerhouse with its $800m, has clearly been putting its money where its mouth is, and the same is true for Cambridge, whose Seed Funds has taken home the GUV award for Investment Unit of the Year and whose Cambridge Innovation Capital is fresh from a $196m fundraising effort that netted it a nomination for Fundraising of the Year.
Parkwalk Advisors, a fund management subsidiary of commercialisation firm IP Group, continues to be a strong supporter of spinouts from both universities.

Elsewhere in the so-called golden triangle, University College London and Imperial College London put money into their own spinouts through UCL Business, Imperial Innovations and Touchstone Innovations – the last two both owned by IP Group until March this year before the university moved tech transfer operation Imperial Innovations back in-house when the existing agreement expired.
Stanford University, renowned as one of the most entrepreneurial universities, has been doing so well because of the Stanford-StartX Fund, and our analysis shows that vehicle was the most important backer for the university’s spinouts. But the fund is embroiled in a legal battle with portfolio company MedWhat, which has accused StartX and Stanford of fraud in its funding arrangements – if MedWhat wins the case it could have far reaching consequences and even endanger the non-profit status of Stanford University. In January this year, the fund announced it would halt investments later this year, and beyond the legal issues, this throws up a question about what this table will look like in a year’s time.

Several corporates feature among the backers of Stanford-founded companies, and this is also true elsewhere in the US, for example Harvard University, where we find life sciences real estate company Alexandria Real Estate Equities, Alphabet, Novartis and other pharmaceutical firms such as Johnson & Johnson and Pfizer.
Plenty of corporates can also be found among the spinouts from University of Michigan.

Remarkably, the record-breaking number of deals and money invested, however, came from the least diverse group of backers since 2013 – a total of 99 backers participated in deals. That is despite the fact that the relative proportion of each type of investor – university, corporate, government, institutional and angel – have remained the same year-on-year, within negligible shifts of a few percentage points.
Global University Venturing previously referred to 2018 as a year for the history books in its annual review published in January, and this holds true not just in a year-on-year comparison but even more so in the context of this long-term analysis.

Our quarterly analysis published this April may have indicated that the current calendar year is off to a somewhat slower start, but with many firms such as Allied Minds and Fusion IP noting that their aim this year will be to double-down on existing portfolios, this is not necessarily a bad thing. And it does not mean universities have stopped producing spinouts – GUV award winner ETH transfer, for example, has already revealed six new spinouts, while Oxford University Innovation’s Mark Mann – GUV’s Personality of the Year – is gearing up to help establish dozens of social enterprise spinouts from the institution.
It does not seem unrealistic to predict GUV will have tracked more than 5,000 deals within a decade, even if such a statement would have sounded wildly optimistic just a couple of years ago.