Supporting spinouts going forward

May you live in interesting times, as the saying goes – often wrongly thought to be a curse from Chinese, though there is no equivalent idiom in that language. But a curse it can turn out to be nonetheless if tumultuous times are approached without care or, indeed, a plan.
Coming up with a plan on how to support the innovation ecosystem when a pandemic is wreaking havoc with the economy is arguably at the more challenging end of the spectrum, so it was good to hear from experts in the US, the UK and Australia that these interesting times are not the end of days.
Tom Vanhoutte, a partner at research institute Imec’s investment fund Imec.xpand, summed up the current state of affairs from his point of view: “The most you can do for companies is provide them with cash – it is the thing that is hardest for them to get. We are very active, expanding our network within the investment community and we obviously, as a technology partner, get them in touch with the right people who can help them develop their technologies.”
Imec.xpand did not focus much on acceleration services, Vanhoutte added, though companies would have no problem finding this help elsewhere.
Jim Wilkinson, interim chief executive at University of Oxford’s venture fund Oxford Sciences Innovation (OSI), on the other hand had slowly adapted the focus to also provide acceleration services: “We built up a list of limited partners who invested in us, to give them access to the intellectual property (IP) and to actually help us with the companies. They help us to do due diligence … with the strategy and management, and with finding commercial leads. The whole plan is that we can accelerate a company’s development.”
When it came to funding, Wilkinson said, OSI had a rule that from series A stage the fund needed co-investors to validate the technology. He explained: “We are spending a lot of time on bringing new co-investors into Oxford – at the last count it was about 30 that we brought in that had never invested in Oxford spinouts previously. Most of them have done one, and about three or four investors have done more deals.”
The aim, Wilkinson continued, was to embed investors into Oxfordshire. This also fit into OSI’s plan of building an accelerator program and a larger ecosystem that would attract international talent, he said.
OSI was “half good at buildings”, Wilkinson added, because a third of its portfolio was in life sciences and those companies required wet lab space – which was in short supply in the city and caused the fund to expand its original remit to invest in real estate.
A university that could easily be considered exceptional at buildings is Birmingham, where the tech transfer office, University of Birmingham Enterprise, manages the Birmingham Research Park, an incubator called BizInn and a wet lab space called BioHub.
David Coleman, head of enterprise acceleration at the TTO, said: “We are working with the city and have invested in space for a new life sciences park as well. It is a real area of strength for the university and the region.”
None of this happened overnight – in fact, it took many years to build – but University of Birmingham has never been one to rest on its laurels: for the past eight years, the institution has also been busy helping to build up Midlands Innovation, a partnership between eight universities in the region that operates the Midlands Innovation Commercialisation of Research Accelerator.
Another panellist who knows a thing or two about consortia was Moray Wright, chief executive of fund manager Parkwalk Advisors that handles co-investment funds for several British universities. Wright said: “In the financial crisis, we saw a lot of funds did not have an awful lot of cash to invest, so it was a dramatic disappearance of money then compared with the Covid-19 issue. A lot of venture funds today have reasonable amount of cash piles.”
This did not mean money would be free-flowing, Wright cautioned. We might see many funds “trying to keep the powder dry for a while because nobody really knows how long this is going to last or how bad the impact is going to be on funding generally.
“We are still seeing reasonable amount of money going into seed rounds but when it gets to series A or B, a lot of funds appear to be concentrating on their own portfolios.” Parkwalk was in a position to cope with the fallout for about a year, Wright added, but beyond that it was a big unknown – similar to most funds, he postulated.
Peter Devine, chief executive of multi-university venture fund, revealed: “In Australia, universities rely heavily on international student revenue and all of their budgets have been hit. It is probably going to take three to four years to return to normal. That has had a pretty interesting impact on Uniseed – the universities appreciate the importance of having a fund and moving stuff out, but it has meant looking closely at their companies and figuring out how to spread things out without stopping progress.”

Above: Peter Devine
Uniseed was fortunate to find itself in a country that had traditionally benefited from the mining industry – a boom that had ended, Devine said, and led to family offices and high-net-worth individuals seeking out other opportunities and ensuring investments were still being made even as clinical trials were being put on hold and supply chain issues arose.
Karen Brooks, program director at multi-university partnership SETsquared, found herself in the interesting position of trying to raise a fund in the middle of a pandemic (see also our profile of SETsquared in this issue). Brooks said: “It is about ensuring that the deal flow does not get stalled by the pandemic. VCs have still got funds in their pockets, but we have been seeing issues in the angel rounds. There is a little more nervousness about spending money.”
Michael Pozmantier, program director of the Convergence Accelerator at the US National Science Foundation, revealed he was struggling with another part of the equation: relationship building. He asked: “How do you build trust over Zoom?”
Being an accelerator, Pozmantier said, also posed the challenge of adequately delivering training content and ensuring startups absorbed the material. “And that is on top of all the normal stuff,” he added, “of dealing with universities that are trying to get things out the door but are backed up.”
Orin Herskowitz, whose positions at Columbia University include executive director of tech transfer office Columbia Technology Ventures, said: “Obviously, it is tough. In New York in general, there is a lot going on. But when I joined about 15 years ago, we were doing four or five spinouts a year – now, it is up to about 20 or 30, so it has been quite a run.”
Capital was no longer an issue in New York, Herskowitz remarked, as there had been “a huge influx of VCs” as the city had turned itself into a “global hub for entrepreneurship across all fields.” Space, he added, was surprisingly also not an issue anymore – while admitting that it was not cheap. Columbia’s challenge, he said, was access to mentors and advisers.
“We have started an executives-in-residence program to bring in serial entrepreneurs, industry executives and venture capitalists to work with the startups on campus. New York is a huge, noisy, crowded, vibrant city, therefore helping our scientists find the people they need to work with has been important.”
He added: “We spend a lot of our time educating students and faculty on how to launch startups. We have spent an increasing amount of time helping companies refine their pitches.”
Herskowitz also echoed Wilkinson’s thoughts on attracting talent, saying: “One of the challenges in New York has been finding the right C-suite to actually launch startups. We have started an initiative across about 20 universities in the US to connect serial entrepreneurs in Columbia’s network to startups that need serial entrepreneurs at universities including Stanford, Harvard, MIT, Yale, Cornell, Caltech and Michigan.”
Kelly Sexton, associate vice-president for research, technology transfer and innovation partnerships at University of Michigan, managed to solve the cashflow problem in the middle of the pandemic, with the launch of the $130m investment fund Great Lakes Discoveries.

Above: Kelly Sexton, University of Michigan
She said: “It was nice to be able to bring what is largely a new source of research funding to campus and to provide that bit of good news at this time.”
The challenge for Michigan lay in being located in Ann Arbor, a relatively small city, she said. “We are not in a vibrant ecosystem like New York, Boston or Silicon Valley, so how do we create these connections to talent and early-stage capital? Like Columbia, we have created a mentor-in-residence program – that name is purposeful because they are getting involved with faculty and graduate students very early on and we wanted a non-intimidating descriptor.
“The mentors help us with the talent problem, which is a really tough challenge for us. They have big networks and, on occasion, one of them will see a really compelling opportunity and leave the program to launch the company. That is not the purpose of the program but when that happens, it is a success as well.”
The university also maintained a range of funds and was busy raising another one, she said. “As others on the panel have said, it is an interesting time to be raising a fund, even through philanthropy.”
While that work goes on, Sexton noted her team also maintained a “pipeline report that is sent out quarterly to around 450 VCs and angel investors around the world. It is where we curate our emerging startups, those that recently launched and those that are raising funds and want to be included in the list. That has been a really helpful tool.”
She added: “In our alumni, we have really strong supporters of the university, so we are trying to find ways to tap into their enthusiasm to support these efforts – whether it is through philanthropy, investing in, mentoring or advising companies. We do not have that figured out yet fully, but we know it is a huge opportunity for us.”
Someone who has figured out how to leverage that opportunity is Tony Armstrong, president and chief executive of Indiana University’s fund management arm IU Ventures. Having already established the IU Philanthropic Venture Fund, among other vehicles, Armstrong said, “we formally launched our IU Angel Network about two months ago to give our alumni a chance to personally invest in some of the opportunities that we are coming across.

Above: Tony Armstrong, IU Ventures
“It can be complimentary to the Philanthropic Fund, but we are finding the angel network gives us a chance to put alumni opportunities and earlier stage opportunities in front of a group of investors that are really anxious to see what is happening.
Hardly short on cash either is the Cambridge ecosystem where Tony Raven, chief executive of tech transfer office Cambridge Enterprise, not only has the internal Seed Funds to tap into but also the significant firepower of external patient capital fund Cambridge Innovation Capital, as well as the co-investment funds managed by Parkwalk.
Raven showed himself cautious, however. “The thing that struck us is how little experience there is of managing the cashflow crisis in companies and indeed in the investor community. Part of our aim is making sure that we are giving our portfolio the training in what to do to extend the cash runway.
“We continue to see a flow of companies coming out and we are investing, but only if they can show that on the cash we give them they can last for at least 12 months.”
He continued: “We are very lucky in Cambridge in that other people take care of incubators for us.
“In terms of talent, we are very fortunate that we have a cluster here of 5,000 companies – comparable to the size of the Israeli ecosystem – so we have a lot of very engaged serial entrepreneurs with a great deal of experience that are able to provide mentorship.
“We use a model of putting postdocs with an experienced chairperson, who can mentor them into the role running the companies. That has been very successful.
“The last thing that is interesting for us is that geography is evaporating at a time when the world is fragmenting. We had an investment committee recently that Hermann Hauser joined in on from New Zealand. We had an interview panel where a colleague from the US joined – things that you would never have done in a physical space we are now doing. So, the question for me is do we have an opportunity here where it does not matter where you are located? That is going to be an interesting area for us to explore in the future.”

Above: Tony Raven, Cambridge Enterprise
Mario Barosevcic, principal at edtech-focused venture capital firm Emerge Education, echoed Raven’s point on location: “We have always been quite agile with our approach. We have been practising what we are preaching about the power of online: we are in the process of closing an investment in a fully online university without having met the team in person.
“I hear in the rest of the VC community there is a lot of scepticism and many funds have not made any investments in the past three months, but the economy is not going to be rapidly opening up. More and more funds will rethink their strategies and become more open to online, given the deployment periods of their funds.”
Edtech was a particularly exciting space to be in right now, Barosevcic argued – much like life sciences and as opposed to sectors such as engineering, which have struggled, the panellists said.
Barosevcic continued: “There has been a huge demand for edtech. It is a rare moment in time when working with various universities on their 2030 strategies that have all of a sudden become the September 2020 strategies.”
David Richardson, chief entrepreneurial executive at Heriot-Watt University, meanwhile noted that he was seeing a “move to more automation and robotics and the acceleration of those technologies – in particular, the robotic automation space looking at medical and future sensing – as well as the rise of 5G.”
There was an opportunity to repeat the successes after 2008, Richardson said, when “people who were not going into big corporate positions ended up starting companies. There is an opportunity if we can put the right types of funding in front of these people that we could be starting businesses that we have not even thought of before.”
Richardson was also interested in virtual experiences, saying: “Can we create new experiences where, if you cannot physically get to them, you experience them in a completely different environment? Think of the number of virtual wine and whiskey tastings that are happening right now through fairly traditional web conferencing facilities.”
Heriot-Watt was exploring “digital twins and how to recreate features of the physical world”, he added. Much like Raven, who managed to attract investment from New Zealand, Richardson was excited about the opportunities presented by physical presence no longer being considered necessary. He concluded: “We have five campuses, including overseas, and trying to reach those audiences previously was challenging. The fact that now everyone is online means everyone is equal, give or take, and the only issue is the time zone.”
It was a sentiment echoed by Sexton, who said she was hopeful the fact that every startup now had to use web conferencing to talk to potential investors would mean that investors might start considering opportunities outside the traditional hotspots of Silicon Valley or Boston.
May you live in interesting times, the saying might be, but let GUV humbly propose an addendum: may you be guided through by leaders as capable as these panellists.
– Disclaimer: some quotes have been edited for clarity.