OSI: Patient Capital Meets University Venture

“Our shareholders are not like venture capital investors,” says Jim Wilkinson, the veteran CFO now steering the finances of Oxford Sciences Innovation, aka the largest university fund in the world. “This is a very different model which is all about encouraging patient capital.” Last month, FPB sat down with Jim to find out how OSI is putting that capital to work.

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David Norwood and Jim Wilkinson, CEO and CFO of Oxford Sciences Innovation

There is no doubting that OSI’s model has been an immense success from a fundraising perspective. Launched in May 2015, the firm has now amassed more than £600 million and, at least for the time being, ceased fundraising. More intriguing is the sheer diversity of the investors represented, ranging from well-known fund managers (Invesco, Woodford) to Sovereign Wealth Funds (Temasek, Oman Investment Fund), and from Corporate Venture Capital (GV, formerly Google Ventures) to University Venture specialists (IP Group, Future Planet).

Even in a climate where technology and life science investing has been the topic du jour, this success stands out from the crowd, especially for a new player launched just two and a half years ago.

So far, this team has deployed approximately 10% of the capital in 48 Oxford start-ups, most of which are less than two and a half years old. The other 90% has been retained as firepower for later-stage rounds as these companies grow, as well as new investments.

Intriguingly, OSI’s investors have bought into a concept, a structure, and a team led by IP Group founder David Norwood which is not based on immediate financial returns. The shareholders share the vision of building an ecosystem based around the University of Oxford, with the aim of generating a flood of world-changing companies.

Meanwhile, OSI is on the journey with their portfolio companies – in more ways than one. As a recent-start-up, the firm can relate to many of the administrative and operational growing pains that Oxford spin-outs themselves face.

So what happens now? For OSI’s strategy to bear fruit, the team are counting on two key ingredients.

The first: strong and consistent dealflow. In this respect, the impact of this new player on the Oxford ecosystem has clearly been dramatic. In the three years before the firm launched, Oxford University had four spin-outs per year. Since launch, that figure has risen to 44, fostered by the newly supportive climate. Although the OSI team don’t expect that volume to be sustained, they are anticipating a longer-term rate of ten-to-fifteen spin-outs per year. Moreover, their arrangement with the University gives them an equity stake in every single one, regardless of whether or not they choose to invest.

The second: partnerships. OSI does not have specialist expertise across the University of Oxford’s 29  science faculties, which range from computer sciences to life sciences and engineering to zoology.To counter this problem OSI use the Oxford brand to helped attract the right calibre of partner and co-investor: from motor manufacturers to major West Coast IT firms, leading companies of all shapes and sizes come through the OSI offices each week. These partners are fundamental to helping the portfolio companies grow through using the expert knowledge and contacts available.

The mission to collaborate with the best is already bearing fruit. Thanks to a relationship forged by OSI, Goldman Sachs recently made its first ever investment in an Oxford spin-out: artificial intelligence firm Diffblue, which closed a $22 million Series A round in June 2017. Google Ventures is another interesting example: having taken a stake in OSI itself, GV also invested directly in SpyBiotech – whose new approach to vaccine generation features a so-called ‘molecular superglue’ – earlier this year.

So far, OSI’s progress appears to be going to plan. It is good news for the university technology commercialisation ecosystem: this is a model that other universities, other asset managers and other investors are watching closely, to see whether a different approach pays off. And it is good news for the firm’s stakeholders, including Future Planet Capital.