University of Edinburgh launches investment vehicle

For the first time, the University will be making investments from its balance sheet.  Previously the University was awarded one of the 15 seed funds that were established as part of the Government’s University Challenge Seed Fund scheme, but the priority of the resulting fund, the Edinburgh Technology Fund, was broad and included using Government funds to help start new companies rather than specifically making commercial investments.
The new investment group will make mid and late-stage venture investments into companies as they grow and develop.  Investments will be made as part of large deals involving venture capital funds or professional investors.
Old College Capital will seek to invest a total of up to £2 million, making available amounts of normally between £100k to £200k for future spin-outs with very high growth potential.
Further funds may be committed to Old College Capital in the medium term, with the possibility of participation for external investors.  Old College Capital expects to make three to five investments each year.
In the long-term, Old College Capital is expected to build a significant and sustainable investment activity that provides sector-leading returns, while contributing capital to University companies.
Grant Wheeler, Head of Company Formation and Incubation at the University, is keen to stress that the purpose of the new activity is to generate returns.  “The challenge has been persuading people that venture is an asset class worth investing in and that our knowledge, expertise, and experience should de-risk the investments made,” he says.  “This stage of our investment activity is a start, to see what can be achieved and to build a model for a more substantial activity in the future, perhaps with a broader scope but with the same commercial purpose.”
The University has a strong track record in commercialising its research.  In 2010, staff and students at the University formed 40 new companies from a range of technology disciplines across the research base.
Old College Capital’s first deal is an investment of £200k into NGentec, which is developing a generator for use in large wind turbines.  The company recently confirmed a £4 million investment from Dutch VC SET Venture Partners and the Scottish Co-investment Fund, and an industrial partnership with Clyde Blowers subsidiary David Brown ( see last two issues of YCF for full details).
Nigel Paul, director of Corporate Services at the University of Edinburgh, said “We already have a substantial amount of high value knowledge about the technologies developed in the University and about their markets, and we have married that with considerable investment experience and knowledge from Edinburgh’s financial industry.”
Alan McFarlane of Dundas Global Investors, Chair of the University’s Endowment Investment Committee and a member of the Equity Management Group, said “The University’s commitment into Old College Capital is modest compared with the total value of its portfolio of investments, but it offers the potential of a very significant return and, crucially, stands to benefit some of the University’s leading spin-out and start-up companies.”
Hamish Mair, head of private equity at F&C Investments and an alumnus of the University, will chair Old College Capital’s investment committee.  He said “This has the potential to grow into something substantial for the University and the wider economy.  In Cambridge and parts of the US, the partnership of venture capital investors and new technology companies generates significant returns across the board.  Old College Capital can be the focus for a similar partnership in Edinburgh.”

Contact:  Grant Wheeler
0131 472 4756
www.research-innovation.ed.ac.uk

Posted on Thursday, 24 March 2011 under University news

 
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