Tech transfer, supporting Cambridge University start-up spin outs

Podcast transcription - 17th april 2018

Alan Cowley:                    Welcome to the Invested Investor. This is slightly different from our usual podcasts. Our usual podcasts are business journey podcasts, whereas here we're more focused on specific themes and specific passions of people within the startup ecosystem. This week, we've got Anne Dobree who will be speaking about philosophy of backing the business rather than making investments, and she works for Cambridge Enterprise.

Anne Dobree:                   Thank you. It's great to be on the Invested Investor. As you said, my name is Anne Dobree and I'm head of seed funds at Cambridge Enterprise, which is part of the University of Cambridge. Just to set the context for what I wanted to talk about, I'll give you a bit of background. We're the seed technology investment fund for the university and it's our role to help companies emerge out of the university and develop university knowledge, science, research results into commercial ideas that will improve society. It's another part of our university mission alongside research and teaching to impact on society.

                                             We have a 15 million pound fund that has been going since 1995, and over the lifetime of our fund we've invested in over 80 companies and returned 30 million pounds to the fund from these investments. That gives us a multiple of 2.5 times, and they may not be that well known outside of Cambridge, but in the most recent period some of our successes include a company called XO1 that was bought by Janssen Pharmaceutical, Inc. A company called Vocal IQ around speech recognition that was bought by Apple. A company called Cambridge Semiconductor Sensors that was bought by AMS in Austria around sensing, obviously. We've had quite a few returns over the years and given us a much better return compared with venture investing, where the average return is one times cash.

                                             Partly, I think that stems from our mission and our approach to investing, which I think matches very well with the approach that angels can take to investing. Hence, being on your podcast today. Our fund has a double mission. As I said, the primary mission is societal impact. Secondary to that is the financial return. Obviously, we need to be investing in financially viable businesses so that they are successful, we need to maintain our fund. Our main mission is to make a successful result of the commercialization and the impact on society.

                                             That means that unlike a venture fund, we are not desperately trying to preserve our percentage, we are not tied to investing a set amount at a set stage. We can do whatever is best for the company in trying to make it successful. That, luckily or happily, feeds back to actually great returns. That is the approach that I would like to encourage all angel investors to take, because I think, like our fund, angels often get involved with investment for more issues than just financial return. They often have an interest in the technology or affecting a particular part of society. That approach that they share with us in backing the company to be successful rather than trying to maximize financial return actually pays off in both ways.

Alan Cowley:                    How do the companies stem out of the university?

Anne Dobree:                   Our companies come to us in various forms, and we are very lucky in Cambridge, which not all investment areas will have this particular position and not all angels will be able to access this sort of deal flow. Obviously, we are sitting on top of a group of high class world leading academics who are doing ground breaking research. The science is always brilliant. We have this constant deal flow of both academics or students who have an idea that might form the basis of a company, but they're very early in that journey. Or, we also have more developed companies which, you know, have the basis of a plan, they have the basis of a team and they're now looking for investment.

                                             We work with all of those sorts of people to try and get them to a stage at which they have an investible proposition that they can take to our investment committee or take to one of our co-investors, whether that's an angel or a VC or whoever. A lot of that activity is not just about iterating the plan, but obviously from a commercial academic background, the academics are probably going to want to stay within the university and work part time for the company on a scientific front, so it's about building the team as well and bringing in management or angels to help build the company and take it forward.

Alan Cowley:                    Do you have any advice or tips to other universities that are looking to set up similar initiatives?

Anne Dobree:                   I would definitely encourage other universities to take the same approach in terms of having an impact driven mission. Luckily, I think most universities do. Any sort of seed investment, the numbers involved, they're always going to be kind of change under the sofa for the university as a whole. Where it does impact on the university is really is helping support return to society. Which of course then feeds back into government support and funding. I would first encourage all universities to take that approach to investment.

                                             Then, it's about leveraging your network, which is again where the close relationship with angels comes in. Not all universities will have such a great network as Cambridge to work with, but it's about using your connections in terms of people you know who will know management, whether that's venture funds who keep up to date with management, whether it's other start-ups or whether it's angels.

Alan Cowley:                    One of the major things we're trying to educate angel investors is to be more invested in these companies and mentoring and advice. Do you see that a lot at Cambridge Enterprise, and is that a beneficial thing to the start-ups?

Anne Dobree:                   Yes, I think that's a brilliant addition from angels. I think angels might be surprised at how open companies are to having that advice. Particularly, in a university kind of environment because you've got two types of founders. You've either got your career academic who doesn't want to be the CEO of the company and so is looking for someone to work with them and take the lead on that and give that advice, whether that's a board level or CEO level or whatever, so there's a way to work and mentor on that side of things.

                                             Or, the other kind of side of the coin is the young team of graduates or students who are keen and eager to learn but don't have enough grey hairs or experience, and they are super keen to get people involved as mentors and as angels to guide their journey. They're just great to work with, because they have so much enthusiasm and the best of those will really listen and take on board what you're telling them.

Alan Cowley:                    You talked about supporting the businesses. Can you elaborate on that please?

Anne Dobree:                   Yes, I would be happy to, because of course, it sounds a bit arm-wavy, just supporting businesses, doesn't it? What's that mean in real life? At a very general level it means staying in touch with those businesses, probably through a board seat. Again, quite analogous to an angel who will probably take a seat on the board. Just thinking about what connections do we have that might help.

                                             It's sitting in meetings thinking, "Oh, I know someone who does that that might be useful to you. Shall I connect you with them?" A lot of what we do is that kind of introduction, whether it's to investors like I said previously or to other managers or just even other companies who have been there and done that. In fact, I've found that particularly younger teams don't necessarily want to learn from the leaders of the field in entrepreneurship. They do a lot of peer learning. If you can introduce them or connect them with a company that's just kind of one step ahead of them rather than the successful exit company, they're very open to that and that's very useful to them.

                                             In a more transactional way, it's about not being ... How can I say this politely? Not being annoying when a transaction is happening. You hear stories of funds refusing to sign paperwork because they're more concerned about their position than what's good for the company. We do not do that. We do what's best for the company, and if we're diluted then we're diluted. Hopefully the upside at the end of it means we'll actually do better in the end than if we'd been awkward and not helped the company get forward.

                                             It's about pulling out all the stops to help a company when it's in trouble as well. Thinking for some anecdotes, we have had, for example, a company in the past that had been talking closely with a lead investor. They were getting to the end of their funding cycle so they were tight on cash. Obviously, I won't name names of anyone. They believed they were going to secure investment from this investor. At the last moment, the investor pulled out and the company was left with half a round hanging and the risk of having to be liquidated.

                                             Well, we worked really hard on that day to pull in one of our local angels who was slightly involved but wasn't fully aware of the situation, and luckily convinced him to put his name behind the round which enabled it to get closed and the company to go on, and it was sold a couple of years later in a successful exit. We are very proud of that one, and we have our examples like that where actually, it really has been our involvement that has made the difference.

Alan Cowley:                    One final question. Seeing as you work with Cambridge University students and in start-up scene, what do you think the next big market or sector or fad will be?

Anne Dobree:                   That's a tricky one. We see a lot of, obviously, AI and machine learning stuff coming out at the moment, and everyone is doing something with AI and machine learning and autonomous vehicles, so there's obviously that above all that's closest. Actually, some of our best successes have been more traditional areas anyway, therapeutics which may not be every angel investor's cup of tea, but some of the companies we have backed on pure drug discovery in high medical need areas have been our most successful exits and those there will always be a need for.

Alan Cowley:                    Thanks very much Anne, it has been absolutely brilliant. I know that our listeners will learn a lot from what you've been speaking about today.

Anne Dobree:                   Thank you.

Peter Cowley:                  Thanks for listening to another Invested Investor podcast. You can subscribe to all future podcasts via our website, investedinvestor.com, or via a number of online podcast platforms. Be sure to follow us on Twitter, LinkedIn, and Facebook to get the most up to date, interesting and insightful content.