“The Cambridge cluster has worked very well for a long time. It has an established angel and entrepreneur ecosystem and what we’re seeing now is entrepreneurs beginning to invest back into new technology companies,” says Victor Christou, Senior Investment Director at Cambridge Innovation Capital, a newly established £50m fund with a remit to invest in technology and life science businesses within the city and its surrounding area.
However, there is a ‘but’ coming The United Kingdom is not a particularly large country but despite a perfectly serviceable transport infrastructure it often seems that VC funds based in London are strangely reluctant to travel very far beyond the capital in search of investment opportunities. And as Christou adds: “Cambridge has been a bit insular.”
Given the relatively rich ‘angel’ culture in the area, that insularity manifests itself primarily in a shortage of what Christou describes as ‘follow on’ capital. Promising companies raise seed and early stage finance but find it difficult to attract the £1 million to £5 million investments necessary to move them on to the next stage. The result is that IP is sold or the businesses move out of Cambridge to base themselves in London (closer to the financiers ) or Silicon Valley.
Cambridge Innovation Capital is seeking to “redefine” investment in the Cambridge area by offering what it describes as founder and angel-friendly finance to enable entrepreneurs build £100 million and £200 million businesses by supporting them through the ‘valley of death stage’ that lies between the development of innovative technologies and full commercialisation.
Well as Christou explains, in addition to private investors – such Invesco Perpetual, Lansdowne Partners, ARM and IP Group, CIC has also raised funding from the Cambridge University Endowment Fund. Equally important, CIC has a close working relationship with Cambridge Enterprise, the University’s commercialisation office. These links with Cambridge and its colleges ensure that CIC is plugged to tech-led businesses coming out of the University. However, as Christou is anxious to stress: “We are not constrained by the University. We are free to invest in suitable companies across the cluster.”So what makes CIC different from any other VC investment fund?
Nor is CIC limiting itself to any particular technology sector. This morning (August 12) the fund has announced investments in three businesses. Cambridge Imaging Systems (offering cloud-based video archiving, delivery and billing); Origami Energy (smart grid management technology aimed at the renewable energy sector) and Jukedeck ( automated music composition for video producers), with the parties receiving £1.5 million, £1.25 million and £100,000 respectively.
As Christou acknowledges, grid management and digital media are hot sectors at the moment, but CIC has a remit to invest across a much wider field of disruptive technologies. Life sciences will also be a major theme. “We expect to be announcing a number of life science investments in the months ahead,” he says.
By providing series ‘A’ investment, CIC sees its role as helping Cambridge area entrepreneurs “realise their ambitions” without necessarily moving elsewhere in search of a more supportive funding ecosystem. As Christou acknowledges, Cambridge does have its fair share of high-value businesses that grown from a base inside the cluster – ARM being a case in point – but he believes there has been a residual funding gap which the fund will help to fill.
The fund’s timelines are set to be longer than the VC norm. In the UK, limited liability funds tend to think in terms of ten year investments, which CIC believes is too short to allow entrepreneurs to fulfil the potential of their companies. The intention, therefore, is to provide founders with a longer timeframe in which to grow and develop.
With a history stretching back more than 50 years and around 1500 technology businesses located in science parks and industrial estates, the Cambridge cluster has long been established as one of the UK’s most dynamic hubs for innovative companies. Perhaps the most surprising thing, then, is that there is still a perceived investment gap – one that CIC has a remit to fill, at least in part. But perhaps the most significant aspect of CICs launch is the Commitment of Cambridge University itself to supporting companies not just through early stages of spin-out development but on the longer road to commercialisation.