Venture Houston 2018
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24 May 2017

2013-2016 data review

As the world’s largest venture capital ecosystem, the US has lots of VC firms and connections with and funding by universities.

Author: Kaloyan Andonov, reporter

Over the past four years, Global University Venturing (GUV) tracked 1,668 deals involving spinouts from academic institutions. The number of such funding rounds doubled between 2013 and 2014, from 213 to 529 rounds. Subsequently it remained stable at 519 through 2015, only to drop down to 407 in 2016. Life sciences, information technology and services startups comprised the majority of the deal flow every year of the examined period. Startups from these three sectors also accounted for the vast chunk of total capital raised by businesses spun out from academia.

In terms dollars invested in such enterprises, GUV found a total of $35.6bn invested over the 2013-2016 period. The total capital raised sharply increased to to $9.88bn in 2014, up from $5.33bn in 2013, and later to nearly $14bn in 2015. That upward trend, however, turned out to be unsustainable and the capital totals went back down, rather drastically, to $6.41bn last year.

Despite this sharp decrease from last year, the prospects for commitments in university-affiliated companies do not seem bleak, if we consider the university-related funding initiatives that have seen a sustained and steady growth over the period. In numbers, they have somewhat fluctuated in the past two years (62 and 72 funds), after a considerable spike registered in 2014 with 92 funds – up from just 22 in 2013. Nevertheless, the growth of total capital committed to such initiatives was mostly gradual – from $2.98bn in 2013 to $5.84bn in 2014 to $7.54bn in 2015, until it surged by 84% to $13.89bn in 2016. This growth of such funds is likely to entail an increase of capital commitments to university spinouts in the coming years. Given these favourable prospects, it is interesting to dive in a little deeper with data and get to know the university venturing space somewhat better.

Geographically speaking, the university venturing space is somewhat unevenly distributed around the globe, withspinouts from US and UK-based academic institutions having generated the majority of the tracked deal flow – 768 and 505 rounds, respectively. Other geographies with notable total deal count include Germany (50 rounds), Canada (47), Australia (38), Israel (18) and China (18). Most of the capital attracted by spinouts also tends to go into European and North American companies, stemming from some of the most established and oldest academic centres in the world.

Stanford University, University of Cambridge and the University of Oxford were the top ranking academic institutions whose affiliated businesses raised the largest number of rounds over the past four years. Their spinouts also attracted the most capital as well. These results should be hardly surprising, as the said academic institutions constitute the heart and soul of the largest innovation hubs of the US and the UK, respespectively.

Rounds raised by spinouts have drawn in a wide variety of investors. Among them, between 12 to 17% tend be university investors, roughly 20% are normally corporate investors – both specialised CVC units or corporate divisions taking minority stakes. Government agencies and investment vehicles tend to represent 5-10% of backers and their participation appears to be on a downward trend. The vast majority of investors are comprised of traditional venture capital firms, private equity investors, foundations, private investors, angels and other individual investors.

Dezima Pharma, a life sciences company founded by Amsterdam University professor John Kastelein and venture firm Forbion Capital Partners, was acquired by pharmaceutical firm Amgen for estimated $1.55bn. The deal included an upfront payment of $300m, with the remaining $1.25bn allocated to milestone  payments. The company raised $18.6m in 2013 with support from Forbion and venture peers BioGeneration Ventures and New Science Ventures. It also received a $5.66m loan from the Dutch Government. Dezima develops a treatment for dyslipidemia, a condition derived from too much insulin where the body overproduces lipids – a major risk factor for cardiovascular disease.

Spreadtrum Communications, a smartphone chipset manufacturer backed by venture firm New Enterprise Associates (NEA), received a $1.3bn non-binding buyout offer from Tsinghua University. The offer was made through Tsinghua Unigroup, a subsidiary of the institution’s state-owned investment unit Tsinghua Holdings, representing a premium of 28% for Spreadtrum’s closing price on the Nasdaq. Spreadtrum had gone public in 2007, raising $124.6m when it floated.

US-based gaming company Zynga bought Oxford spinoff Natural Motion for $527m, which was actually the company’s second recorded backing. Since its inception, Natural Motion had only held one venture round for an unspecified sum from early-stage venture investor Balderton. Natural Motion is a game developer for mobile devices, whose most famous game was CSR Racing for iOS, which became the number one sold in App Store game charts in over 70 countries.

Anglo-Swedish-listed pharmaceutical giant AstraZeneca acquired biotech firm Amplimmune in a deal worth up to $500m. The Johns Hopkins University spin-out that has retained close ties with the academic institution, develops drugs to bolster the body’s immune system in order to fight cancer. The exit could ultimately bring in much higher returns for AstraZeneca. Made through AstraZeneca’s biologics research and development unit MedImmune, the deal will allow the pharmaceutical company to tap into Amplimmune’s developing cancer drugs.

Wolfson, a microchip and audio firm spun out from University of Edinburgh was acquired by US-based Cirrus Logic in a surprising deal worth £291m – a 75% premium to the Wolfson share price. Having stuck partnerships with major technology manufacturers like Samsung, Wolfson was, at the time of the acquisition, trying to develop a next generation of microphones and audio hubs regarded as key components for smartphone and tablet manufacturers. The acquirer, Cirrus Logic is a semiconductor supplier specialising in analogue, mixed-signal, and audio digital signal processor integrated circuits.

US-based biotech company Celgene invested $1bn in Juno Therapeutics, as part of a wide-ranging partnership aimed towards the generation of new experimental cancer treatments. This move made Celgene one of the most important backers of Juno’s so-called “Car-T therapy” treatment, which involves “reprogramming” patients’ white blood cells to make them attack tumours. The total amount of the agreed investment will to be spread over 10 years, with Celgene making an upfront payment of $150m.

BioMérieux, a medtech firm based in France, agreed to buy its US rival BioFire, a spin-out of the University of Utah, for $450m. Launched more than two decades ago, the Salt Lake City-based BioFire specialises in producing FilmArray, a medical diagnostics kit which can identify 20 bacterial and viral infections in one hour. As part of the deal, the French medtech was not only able to add FilmArray to its own product line-up, but also to grab a solid footing in the US which currently makes up 24% of BioMérieux’s total sales. 

Allergan, an Ireland-based pharmaceutical company, agreed to acquire Northwestern University’s central nervous system life sciences firm Naurex in a deal worth $560m. The company received $560m in upfront payments from Allergan, with potential future milestone payments. In return, Allergan added Naurex’s anti-depression drug candidates to its portfolio. Since launching in 2008, Naurex has secured $162.1m in external funding. Backers in the firm included Baxter International, Adams Street Partners, Druid Bioventures, Genesys Capital, Latterell Venture Partners, PathoCapital, Savitr Capital, and Takeda Ventures.

US-based Moderna Therapeutics closed the largest financing round ever raised by a private biopharmaceutical company, raising $450m from investors including pharmaceutical firms AstraZeneca and Alexion Pharmaceuticals. Viking Global Investors, Invus, RA Capital Management and Wellington Management Company all participated in the round as new investors, while undisclosed existing backers also took part. Moderna is developing an in vivo drug technology called messenger RNA therapeutics that produces human proteins, antibodies and protein constructs in cells in order to combat diseases previously untreatable with drugs.

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