Venture Houston 2018
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25 April 2018

Review of the first quarter

Q1 data analysis

Author: Thierry Heles, editor

It is no understatement to claim that 2018 has kicked off with a bang, setting the stage for what could become one of the most successful years for university venturing. The jaw-dropping $8.7bn acquisition of Ohio State University’s gene therapy developer Avexis by Novartis may be fresh on everyone’s mind, but it happened earlier this month so will not register in the graphs below. Yet the figures for the first quarter are impressive.

When Global University Venturing undertook its annual review in the January issue, 2017 had already outperformed 2016 and the recent heights of 2014.

With 44 deals in January 2018 and a steady 63 investments in both February and March, numbers are higher across the board than the same period a year ago, when GUV tracked 43, 36 and 27 deals across the first quarter.

The value of investments has risen too – $587m in January 2018, up from $280m last year, with $507m in February, up from $202m, and almost $1.37bn in March, up from $444m.

It is intriguing to note that although there were more deals in February this year, the total value of investments was significantly lower, though this is partly due to some remaining undisclosed.

The US and Canada continue to dominate both in terms of number of deals and total value. Europe accounted for far fewer deals compared with the 23 out of 43 deals in January last year.

It is too early to say whether the trend will continue, but considering that the high point last year was September with 69 deals – a spike caused by several tech transfer offices disclosing their spinouts for the previous academic year – and the first quarter is already within touching distance of that ceiling, things are looking good for the rest of the year.

In fact, even January’s 44 deals stand above nine out of 12 months’ figures for 2017, while February and March’s 63 deals tower above every month but September last year.

The number of exits has also increased. In January, GUV tracked three, February dropped slightly to two and March rose to six. The value of January’s deals was not disclosed, but February’s brought in $95m in an upfront payment for the shareholders of Elastagen, an Australia-based dermatology product spinout from University of Sydney, which agreed to an acquisition by pharmaceutical firm Allergan. Investors may yet receive more cash from that exit, as the agreement included an undisclosed sum of contingent, commercial payments.

Elastagen’s shareholders included Cicada Innovations, an incubator operated by University of Sydney, University of New South Wales, Australian National University and University of Technology Sydney, as well as AmorePacific Ventures, the corporate venturing unit of beauty company AmorePacific. The spinout had secured $12.5m from its series A and B rounds.

Meanwhile, March’s exits resulted in an $831.3m windfall for investors.

These figures compare with one exit in January 2017, and three each in February and March. However, only about $600,000 was disclosed across those exits and while some may have brought in substantially more than that, more than $900m in the first quarter of 2018 is a considerable feat bettered only by October 2017, when backers received nearly $1.1bn across nine exits.

All these figures have led to a palpable optimism – Matt Perkins, chief executive of University of Oxford’s technology transfer office, Oxford University Innovation (OUI), said: “With six new companies and over £150m ($210m) in external investment, our ever-growing portfolio of spinouts is off to a strong start in 2018. This activity is a continuation of the persistent and rapid change we have seen in the Oxford innovation ecosystem. At OUI, we are looking to harness the power of that change and make it sustainable.

“Among many activities, we have been investigating new methods of supporting our colleagues in humanities and social sciences, culminating in an Oxford Innovation Society meeting focused squarely on innovation pouring from these two divisions. We hope this can be the starting gun for more companies like 2017’s humanities spinout InkPath, or this quarter’s social sciences company PalaeoPi.”

European institutions as a whole may still be playing catch-up with peers in the US, but as the two world maps for number of deals and their value show, they are doing a good job in the global context.

The performance of European universities is clearer in the league tables for the number of deals and exits – apart from US institutions, we find only UK universities. In addition, the golden triangle of Oxford and Cambridge universities and London institutions such as Imperial College London and University College London are the strongest players, though we also find Edinburgh, Manchester and Leeds universities here.

All of this puts 2018 in a strong position to become a record-breaking year. It bodes well, too, that intellectual property law firm Anderson Law revealed earlier this month that nine out of 10 university spinouts that received private investment between 2011 and 2015 are still operational – a significantly higher rate than startups in general, where only two in 10 survive beyond five years.

GUV’s prediction in its 2017 annual review that university venturing is “looking at a stunning run as we approach the end of the decade” appears to be coming true.

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