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20 July 2018

First half of 2018 sets up record-breaking spree

Investment analysis January to June 2018

Author: Thierry Heles, editor

Technology transfer has been on an upswing for a while – illustrated particularly in our five-year data review published in GUV’s May 2018 issue. In that analysis, we noted that 2017 featured the highest number of investments over that period – 478 – though the number has since risen slightly to 481 as a few additional historical deals have been added to our database.

If that seems a lot, and it is compared with 2016’s lull of just 380 deals, consider this – by the end of June, the count for 2018 already stood at 409. And June itself proved to be a true blockbuster of a month by clocking 111 investments – nearly twice as many as the same month last year, when GUV tracked 59 deals.

There is often increased activity in June as universities ramp up the news flow ahead of the summer holidays but, astoundingly, June this year towers even over September 2017, when several universities revealed spinouts launched during the previous academic year without specifying months, leading to companies being added to our database that month.

The momentum from June is unlikely to continue through this current quarter – in July there has so far been a reduced news flow on the GUV website as universities reduce their activities for the summer break. While we may see a spike again in August and September when institutions publish their annual reviews, it remains to be seen whether any will break through the threshold of 100 deals again.

Healthcare continues to be the source of most deals in technology transfer, though the rise of the industrial, IT and consumer sectors is notable. With institutions also increasingly looking towards departments such as social sciences and creative industries – the latter was the subject of a panel discussion at the latest PraxisAuril conference (see special report) – it will be interesting to track whether life sciences will continue to be the dominant sector.

More deals do not necessarily equate to more money overall – indeed the nearly $1.5bn disclosed in June appears relatively low compared with March and April, both of which also broke through $1bn but with significantly fewer deals.

However, there are two key points to be made. First, GUV has not tracked more than $1bn in total investments in a single month since January 2016, and there have already been three months this year in which more than this milestone has been raised. Second, even in January, February and May this year, more has been raised in each than in 11 out of 12 months last year. September’s data, as noted above, is slightly skewed.

While the total value of deals in 2017 was about $4.9bn, the total value this year is already approaching $5.9bn, and there have been more transactions than in 2016, when $5.4bn was invested. The odds are 2018 will beat 2014, when $7.2bn changed hands, and 2015, when spinouts secured a total of $9.4bn between themselves.

University venture funds have played an important role in driving up the number of deals in spinouts, with those vehicles making up more than 10% of funding each month – even matching corporate venturing units in June. Other investors, such as venture capital firms and angel investors, however, remain the main source of funding.

The situation is similarly heartening when looking at exits during the first half of the year. The number is roughly in line with the same period last year – 22 during the first half of 2017 compared with 26 this year.

The value of these exits has shot up, however, due primarily to the acquisition of Avexis, a US-based neurological disease treatment developer commercialising Ohio State University (OSU) research, which completed an acquisition deal with pharmaceutical firm Novartis for $8.7bn in May 2018. OSU’s shares in Avexis were worth a relatively modest $2.7m at the time of the acquisition, though it is not clear how many shares the university may have sold while Avexis was a publicly-traded company on Nasdaq between February 2016 and May.

The remaining months during the first half of 2018 also featured good-sized exits, with March bringing in more than any month in 2017 except September.

The 10 best-performing universities in terms of transaction value and number of deals in their spinouts are arguably less surprising. Stanford University dominates with $359m and shares fifth place with Harvard University with 14 deals.

In the UK, Oxford and Cambridge universities are neck and neck – while Cambridge’s spinouts attracted roughly $500,000 more than Oxford’s, the latter comes out on top with 18 deals compared with Cambridge’s 17 transactions.

US and UK institutions each make up half of top 10 for total value – disproving the common perception among policymakers that non-US universities are somehow doing a worse job of fostering commercially viable companies.

US universities come out on top for the number of spinouts that secured funding, though there are of course more institutions that generated one deal than thosde randomly selected for the graph above.

The dominance of the UK over other European countries is also reflected in the nature of investors, where UK-based fund manager Parkwalk Advisors is in first place. German public-private partnership High-Tech Gründerfonds is represented in the list despite no German universities making it into the top 10 ranking.

In the US, we find Purdue University’s entrepreneurship hub Purdue Foundry and University of California Berkeley sharing first place, with several corporates also represented.

Investors in Asia are more varied and the vast majority contributed to only one deal. University venture fund, University of Tokyo Edge Capital, dominates the list, and Temasek, an investment firm owned by the government of Singapore, participated in only one transaction despite being a prolific investor on our sister site Global Government Venturing and having several spinouts across the world in its portfolio.

Backers were similarly diverse across the rest of the world, including universities, public investors, corporations and private investors. The shorter list also reflects the reduced activity of spinout generation outside the juggernauts of the US and Europe.

GUV has repeatedly argued that the ecosystem is gearing up for a stunning run towards the end of the decade, and if the first half of 2018 is any indication, that prediction is coming true sooner rather than later. It is not simply the fact that so many deals are in train, but that the rate at which money is changing hands has also quickened – from 44 deals in January to 111 deals in June.

Will the second half of the year be just as impressive? GUV would wager yes.

Copyright Mawsonia Limited 2010. Please don´t cut articles from www.globaluniversityventuring.com or the PDF and redistribute by email or post to the web without written permission.

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