A PIECE of advice from a former Royal Bank of Scotland chairman was ringing in his ears when venture capital investor Sinclair Dunlop returned to Scotland, writes Peter Ranscombe.
As a St Andrew’s Society of the State of New York scholar, Dunlop left his homeland 17 years ago to study in the United States.
“George Younger always used to tell the scholars that they should return to Scotland – it’s perhaps taken me longer than I first expected but I’m pleased to be coming home,” says Dunlop, who last week opened the UK office of his Rock Spring Ventures investment company in Edinburgh.
His return to Scotland was the talk of the steamie at last week’s Scottish Enterprise life sciences dinner, one of the highlights of the industry’s calendar north of the Border, when more than 700 entrepreneurs, scientists and their hangers-on gathered for food and an awards ceremony at the Edinburgh International Conference Centre.
Though the prizes and keynotes speeches may have grabbed the headlines after the event, it was the “networking” that went on into the early hours of the morning for which most delegates attended the dinner. And in those bellowed conversations, it was the launch of Dunlop’s £50 million venture capital (VC) fund that had tongues wagging.
The Edinburgh-based fund – which is backed with cash from Aberdeen, Edinburgh and Glasgow universities, along with the European Investment Fund, Scottish Enterprise and the Strathclyde Pension Fund – will pump between £2m and £5m into early-stage life science companies and spin-outs from the UK’s universities.
While Dunlop’s broad grin shows he pleased to be home in Scotland, he has only one topic on his mind.
“The romantic side of coming home is all very nice, but let me be clear – this was a business decision,” Dunlop says. “We did a lot of research before taking this decision and we know there is an untapped wealth of life science companies in Scotland in which venture capitalists will want to invest.”
His assertion is part of a narrative that is gathering pace north of the Border. In December, BioQuarter commercialisation director Mike Capaldi told Scotland on Sunday that his organisation is looking to bring in £50m of VC funding by the end of next year, capitalising on investment opportunities that have gone under the radar in the past.
So, is Scotland finally starting to fill the “VC gap” that many in the life sciences industry and the wider investment community have felt is holding Scotland back?
“We won’t do it on our own,” admits Dunlop, “but we’re certainly part of that story. Ideally, we would want two or three or even up to six funds like Rock Spring Ventures operating in Scotland.
“We’ll be working with business angels to invest in companies, but we’ll also be using our contacts to bring in investors from the Europe, the Far East and the United States.”
Those contacts have come from the impressive CV that Dunlop has built up during his 17 years overseas. After studying international relations at Syracuse University and gaining a master’s degree in business administration (MBA) from Columbia University, Dunlop became one of the protégés of legendary American business angel investor John May, the first to lead life science investments in the mid-Atlantic region.
It was also while working for May that Dunlop met business partner Kyp Sirinakis – the pair went on to work together at Masa, a life sciences venture fund founded by Dunlop and have now joined forces to found Rock Spring Ventures, which, as well as its £50m UK fund, is raising $100m (£64m) in the US.
Both Dunlop and Sirinakis both still speak warmly of their time with May and believe that the lessons they learned while cutting their teeth in fund management will stand them in good stead in Scotland.
“We’ve worked a lot with business angels in the past,” explains Sirinakis, “and so we know about their needs and expectations”.
One of the factors that may have held back VCs in the past is the time-consuming nature of doing deals with business angels to buy their stakes in life science companies.
“At the end of the day, we’re all looking for a return,” says Sirinakis.
Dunlop adds: “One of the advantages of bringing in VC money will be that we can develop drugs or medical devices even further before we look at an exit for the shareholders. We can build value for everyone.”
Offering business development advice to the companies in which it invests is high on the list of priorities for Rock Spring. Dunlop and Sirinakis plan to use their international contacts to open up new markets for companies, for sales as well as investments.
During his time running Masa, Dunlop forged links with life science companies and investors in Japan and South Korea, as well as attracting investment from players in Europe.
“I think one of the factors that has been holding Scotland back is not having a ‘local’ investor like ourselves,” says Dunlop. “We can pick up the phone to investors in France or Germany as well as the south-east of England and talk to them about the opportunities.
“We know that there have been VC funds that have visited Scotland recently and have looked at companies and kicked the tyres of potential investments. They’ve expressed interest and so now we’re going to be asking them to invest alongside us – putting their money where their mouths are.”
Although Edinburgh-based contract manufacturing firm Angel Biotechnology’s slide into administration on Friday highlighted the risk involved in investing in the life sciences sector, Rock Spring’s founders are looking to hit the ground running.
Dunlop, who will be based in Edinburgh, and Sirinakis are looking to undertake due diligence on up to six potential investments over the spring, and expect to unveil their first funding deal during the autumn.
CV: Sinclair Dunlop
Born: Dumfries, in 1972.
Education: Glasgow, Syracuse and Columbia universities.
First job: Working on my dad’s dairy farm.
Ambition while at school: To go into business.
Car: Trying to live without a car at the moment.
Kindle or book? Book – I’m old fashioned in that way.
Can’t live without: Friends and family – and my business partner.
Favourite place: Galloway.
Best thing about your job: Being able to help companies have an impact on patients’ lives. I don’t think enough is made about the social benefits that investing in the life sciences sector can bring. It’s one area of business that isn’t just about the bottom line, it’s also about improving lives.
CV: Kyp Sirinakis
Born: Baltimore, in 1965.
Education: Boston College.
First job: Working in my parents’ diner, then as an auditor at Coopers & Lybrand.
Ambition while at school:
I always knew I wanted to be in business. I studied finance at university but the other parts of being in business came naturally to me.
Car: An Audi TT with a manual gearbox.
Kindle or book? I love books but I like to travel light, so I have a Nook.
Can’t live without: Good food.
Favourite place: Skyros, a Greek island where my family has a house.
Best thing about your job: My business partner and investing in companies that make a difference to patients’ lives.