University spin-outs bridge venture capital gap with access to £150m fund

By Peter Ranscombe
Published on Sunday 12 February 2012 00:00

SPIN-OUT companies from Edinburgh University will have access to a £150 million investment fund being raised by London-based MTI Ventures in an effort to close Scotland’s “venture capital gap”.

The Orion Fund will be the UK’s largest unlisted vehicle investing in university technology companies and will also pump money into start-ups at Manchester University and University College London.

Although Scotland already has an active “business angel” scene – with syndicates of wealthy individuals investing in new businesses – a “valley of death” has opened up when companies cannot raise enough follow-on funding to help them grow.

Grant Wheeler, head of company formation at Edinburgh University, said he expects the Orion Fund will make “seven or eight-figure” second and third-round investments in companies, as well as helping with start-up cash.

Wheeler said: “Another exciting element is that MTI will be able to bring in partners, such as other venture capital funds, to invest alongside them, which will give Scotland exposure to even more potential investors.

“MTI will also gain exposure to the investment scene in Scotland and could pump money into other businesses outside the university.”

Wheeler is continuing to talk to other venture capitalists about setting up similar funds as the arrangement with MTI is not exclusive.

He added: “MTI’s areas of expertise include medical technology, engineering and information and communication technology. I’d like to see us setting up similar funds to help businesses operating in other areas of science too.”

Edinburgh University has launched 101 spin-out and start-up companies in the past three years, the highest rate for any higher education institution in the UK.

Professor Sir Tim O’Shea, Edinburgh University’s principal, said: “Our partnership with MTI is important news for the university and good news for the Scottish economy. It will introduce a new investor to the Scottish scene and one capable of making significant investments into our best spin-out and start-up companies.”

Jim McFarlane, managing director of operations at Scottish Enterprise, said: “This new fund not only has the potential to significantly increase venture capital activity and presence in Scotland but will build on existing efforts to bridge the gap between industry and world-class research.”

Richard Henderson, managing partner at MTI, said the lack of a dedicated fund had “retarded the creation of world-class companies” from the UK’s top universities.

MTI had previously raised a £32m fund exclusively for Manchester University and is understood to have been attracted to working with Edinburgh thanks to its technology transfer office’s (TTO) record.

Edinburgh’s TTO brought in £187m of funding for the university in 2010-11, signed 65 licensing agreements and made £5m in consultancy services.

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