With support from Cambridge University, a £50 million fund has been established to support spinout companies from the University and the wider Cambridge ‘cluster’. Spinouts are companies established to exploit intellectual property that has been developed by larger bodies. As such, they put University research to commercial use.

A new investment fund – Cambridge Innovation Capital, which describes itself as investing in “high-growth technology companies” – is to manage this investment. In their statement announcing the funding, CIC said “Cambridge is one of the most dynamic technology and business clusters in the world and the university is at its heart, being surrounded by nineteen science and business parks and over 1500 high tech companies, a dozen of which have achieved a valuation of over $1bn”. CIC plans to invest the whole of the capital over the next two or three years.

CIC also intends to offer longer-term financial support to the companies in which it invests, up to ten years and even longer in some cases. “Even when [venture capital firms] do invest,” said Edward Benthall, the fund’s non-executive chairman, “they have an expectation for an exit in just five years.” He added that University spinouts often need a long period to fully exploit their intellectual property.

The investment was made with the intention of helping spinout companies over the “valley of death”, a point after seed funding has been used when the company needs a significant investment in order to grow. It is at this crucial moment that companies often fail, or are sold off to larger, often international businesses. This was what happened in the case of Solexa, a spinout company intending to commercialise a method of DNA sequencing that had been developed by two Cambridge scientists. Solexa was sold to US corporation Illumina in November 2006 for $650 million, and was hailed as a commercialisation success story. However, that sum seems paltry compared to the $10 billion Illumina is worth today.

The fund is therefore intended to prevent innovative companies from failing, but also to encourage companies to exploit the University’s intellectual property in the UK, rather than abroad. In Benthall’s words, CIC would like to see spinouts “build a big business rather than just flip technology to a US corporation”.

As well as financial support, the spinouts will also receive assistance in the form of expertise from Cambridge Enterprise, the University’s commercialisation company.

Along with Cambridge University, significant investors in the initiative include Invesco Perpetual, Lansdowne Partners, ARM Holdings plc and IP Group plc.

The University’s vice-chancellor, Professor Sir Leszek Borysiewicz, stated:  “The university benefits society through the pursuit, dissemination, and application of knowledge. Today we are furthering that mission by partnering with experienced investors, innovators and managers to help the early stage technology companies of today become the great businesses of tomorrow. With the launch of CIC, the university and our co-investors are taking an important step in supporting the continued economic growth of the region and the country.”