For 36 years now, founder Lucius Cary and the team at Oxford Technology Management have been helping generations of original thinkers to push the boundaries of science and technology. Their unusual blend of commercial know-how combined with a sympathetic understanding of scientific processes has delivered more than 150 start-ups since 1983.
The first thing that rather sets Oxford Technology Management apart is that they specialise in making small initial investments in high risk / high reward science start-ups.
It’s little surprise that the majority of investors shy away from this highly fertile sector – largely because they simply don’t understand the science; few people invest in what they don’t understand, whatever the potential.
By the same token, some of the most impressive scientific brains in the UK don’t have the first clue about to how to launch and run a business; and indeed, why should they?
The Oxford Technology approach is to guide investors and investees alike through these murky waters of mutual ignorance.
This is why most of their investments are in enterprises based within an hour’s drive of their Oxford HQ. They can and do get involved to help, and in the vast majority of cases their assistance is appreciated and acted upon (although some founders can be less than receptive).
Everybody at Oxford Technology has a science background, and actively enjoys and appreciates the technical side of the investments. But their commercial credentials are solid too, as even the most cursory inspection of their track record since the early 80s will confirm.
OT(S)EIS is the company’s 12th fund in that time, which means that they have unrivalled experience in this highly specialised sector. 6 years in, the results so far are very encouraging. As at 5 April 2019, the fund had invested in 39 science start-ups. Three have failed and the combined losses on these, after the generous SEIS/EIS tax relief were £45,900. The gains on the winners, valued at the latest share price paid by incoming investors were £9.15m. But, apart from one exit (at 14x the after tax share price) all the gains are on paper only so far.
The SEIS scheme is ideally suited to operations like Oxford Technology’s. It gives investors 50% back at the outset and the loss reliefs further reduce the net cost of any failures. All gains on the winners are tax free.
The company’s strategy is not to maximise the tax reliefs, but to maximise the eventual return to investors; therefore, investments are over three years. An initial SEIS investment is made in year 1; capacity is kept in place to be able to invest the same sum again in year 2 as an EIS investment, and then the same again in year 3. Having this ability to follow up is crucial, and its absence will usually result in bad consequences for early investors.
The specialist, rarefied nature of the science / technology sector means Oxford Technology often find raising capital themselves quite a challenge; last year they raised just over £1m.
Over the same period, more than £700m flowed into VCTs. This meant that to the company’s chagrin, there were many good investment opportunities which they were unable to take up.
One obstacle is that with these three year investments, it takes investors 4 years to get their tax relief. However, those investors who opt for a VCT (which also has 3 years to invest the money) get their tax relief at the outset.
It would seem to be an anomaly that the Treasury and HMRC favour VCTs in this way, but the company’s attitude is to take it on the chin and just get on with it.
When investees need more capital than can be prudently provided from the fund, Oxford Technology are often able to raise this by contacting their investors and giving them the opportunity to make further direct EIS investments. This benefits the investee companies who can raise money quickly this way which then means that they don’t get sidetracked by a long fundraising process. Founders who spend 9 months raising capital aren’t focusing on developing their science and their business – a potentially fatal flaw.
The company also has a base in Shanghai which is run by Chenjie Ma who graduated in engineering at Oxford University and then worked for Oxford Technology in the UK. Her job is to help investees get their technology adopted in China – one of the largest markets in the world. Having a Chinese speaker on the ground who is also an engineer has proved to be a great boon. One of the investee enterprises, Sime, had developed a method for detecting the lack of surfactant in the lungs of very premature babies (which can cause brain damage and even death). Sime’s innovation had its first use in the world in China at the end of 2018, largely as a result of the onsite help that Oxford Technology was able to provide.
Aside from the potential financial rewards, at a time when ethical investment is a hot topic, Oxford Technology Management’s staff and investors also gain satisfaction from being involved in start-ups which ease pain, improve mobility, reduce infant mortality or just generally make the world a better, healthier place.