Cambridge Innovation Capital raising second fund

Spinning out: Cambridge Innovation Capital managing partner Andrew Williamson

Cambridge Innovation Capital (CIC), the Series A investor partner for University of Cambridge tech spinouts, is raising a second fund.

CIC, which currently manages over £500m, is continuing to raise cash following the success of its first £275m fund, whose unicorns include cancer diagnosis start-up Inivata, which US firm NeoGenomics bought earlier this year for $450m.

The fund, which launched in 2013 with £50m worth of investment, mainly acts as a booster rocket for Cambridge university tech spinouts which need second-stage funding. Cambridge has its own seed-stage venture capital fund, managed by Cambridge Enterprise, which typically provides start-ups with two years of runway through seed investments averaging £500,000. CIC then provides follow-on Series A funding averaging £5m.”.

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Managing partner Andrew Williamson says the need for CIC came about because there was a gap for a Series A venture capitalist fund that could do all the things any VC could do, but also had the scientific and technical knowledge to do a deep dive on these businesses.

Williamson himself has a PhD in physics from Cambridge and led a research group applying computing to materials science at the prestigious Lawrence Livermore National Laboratory in California before spending a decade as a venture capitalist in San Francisco and Chicago.

To date, CIC has made between five or six investments a year, with 35 in total.

Its 50-strong investor pool include the Cambridge University Endowment Fund, US investor Invesco, insurer Legal & General and local Cambridge-based investors, including semiconductor chip giant Arm.

Williamson said: “Over the last five years we have invested £200m into the Cambridge ecosystem. Our co-investors have invested £2bn in these same companies, creating a portfolio value of £6bn.”

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Asking Williamson which of CIC’s current investments he is most excited about, is a bit like a parent to choose a favourite child.

He points to CMR Surgical, which builds next-generation surgical robots for the NHS. CIC invested Series A when the company was valued at less than £100m but CMR Surgical is currently valued at more than £2bn.

Another investee, Riverlane is building Deltaflow.os, an operating system for quantum computers which will work across any hardware, giving it potentially a huge market. Quantum computing is especially useful for computer-based drug development or researching new materials or optimising logistics or finance, as well as cybersecurity, both encoding and cracking codes.

Williamson becomes even more animated talking about PragmatIC Semiconductor, which last month raised $80m Series C. PragmatIC manufactures postage-stamp-sized adhesive radio-transmitter semiconductors, like an old-fashioned kid’s transfer. It is in talks with various consumer brands about how to encourage recycling using its disposable chip technology. For example, you could stick these flexible semiconductors on plastic bottles, so you would be rewarded for depositing them in smart bins, just like the old penny-back-on-a-bottle scheme here in Britain.

Williamson disagrees those who say all this attention on university spinouts – Northern Gritstone, a new £500m fund backing spinouts from the universities of Leeds, Manchester and Sheffield launched in September 2020 – is overheating valuations these tech start-ups.

Williamson said: “There’s not that many firms chasing these opportunities. Series A is a local relationship-driven business. We meet academics yeas before they ever spin out a business. So far, we haven’t seen a huge amount of unrealistic expectations on valuations. They’re still grounded, at least at the early stages.”

Williamson, who chairs the venture capital committee of industry association the British Venture Capital Association, agrees with Chancellor Rishi Sunak when he argues the real problem in trying to keep British successes such as DeepMind (bought by Google for $500m in 2014 – a price ex-Google CFO Patrick Pichette later admitted was “a steal”) in UK ownership is that pension funds do not invest anywhere the same amounts as institutional investors in the US and elsewhere in Europe.

“We need more later stage capital in this market,” Williamson said.

Further reading

UK tech investment accounts for one third of £76bn invested in Europe