Imperial Innovations: what’s the recipe for success?

A decade ago, Imperial Innovations began as a noble experiment in tech transfer and development: its parent, Imperial College London, spun the former tech-transfer office out onto the London stock exchange as an independent company, in hopes of raising lots more cash to move technologies to market.

The experiment appears to be working: the company just announced a big rise in the size of its portfolio, to up to £327.2 million from £252 million, and its share price is 10 per cent up on the figure last October.

The 12 months to the end of July also saw a near doubling of the investment rate, up from £32.8 million across 25 companies in 2014 to £60.8 million. “Many of our companies are making good progress year on year,” the company’s CEO, Russ Cummings, told Science|Business. He adds that the existing portfolio accounted for 85 per cent of Imperial Innovations’ investment last year.

Of course, it isn’t all good. Pre-tax profit fell from £25.4 million in 2014 to £15.1 million, but Cummings does not see that as the key indicator. The actual profit number “tends to come in lumps”.  Last year the IPO (initial public offering) of Circassia, which created a significant uplift. “This year although we had the sale of two smaller software companies there wasn’t a large trade sale.”

So in a year when Imperial Innovations did not have those large gains, Cummings sees the profit figure as indicative of healthy progress. And the rising share price suggests investors think so, too. In fact, the price is now nearly double what it was at the company’s market debut, a decade ago.

The secret sauce

“What’s the secret sauce? I don’t think there’s any single item,” says Cummings. It’s a combination he says, starting with a concentration on quality around the “golden triangle” of London, Oxford and Cambridge – “a really rich seam of high-quality research”. Next he points to “a really great team, built up over many years”.

That combination has resulted in Cumming’s third ingredient: the Imperial Innovations portfolio, which he describes as the real strength of the business. At the heart of the portfolio are six unlisted companies with an average age of eight years and which between them have raised around £240 million.

“So we are investing in companies that we know intimately,” Cummings adds. That knowledge comes from hands-on experience: Imperial Innovations recruited much of the management in its portfolio companies, and sits on the board of each one.

That core portfolio, built up over many years, distinguishes Imperial Innovations from many other university-based venture firms. “A number of our peer group companies have less mature portfolios or less experienced teams – or haven’t got [existing] homes for their capital,” says Cummings.

But that situation is unlikely to last forever. Cummings notes the continuing development of venture capital within the “golden triangle”. And he is keen to give the University of Oxford credit for being at the forefront of academic venturing with its 2008 deal between IP2IPO (now IP Group) and the Department of Chemistry.

Cambridge, he adds, has always had a vibrant local venture capital community, so perhaps initially didn’t feel the need for a dedicated venture fund. Now, however, Cambridge Enterprise has a sister fund, Cambridge Innovation Capital, which can give follow-on funding to promising companies. London, too, has a vibrant venture capital scene, says Cummings. “The three corners of the triangle are walking up together,” he says.

Cummings believes that the current high level of interest in IP commercialisation is due to high-profile successes such as Circassia, an Oxford spin-out backed by Imperial Innovations which last year became a FTSE 250 company. Imperial Innovations began its involvement with Circassia back in 2007 with a seed funding of £2 million. Now the pharmaceuticals company, which specialises in immunotherapeutics, has a market capitalisation of £775 million.

Still mining the ‘golden triangle’

With a formula that certainly seems to be working, does Cummings see any limits to growth? Not as such, he says, “because there is such a rich flow of opportunities and we have very supportive shareholders encouraging us to do more.”

But Imperial Innovations is not likely to stray too far from a path that has proved so successful. “It is our desire to stay focused on quality and work with companies which are in this ‘golden triangle’, and which are close to us,” he says. “That doesn’t inhibit growth because what we are determined to do is grow our portfolio companies and the size of our investments – and deliver growth to our shareholders that way.”

Even though he is not looking outside the “golden triangle”, Cummings is keenly aware that there is great science elsewhere. “Our networks and in particular the people that we work with will of course draw our attention to great science coming [from outside], and occasional we will [get involved].”

He points to antibiotic company Auspherix, which originated in research at the University of Sydney, Australia. Imperial Innovations got involved when the founding academic relocated back to UK to build his company in London. But that, says Cummings, is more an example of international researchers choosing to base their business in London because it is “a great place to base your business and recruit your management team”.

More of the same? Not quite…

After a good year – his second as CEO, though he has been involved in Imperial Innovations at a senior level since 2006 – where is Cummings aiming to be a year from now? The answer would appear to be in the roughly the same place, but even stronger.

“We see no shortage of opportunities to continue to deploy the capital at the same rate into a combination of our own portfolio and new companies,” he says, foreseeing the opportunity for plenty of good news from the portfolio companies.

But there is one area that will see particular activity: “We are taking proactive steps to increase our investment in ICT and digital technologies.” Why? “Because we are successful at it and we think we can deliver good returns to our shareholders,” says Cummings.

Another reason is that having successfully sold three software companies in the past 18 months – including its stake in e-learning company Epigeum to Oxford University Press – Imperial Innovations would like to replenish its portfolio. “We’ve got a really strong therapeutics portfolio,” says Cummings, “and we see the opportunity to grow our ICT and digital side so that it keeps pace.”