BioWorld | Nuala Moran 25 Apr 2022
Cambridge Innovation Capital (CIC) has closed its oversubscribed Fund II at £225 million (US$287 million) and is moving from its previous model of open-ended investing to a traditional fixed-term venture capital fund.
The money will be dedicated to spinouts from Cambridge University, with CIC investing in series A rounds, but also following on as companies mature and their capital requirements increase.
While Fund II will invest in all areas of technology, it will be a major backer of life sciences companies, including genomics, gene therapy, biologics and liquid biopsy specialists.
Fund II has already made its first investments. These include Pretzel Therapeutics Ltd, which is developing mitochondria-targeted drugs, and Epitopea Ltd., a cancer immunotherapeutics company, which announced its seed round of $13.6 million on April 25, at the same time as CIC said it had closed the fund.
CIC was set up a decade ago by Cambridge University to boost commercialization of its rich research base. It has operated as a limited company to support investee companies over the long term. The change to a traditional LLP reflects the fact that there is now more money going into seed and series A rounds, accelerating the development of startups.
“What we found now that we’ve been doing this for 10 years is that, actually, the average sort of hold period for our investments is about seven or eight years. The investments we made back in 2014 and 2015, many of those have already exited. I think now, we’re increasingly confident a 10-year fund does match the investment model that we’re looking at, and it’s certainly more popular with global investors.” – said Andrew Williamson, managing partner of CIC.
The startup ecosystem as a whole is growing rapidly, and there is much more capital coming into the kinds of companies Cambridge is good at creating. “We’ve seen roughly a doubling of the amount of investment coming into the Cambridge ecosystem every two years. Last year, in 2021, £1.5 billion of venture was deployed in Cambridge. In 2019, when CIC did its last capital raise, it was about £800 million, and it was about half of that back in 2017,” Williamson said.
The other major change since CIC was formed is the mix of where the capital is being deployed. “Five or six years ago, we were principally making seed and series A investments, putting the first capital into companies, and in fact, the majority of the capital being deployed in Cambridge was at those early stages,” Williamson said.
Now though, companies are attracting sufficient funding to maintain their independence. “A lot of businesses in Cambridge historically, and I think this has represented the U.K. as a whole, were acquired quite early, before they got a chance to get to the scale where they could raise significant capital. The dynamics we’re seeing is more and larger later-stage rounds,” said Williamson.
Of the £1.5 billion invested in Cambridge companies last year, £800 million was in series C rounds of £50 million plus. “The biggest change in the last few years is that as the ecosystem matures, you’re getting a larger cohort of these main-stage businesses that are raising significant capital to really do things at scale,” Williamson said.
The increasing maturity is attracting a lot more foreign investors. “Ten years ago, when we were first being set up, there were relatively few venture funds, particularly in the U.K., that were focused on an ecosystem like Cambridge doing tech and life science. In the last few years, we’ve seen over £2 billion of co-investment in CIC backed companies,” said Williamson.
In Fund II, about half the capital has come from U.K. investors, and the rest from mainland Europe, North America, the Middle East and Asia.
Their motivation is both to get access to the series A investments, but also to build a relationship with CIC as a gateway to Cambridge and to get access to later stage investment opportunities.
CIC has preferential rights from Cambridge University running to 2033 to promote life sciences tech transfer. To back this up, CIC co-founded Start Codon, an accelerator that bridges the gap between translational research and companies that are ready for series A funding.
“Start Codon is absolutely fulfilling its strategy of helping create and seed Cambridge businesses so that they can reach the point of series A investment, where CIC can then back them,” said Mike Anstey, CIC partner specializing in life sciences.
Start Codon currently is incubating 15 early stage companies, a number of which will be a “perfect fit” for CIC fund II, he told BioWorld.
Cambridge is of course the birthplace of that pillar of the biotech industry, the monoclonal antibody, and Anstey said CIC will continue to invest in this area. “Antibodies continue to be a great modality for novel therapeutics, and Cambridge is one of the best places in the world for developing platforms that create novel antibodies,” he said.
A second major focus for Fund II will be in genomics, and in particular, what was previously referred to as junk DNA. “There’s a lot of excitement [about] the non-coding region of the genome, with the emergence of new therapeutic targets and the importance of the non-coding area in actually stimulating genes in abnormal physiological states,” said Anstey.
The third area of focus for CIC Fund II will be the intersection of tech and life sciences.