Patient capital allows time for growth

The article below originally appeared in Business Weekly.  A full copy of the publication in which it appeared is available here.

Greater access to intelligent finance is one of the factors that is accelerating the transformation of breakthrough innovation into successful businesses in the Cambridge cluster, according to the findings of a new book, ‘The Cambridge Phenomenon: Global Impact’ by Charles Cotton and Kate Kirk.

Victor Christou is the CEO of Cambridge Innovation Capital (CIC), which offers ‘patient capital’ to early stage high growth companies to allow them to stay and grow in the cluster.

The ‘futurology’ chapter of the book identifies several technology clusters – including genomics, digital health and flexible electronics – that have the potential to become significant industry sectors, and highlights a number of companies that are in CIC’s portfolio, among them Inivata, Congenica and PragmatIC.

Christou says: “Early stage companies are inherently high risk and often the technology needs time, money and a good understanding of the market in order to develop to its full potential.

 “I think that too often in the past the investment strategy has not given companies enough time to overcome the inevitable developmental problems that all tech companies face, and there has been an over-emphasis on achieving an early exit rather than optimising the longer term return.”

Christou believes that the multidisciplinary nature of the cluster demonstrates one of its key strengths: “We are receiving pitches with a 50:50 split between healthcare and high technology, with an equivalent split between university spin-outs and companies arising elsewhere in the Cambridge cluster.”

CIC is becoming a driving force behind the cluster. The investment fund provides long-term capital for intellectual property rich companies emerging from the University of Cambridge and the wider business and research community. It was established with an initial capital of £50 million in 2013, largely as a result of work by Tony Raven, CEO of Cambridge Enterprise, and Edward Benthall, Chairman of CIC, and it has the support of a number of seasoned entrepreneurs including Charles Cotton, Hermann Hauser, Peter Keen, Andy Richards and Greg Winter – many of whom are featured in the book.

Christou says that to become ‘investment ready’ companies need to be able to offer the following:

• The right people – the company needs a multi-disciplinary team that includes commercial and financial expertise in addition to scientific excellence. Establishing a core team plus advisors is a way of accessing the skills needed without employing all of them directly.
• A big opportunity – there must be a clearly defined unmet need in a rapidly growing market.
• Sustainable differentiation – the team needs deep expertise in a particular field and the company must have a defendable and sustainable proprietary position that can slow down the competition.
• A vision and plan – the entrepreneur needs conviction and passion but also a credible business plan with achievable milestones. Realism is required; it is unlikely that the plan will be right first time, and it might be necessary to fail, to learn from this and build a stronger business concept. The key is to recognise this early enough.
• A good pitch – the entrepreneur needs to have an elevator pitch – a short introduction to the business idea that can be communicated easily within a few minutes. It is best to practice this so that it is fluent, and also to have pitches of different lengths to adjust to the circumstances, eg. 30 seconds, 5 minutes, 30 minutes. Many venture capital groups will see more than 300 pitches a year so it needs to be well-rehearsed and get to the point quickly.
• Know your customers – the company needs to get to know the opinion leaders and, in the healthcare field, the patient advocacy groups, advisors, physicians and needs of large pharma. The team should talk to their customers often and involve them in pilots and early studies to ensure that the company is meeting their needs.