University venturing funds differentiate themselves by offering investors access to promising technologies that may surpass those offered by other types of startup. After all, a spinout is often built on years, sometimes decades, of rigorous research, and spinouts have to undergo significant vetting during the tech transfer process, further enhancing their credibility as potential investments.
But as university venturing continues to grow, so do investor expectations. Corporates are not alone in committing more capital to the sector – governments do too, and their investment objectives are not necessarily focused purely on financial returns. Rather, as in the case of France, the goal may be to nurture a homegrown technology cluster. The question is, can university venturing deliver on such lofty ambitions?
France has already begun the experiment, building on initiatives such as the Satts, the country’s regional tech transfer system. Created between 2012 and 2014, in just a few years Satts have secured nearly 1,400 inventions, invested in more than 1,000 maturation projects and signed more than 400 licensing deals, helping to launch 130 spinouts.
Also in 2014, France launched Paris-Saclay University, an academic project that began in 2008 and is unprecedented in scale. Paris-Saclay University unites 18 institutions comprising two universities, nine grandes écoles and seven research organisations, many of which have a long history as autonomous entities.
Paris-Saclay aims to foster a world-leading technology cluster, and there are signs the university is making steady progress. Despite its youth, Paris-Saclay has produced 14 companies to date, and has now taken the next step in its evolution. Earlier this month, the university group held the first close of a €50m ($53m) seed fund backed by, among others, BPIfrance, the country’s public investment bank. The 18 institutions that make up Paris-Saclay also supplied cash to the fund, either directly or through their respective foundations.
The fund is supported by a wide range of corporates, among them luxury goods company Chanel, networking equipment manufacturer Cisco, business-to-business digital services provider Econocom, utility EDF, insurance group Groupama, outdoor advertising company JCDecaux, telecoms firm Orange and public transport operator RATP. Financial service groups BNP Paribas and Société Générale committed capital too, along with several dozen angel investors consisting of alumni from participating universities, entrepreneurs and heads of France-listed corporations.
The Paris-Saclay fund will provide between €100,000 and €2m to seed and series A-stage spinouts and startups that emerge from its own ecosystem. About 70% of the fund’s capital is managed by VC firm Partech Ventures, and will be invested in IT, internet and digital companies, while the remainder is overseen by life sciences-focused investment firm Kurma Partners.
Raising funds from corporates to deepen industry links and turbo-charge commercialisation is a growing trend in university venturing. In December 2016, Oxford Sciences Innovation (OSI), the university venturing fund of Oxford University, which counts among its backers GV, the early-stage investment arm of diversified conglomerate Alphabet, secured capital from several Asia-based technology companies. Again, governments also joined this initiative. Temasek and Oman Investment Fund, the government venturing arms of Singapore and Oman respectively, participated in OSI’s recent fundraising. OSI now has £580m under management.
The French government, meanwhile, has high expectations for Paris-Saclay. The university was established with the aim of forming a research-intensive technology cluster in Paris that would rank in the world’s top 10.
France is raring to go, and French corporates are playing their part, by ramping up investment in emerging enterprises. Funding for technology companies in France – which has been trending upward since the fourth quarter of 2015 – soared by 200% between the second and third quarter of 2016, rising to $857m over 145 deals, research firm CB Insights found.
Guy Schapiro, president and CEO of the Consumer Technology Association, a US trade body for consumer tech companies, observed last year that French universities “create amazing engineers and programmers available to employers at a fraction of Silicon Valley costs”.
Of course, the cost of the research and development team is not the only factor when considering where to base a startup. The draw of Silicon Valley is its ecosystem, which France now hopes to recreate in Paris. Big names in French business and academia are betting that Paris-Saclay can pull it off. How France’s experiment fares could determine the scale of government ambitions for university venturing in the future.