A number of top business schools and universities including Cambridge, Michigan Ross and Wharton have funds that collectively invest millions of dollars into ventures spun-out of their institutions.
Oxford and Isis Innovation, its technology commercialisation group, are partnering with a new company, Oxford Sciences Innovation, to develop research from the university’s mathematical, physical, life sciences and medical sciences divisions, and turn ideas into companies.
The fund is raising £300 million — £210 million of which has been sourced from six high-profile investors. These include hedge fund Lansdowne Partners, Woodford Investment Management, an asset manager, and IP Group, a London-listed intellectual property firm that invests in tech ventures.
Lansdowne Partners has also previously invested in Imperial Innovations, a tech accelerator founded at London-based university Imperial College that is listed on the London Stock Exchange.
Over the past 15 years, Isis Innovation has developed more than 100 spinout tech companies that have been developed by Oxford research. Noteworthy examples include Oxford Nanopore Technologies, which develops genome sequencing technologies and has raised $270 million in funding, and software company NaturalMotion, which was acquired by Zynga for $527 million last year.
“Spinouts based on our research have an impressive track record of generating innovative breakthroughs and new employment,” said Professor Andrew Hamilton, vice-chancellor at University of Oxford.
Business schools and universities are enjoying much commercial success. Joanna Mills, deputy director for Cambridge Judge Business School’s Centre for Entrepreneurial Learning, said ventures are often spun out of the leading UK school.
The £50 million Cambridge Innovation Capital fund has invested in a number of companies including Horizon Discovery, a biotech group that raised £68 million after listing in London last year.
“Developing business ideas into real ventures and establishing and growing those — we’ve taken the view as a business school that it’s something we need to do,” added Joanna.
Since 2005, Imperial Innovations has raised £206 million from investors. The net value of Innovations’ top-20 portfolio companies was £241 million as of January 2015.
Noteworthy investments include in Circassia, a biotech company that raised £200 million when it floated in London last year, and technology company Nexeon, which has raised $65 million and is based on research by electronic engineering Professor Mino Green at Imperial College.
Diane Morgan, associate dean at Imperial College Business School, said the school tries to aid aspiring entrepreneurs in finding the most appropriate start-up support model.
“There are more and more opportunities to enter incubator or accelerator programs and then gain access to funding, both in London and elsewhere in Europe. Many of these are increasingly targeting students,” she said.
Imperial's base London, and Cambridge and Oxford form the “golden triangle” of start-up innovation clusters in the southeast of the UK.
In the US, Kenan-Flagler Business School has a variety of student-run funds that collectively manage more than $12 million in capital. One Kenan-Flagler fund was set-up with Applied Investment Management’s Global Perspectives Fund, a $2.5 million hedge fund.
Michigan Ross hosts three student and alumni-run investment funds including the $7 million Wolverine Venture Fund.
The Wolverine fund’s successful investments include in Intralase, an optical laser business that raised about $86 million when it floated its shares on Nasdaq in 2004, and in 2007 was acquired by Advanced Medial Optics for $808 million.
Stewart Thornhill, executive director of the Institute for Entrepreneurial Studies at Michigan Ross, said the business school is also developing an accelerator which will invest in student-led companies through grants and which has raised a funding pot of about $2.5 million so far.
Schools’ efforts are part of a response to the surge in students who want to launch start-ups rather than pursue corporate careers. “There is a stronger appetite for people to be in control of where their lives are taking them,” said Stewart.
“The relative riskiness of entrepreneurship has diminished… And in some ways it’s this combination of rock star entrepreneurs — the Zuckerbergs — [who] have made it cool and sexy to be entrepreneurs,” he added.
Start-ups from the world’s top-10 universities have raised more than $25 billion of funding over the past five years, according to research by PitchBook, a venture capital and private equity research firm, including LBS and INSEAD.
Separate research from Poets&Quants found that start-ups founded by MBAs from the top-20 business schools including MIT Sloan and Chicago Booth have raised at least $4.4 billion in combined investment in the past five years.
Stanford MBAs raised the largest amount — about $2 billion in funding for 31 companies. These ventures include Skybox, which provides high-resolution satellite imagery and which was acquired by Google for $500 million last year, and SoFi, the peer-to-peer lender, which has raised about $765 million in funding.