University startup fund aims for record target

A new fund backed by venture capital group MTI, targeting a record £150m, will aim to back university spin-outs in the hope of potentially unearthing another Facebook or Yahoo, both of which owed their genesis to ideas formed at university.

The Orion Fund, launched by UK-based venture capital firm MTI in partnership with three of Britain’s top universities, is targeting £150 million ($238 million; €179 million) in commitments. 

Whilst venture capital investing, particularly in Europe, has waned in popularity with investors in recent years due to its risk / return profile, the returns set to be generated by backers of social networking site Facebook when it floats this year are likely to re-ignite interest in the asset class. Governments too are keen to promote early-stage investing, particularly given the reluctance of banks to lend to start-ups since the financial crisis began.

If successful, the Orion fund would be the largest unquoted investment fund dedicated to university spin-outs, MTI claims.

The seed fund will have privileged access to spin-out deal flow through three of the UK’s university Technology Transfer Offices, which are designed to help commercialise technology research. The three TTOs working with MTI on the fund are based at the University of Manchester, the University of Edinburgh, and University College London.

The fund will also invest with other select universities, including Oxford and Cambridge, MTI said.

MTI has also announced a slew of appointments, effective once the fund is raised. The hires include Sir Richard Heygate, Natasha Oppenheim, Dominic Perks and Paul Ratcliff, all of whom will join the firm as partners.

“This is an ideal time to create a larger and more comprehensive fund,” Heygate said in a statement. “The UK has always been one of the most innovative countries in the world, although sometimes it has lagged behind others in turning this creativity into world ranking businesses. We have some of the highest ranked universities and business schools, a concentration of leading private equity, venture capital and other investment skills, a government committed to encouraging innovation and start up businesses and a secure economy and currency.”