Patient capital investor Cambridge Innovation Capital is following a highly successful 12 months with a fresh fundraising trawl from UK and international sources.

Having raised £125 million to date, CIC is looking to bulge its war chest ready to back more science & technology gamechangers.

CIC increased net assets by 14 per cent to £144m as at year-end (March 31) having injected £32.7m into three new and 11 existing portfolio
companies.

It brought the total invested to £82.4m in 22 companies compared to £49.7m in 19 companies the previous year. Its investments resulted in a portfolio value of £110.7m – almost double the previous’s year’s figure.

A further £8.8m has been invested into four portfolio companies since year-end, bringing the total capital committed by CIC to date to £99.6m.

CEO Victor Christou said: “We continue to build leading businesses from brilliant technologies in the Cambridge Cluster and to guide and support our portfolio of highly promising companies as they develop and mature. 

“In addition, our extensive networks within the University of Cambridge, Cambridge Enterprise and the wider Cambridge community enable us to identify and access further opportunities to add to our portfolio, the flow of which shows no sign of abating.

“Having raised £125 million to date, we have started the process to raise additional funds from UK and international sources. We have confidence that these funds will allow us to continue to build scale in CIC and create substantial value for our shareholders, as well as to create a sustainable business for our stakeholders.”

Investment highlights for the year ended 31 March 2018, including post period, are many and varied.

Bicycle Therapeutics
In May 2017, CIC played a pivotal role in Bicycle Therapeutics’ £40 million Series B round. The company is developing a new class of therapeutics to treat cancer and other debilitating diseases based on its proprietary bicyclic peptide (Bicycle®) technology. The company is making rapid progress having signed partnerships with AstraZeneca, Bioverativ and Thrombogenics and with lead programme, BT1718, now in clinical trials.

PROWLER.io
CIC led a £10 million Series A funding round for PROWLER.io in July 2017. PROWLER.io’s technology combines the three core areas of probabilistic modelling, interpretable machine learning and the principles of game theory to provide artificially intelligent decision support and optimisation in a range of applications. Since the year end, PROWLER.io has successfully launched its VUKU artificial intelligence platform.

CMR Surgical
CIC was part of the syndicate which contributed $26m in an expanded Series A round to CMR Surgical, an existing portfolio company developing next generation robotics for minimal access surgery, bringing the total amount raised in the Series A to $46m. Post period end, CIC also participated in CMR Surgical’s $100m Series B round, the largest financing round for a medical device company in Europe. The company is using the proceeds to prepare its Versius® system for planned commercialisation.

Cytora
CIC made an initial investment in Cytora’s £4.4m funding round alongside insurance companies QBE and Starr. Cytora has built a risk engine applying artificial intelligence to identify patters of good and bad risks over time, allowing commercial insurers to target, select and price risk more accurately.

GeoSpock
CIC led a £5m Series A funding round in this existing portfolio company. GeoSpock aims to become the de facto processing engine at the heart of next generation infrastructure, including smart cities and internet of everything, as well as powering future mobility applications, such as the management of autonomous vehicle fleets.

Origami Energy
CIC participated in a £19m funding round alongside Aggreko plc, the global leader in on-site power generation. Over the last year, Origami Energy has progressed from deploying commercial projects with industrial and commercial customers to signing multi-year partnership agreements with leading energy suppliers including SmartestEnergy, which is owned by Marubeni, the Japanese-headquartered global trading company.

Microbiotica
Post period end, Microbiotica signed a multi-year strategic collaboration with Genentech, a member of the Roche Group, worth up to $534m in milestone and royalty payments.

• PHOTOGRAPH SHOWS: Cambridge Innovation Capital CEO, Victor Christou

The UK has an illustrious track record of introducing revolutionary innovations, writes Dave Excell, founder and CTO of Cambridge technology business, Featurespace. 

Within the past 55 years, we’ve created Atlas (heralded as the world’s first supercomputer), developed the first portable computer and unveiled the first laptop (the Osborne 1 and the Grid Compass, respectively). And thanks to Sir Timothy John Berners-Lee, we can even cite the UK as the birthplace of the World Wide Web. 

That impressive pedigree of bright-minded engineers, scientists and tech pioneers continues today and I’m proud to say that Featurespace is a product of this environment. 

Our success in the UK is evidence of the effectiveness of our unique adaptive behavioural analytics in fighting fraud for the financial services organisations that we serve. However, the fight against fraud is a challenge that poses a serious threat beyond our borders, which is why we expanded to the US late last year. 

Establishing an Atlanta-based headquarters gives us an essentially strategic North American presence that allows us to serve our existing US clients more effectively, while also allowing us to introduce ourselves and our services to companies in the Americas. 

While the geography is different, the challenge here is very familiar. Payments fraud across the Pond is following a similar pattern as it did here. 

In the US, chip cards were deployed about 10 years after they were in the UK and while there’s been a reduction of in-person fraud, online purchase fraud has increased significantly. 

The good news is that the lag in deployment provided us with an additional decade of experience in fighting fraud and those who perpetuate it, giving us an incredible advantage in balancing the detection and prevention of illegitimate activity, while maximising the number of genuine transactions that come through. 

Traditionally, the approach relied on the manual writing of rules that are effective at combating known types of fraud, but this inflexibility makes it virtually impossible to distinguish a good transaction from a bad one. 

Recognising this, we partner with our clients to establish a defence rooted in finesse and agility, using machine learning that continuously adapts to the consumer, identifies their normal behaviours and detects any anomalies that are indicative of fraud. 

This advanced self-learning system, which is the result of more than 30 years of research on human behaviour and the brainpower of some of the world’s best analysts and data scientists, allows us to consistently improve the accuracy in predicting payments fraud to protect our clients and their customers. 

Ultimately, it’s our mission to risk score every transaction on the planet and we’re dedicated to that mission here at home and in the US, where we’re proudly flying the British flag.

featurespace.com

Chinese ICT giant Huawei is looking to scale its UK operations – and Cambridge is understood to be high on the company’s agenda.

Huawei has significantly grown its operations at Cambridge Science Park since entering the cluster through the 2014 acquisition of IoT pioneer Neul.

The deal, at a modest $25 million, was negotiated by seasoned entrepreneur Stan Boland after Neul had worked with Huawei for nine months on narrow band cellular IoT.

Huawei said the move would provide a springboard for a massive push in the Internet of Things arena and its growth in Cambridge has evidenced that intention.

Now the company, which told the UK government it had multibillion dollar investment plans for its UK IoT agenda, is looking to expand again. Huawei has other East of England operations – at Adastral Park in Ipswich – but the smart money is on Cambridge getting the nod for a flagship UK HQ.

Cambridge Science Park would appear to be in pole position.

With Korean business Samsung setting up an Artificial Intelligence hub in Station Road, Cambridge’s cachet as a growth platform for global technology heavyweights shows no sign of abating.

I am also told that Darktrace, PwC and Mewburn Ellis will soon have some powerful new company at the soon-to-be opened Wilkes Building at St John’s Innovation Park. That trio has taken the lion’s share of space at the building, which at the time of writing was on course for completion by the end of June.

I understand that one of Cambridge’s most innovative internationally renowned tech companies is set to join them along with a spin-out business from the world-leading Cambridge online games development cluster. Legal details are being finalised but expect announcements imminently.

• PHOTOGRAPH: The Wilkes Building at St John’s Innovation Park, Cambridge

Man has split the atom, set foot on the moon and made scientific advances in practically every field of human endeavour from astronomy to zoology, but in advertising and marketing he is still, relatively speaking, in the Stone Age.

The way we advertise now is essentially no different from the way it was done in the Victorian era of the snake oil salesman or the Mad Man days of the 1950s/60s.

But what, I hear you ask, of the digital revolution ushered in by the birth of the internet and the rise of Twitter, Facebook, Instagram, Snap Chat et al?  Well the means of delivery has changed, to be sure, but the marketing messages, promises and propositions haven’t, not one whit. And that’s because human nature and needs are pretty much the same now as they’ve always been.

You’ll probably think me an old grump given to mutterings about youngsters teaching grandmothers to suck eggs, but it did rather stick in my craw the other week when a fresh faced digital marketing ‘Ninja’ informed me in all seriousness that teenage boys have short attention spans and that I need to plan my promotions accordingly. Well, you live and learn!

I could have replied by referring him to the KISS formula (Keep It Simple Stupid) that us veterans have been using for generations and which, if applied well, will appeal to even the shortest attention span. Still, I was talking to a member of a generation that thinks it invented communication, so why bother?

So, what else isn’t new? To save my successors the bother of reinventing the wheel, let me set forth here just one tried and tested advertising formula encapsulated by the acronym ‘AIDA’. 

It stands for ‘Attention, Interest, Desire and Action’ the four elements that can still be applied to most successful ads (or emails or blog or posts) and, whilst this is only a starting point in the creation of effective communications and only one of several at that; it’s not a bad yardstick to put against any project where the method of delivery seems to have overtaken the message. 

Attention
There’s no better way to grab attention than with a short, sharp, arresting headline. And that goes for the subject line in an email or the first few words of a tweet. It’s as effective a way to bait a click or hook web browsers as it is to get a reader to read on in a press ad. It should be brief, can be witty or scary, intriguing or questioning but, above all, it should be relevant – a compact summary of what’s to come. It’s a tall order, I know, but writing killer headlines is an art form.

Interest
This is where you make your pitch (or tell your story if you’re one of the digiratti). It could take any form from a long copy ad to a blog or video – it’s all the same so long as what you have to tell or sell relates to what readers want or want to hear. This is where your market research and customer profiling pay dividends. You must know your market trends and customer habits intimately to persuade them convincingly that you have what they need.

Desire
At the end of the day no purchase decision is made on an entirely rational basis. Explaining the uniqueness, efficiency and environmental friendliness of your product or service is all very well, and it will provide potential customers with the justification they need to buy it, but you also need to appeal to their emotions – the pride, pleasure and kudos of ownership.  
Somewhere along the scale between greed and fear you need to motivate them. Whet their appetite. Highlight the benefits. Appeal to their vanity.  Sell the sizzle, not the sausage, the hole, not the drill, the social status, not the car. As Charles Revson, the founder of Revlon, said: “In our factory, we make lipstick. In our advertising we sell hope.” 

Action
This what sales people call closing the sale, and without a strong call to action all the above strategies are worthless. You must make it supremely easy for your prospect to take the next step, whether it be to retweet your tweet, share your post, send for product details, call your telesales hotline or simply make contact.
When I say there’s nothing new in advertising, that’s not to say it shouldn’t be fresh, fun and inspirational. But, if you want it to be successful as well, at least refer back to the tried and tested principles outlined above. You might be surprised at how many times they’ve been put forward as the ‘latest thing’!

simpsonscreative.co.uk/

With the exception of churches, pubs are perhaps the oldest social institution in built form; on a par with the café culture of Paris or the souks of Marrakesh. 

Yet legislation such as the 2007 smoking ban, competition from the falling price of alcohol in supermarkets and shifts in consumer behaviour appear to have conspired against pubs. 

However, it is not only pubs that have felt the impact. Many high street restaurants and shops are also feeling squeezed and not just because of the economics. Changes in social and consumer behaviour have had a significant effect on both restaurants and shops on the high street. 

The rise in online shopping has dramatically changed consumer habits and the frequency in which people visit shops and supermarkets. The ability to have groceries delivered has reduced the need, and often desire, for many to travel into the centre of town, which can also have a positive impact on overall household costs. Some find it more favourable to buy a bottle of wine and enjoy it at home, rather than walk to or travel to a pub, bar or restaurant. 

It is also arguable that some retailers and restauranteurs are still yet to recover from 2008, continuing to offer 2 for 1 and discount meal deals. Additionally, many chains rely on international staff to work in their restaurants and with Brexit uncertainty, employing staff from overseas is becoming increasingly difficult. 

With a number of chain restaurants shutting up shop, social changes are beginning to reveal the cracks in their business models, whilst the recent hike in business rates has exacerbated the issue for many.

That being said, some chain restaurants are thriving. This includes the likes of Nandos, whose format appeals strongly to the younger demographic. Restaurants such as Loungers and Bills are proving popular by offering a varying menu throughout the day from breakfast to dinner.

In Cambridge, many independent mid to high-end restaurants such as Chop House, Trinity, The Pint Shop and the recently opened Ivy appear to be booming in the current conditions, suggesting people are starting to value quality and service again.

Tourism is also helping to keep restaurants buoyant although, as we are starting to experience in Cambridge – especially over the summer months when there is a huge increase in the number of tourists that visit the city – many residents stay home. 

During this season, the King’s Cross to Cambridge trainline becomes an experience that is not dissimilar to London’s tube, a mode of transport that most of us moved out of London to avoid! 

Similarly, the number of people in the bars, restaurants and generally wandering around the city centre at least triples, which makes going for lunch and dinner more of a mission than a fun experience for most locals. This is great for central Cambridge although doesn’t necessarily help the pubs and restaurants on the periphery of the city that don’t attract this footfall. 

Ultimately, we will have to watch and see. The retail and food and drink sectors will survive – it is just a case of them repositioning their offers and evolving with the times. But, times are changing and with the increased use of messaging apps and nights in, it seems that we might be starting to lose our sociability.

www.carterjonas.co.uk

Owlstone Medical has won the 2018 MacRobert Award – the UK’s leading engineering innovation accolade – for its disease breathalyser.

It is the second successive year that Cambridge has scooped the Royal Academy of Engineering award following Raspberry Pi’s triumph last year.

The team behind the unique Breath Biopsy® platform was feted for creating a device with the potential to save hundreds of thousands of lives and $1.5 billion in healthcare costs globally.

Owlstone Medical’s ReCIVA Breath Sampler has opened up the potential for earlier diagnosis and precision medicine across cancer, inflammatory disease and infectious disease.

The Princess Royal presented the team of Owlstone engineers with the MacRobert Award gold medal and a £50,000 prize at the Academy’s Awards dinner at the Tower of London last night.

The winning team members are: Billy Boyle, co-founder & CEO; David Ruiz-Alonso, co-founder & COO; Max Allsworth, chief scientific officer; Alastair Taylor, VP of engineering; Matthew Hart, VP of Research & Development.

Samples from ReCIVA can be used to identify the unique chemical biomarkers of a variety of diseases, also known as volatile organic compounds (VOCs), in human breath. 

As VOC levels change at the very earliest stages of disease and provide information on the current activity of cells and tissue, the breath samples could lead to earlier diagnosis of diseases such as cancer when treatments are more effective and more lives can be saved. 

Breath biomarkers also have the potential to revolutionise the way medicine is prescribed, as they could be used to monitor drug effectiveness and match patients to the correct treatment – slashing healthcare costs by lowering drug wastage.

Owlstone Medical is developing tests to diagnose lung and colorectal cancer, two of the most common cancer killers worldwide and is currently undertaking clinical trials with the NHS and Cancer Research UK. 
The company also supplies Breath Biopsy products and services to academic, clinical and pharma partners who want to develop breath based diagnostics for their own applications.

GlaxoSmithKline recently chose to integrate the Breath Biopsy platform into the clinical development programme for one of the new drugs it is developing for respiratory disease, to assess whether it is possible to identify the right patient for the right treatment.

The Owlstone Medical team were up against Oxford Space Systems for their new generation of origami-inspired, innovative and cost-competitive satellite antennas and structures, and Williams Advanced Engineering and Aerofoil Energy for Aerofoils, an aerodynamic shelf-edge technology that significantly reduces energy consumption in supermarket and convenience store fridges.

The MacRobert Award, run by the Royal Academy of Engineering, is the UK’s longest running and most prestigious award for engineering innovation. First presented in 1969, the Award has recognised the extraordinary potential of innovations that have changed the world we live in. 

In 1972, for instance, the judges honoured the development of the first CT scanner by EMI – seven years before its inventor Sir Godfrey Hounsfield received the Nobel Prize. Last year’s winner was the Cambridge-based team behind the Raspberry Pi.

Breaches of data security, as a result of a cyber-attack, are frequently reported in the news and evidence suggests they are becoming more commonplace, writes Maria Peyman, senior associate at Birketts LLP.

In 2017 the Government undertook a ‘Cyber Security Breaches Survey’. The survey was of 1,523 businesses of differing sizes and 46% stated that they had discovered a cyber security breach in the preceding 12 months – the most common example cited was employees receiving fraudulent emails (72 per cent) and the next most common example was viruses / spyware / malware (33 per cent).

If the often promoted view, that it is not possible to guarantee your organisation will not be subject to a cyber-attack, is correct (and certainly the survey figures seem to suggest it is a common problem) then what should businesses be doing to protect themselves? 

Firstly, and rather obviously, take all reasonable steps to avoid an attack but, secondly and just in case, ensure there is a plan if the business is the subject of a cyber-attack. Below are initial considerations to get your organisation thinking about whether it is addressing cyber security; these are broken down into five proactive steps and five reactive steps. 

PROACTIVE

Assess your risk 
Identify the business’s valuable assets, where and how the information is stored and who has access to it. In tandem consider the business critical systems as well, for example, what would be the impact of no access to email or electronic documents? 

Strategy for managing incidents
In the event of a cyber incident time is key. Every business should have a clear plan of what happens in the event of an incident and who is responsible for each action. Ensure that the plan tested to ensure that it will work. 

Education of your employees
At board level, there should be a proactive approach to cyber security as well as an overall business commitment to teaching employee awareness. To educate and maintain awareness you should produce user security policies, establish a safe staff training programme, implement effective security awareness campaigns, maintain user awareness, promote incident reporting so employees can do so without fear of recrimination and make sure that you test the policies and training that you have in place.

Governance and compliance
Currently laws and regulations are developed through different entities to address cyber security threats which can make it difficult for businesses to identify all of their legal and regulatory obligations. For example, if you operate in more than one jurisdiction make sure you comply with the obligations for each of those jurisdictions and if you are a regulated entity that you comply with your regulatory body’s obligations. You should also be paying particular attention to relevant data regulations.

Network and IT security
This may seem simple but ensure that you have measures in place to help protect against external and internal attacks. For example, establishing anti-malware and firewall defences, intrusion and prevention and detection systems, filtering out malicious content and sites, monitoring and testing security in place. 

REACTIVE

Detection
In the best case scenario, as an organisation, you will detect a cyber incident yourself. It is much worse if it is released through the media. Once detection has taken place, you need to move swiftly.

Assess the cyber attack
This is sometimes more difficult than it sounds but key early stage decisions need to be made such as notifying the regulators or, if you are a large entity or the information is particularly sensitive, managing the media. It is worth noting that cyber-attacks often happen at weekends and bank holidays which make a response more difficult as detection is less likely.

Containment
Once a security attack or incident has taken place, the hacker may remain ‘within’ your business’s systems and therefore you may choose to take compromised systems offline. You may well also want to revert to backup systems or a disaster recovery / business continuity plan if you feel that the systems are severely compromised.

Investigation
The technical investigation will be carried out by in house / external IT, security and forensic experts but this should all be done under the supervision of the legal team to preserve legal privilege.

At the same time as the investigation takes place, consideration needs to be given to the legal position following the results of the investigations. For example, does the Information Commissioner’s Office (ICO) need to be notified? For regulated organisations, does there need to be a notification to your regulator? It is worth bearing in mind that regulators, including the ICO, want to be notified promptly. This is a careful balancing exercise between prompt notification and ensuring that it is not a false alarm.

Review
At the end of an investigation and you are clear that the cyber incident has been contained and dealt with, your business can reflect on the cause of the breach and identify the remedies that will prevent the same attack recurring. This is a review of software and human actions.

When you get to this point, the lessons that you learn can be taken and fed into your business’s proactive steps.

Of course the list is not exhaustive and there will be many other considerations and aspects which are particular to an individual business so it is key to seek advice and input from all your professional advisors.

You can call Maria Peyman on 01223 326596 or email her at: maria-peyman [at] birketts.co.uk

Breaches of data security, as a result of a cyber-attack, are frequently reported in the news and evidence suggests they are becoming more commonplace, writes Maria Peyman, senior associate at Birketts LLP.

In 2017 the Government undertook a ‘Cyber Security Breaches Survey’. The survey was of 1,523 businesses of differing sizes and 46% stated that they had discovered a cyber security breach in the preceding 12 months – the most common example cited was employees receiving fraudulent emails (72 per cent) and the next most common example was viruses / spyware / malware (33 per cent).

If the often promoted view, that it is not possible to guarantee your organisation will not be subject to a cyber-attack, is correct (and certainly the survey figures seem to suggest it is a common problem) then what should businesses be doing to protect themselves? 

Firstly, and rather obviously, take all reasonable steps to avoid an attack but, secondly and just in case, ensure there is a plan if the business is the subject of a cyber-attack. Below are initial considerations to get your organisation thinking about whether it is addressing cyber security; these are broken down into five proactive steps and five reactive steps. 

PROACTIVE

Assess your risk 
Identify the business’s valuable assets, where and how the information is stored and who has access to it. In tandem consider the business critical systems as well, for example, what would be the impact of no access to email or electronic documents? 

Strategy for managing incidents
In the event of a cyber incident time is key. Every business should have a clear plan of what happens in the event of an incident and who is responsible for each action. Ensure that the plan tested to ensure that it will work. 

Education of your employees
At board level, there should be a proactive approach to cyber security as well as an overall business commitment to teaching employee awareness. To educate and maintain awareness you should produce user security policies, establish a safe staff training programme, implement effective security awareness campaigns, maintain user awareness, promote incident reporting so employees can do so without fear of recrimination and make sure that you test the policies and training that you have in place.

Governance and compliance
Currently laws and regulations are developed through different entities to address cyber security threats which can make it difficult for businesses to identify all of their legal and regulatory obligations. For example, if you operate in more than one jurisdiction make sure you comply with the obligations for each of those jurisdictions and if you are a regulated entity that you comply with your regulatory body’s obligations. You should also be paying particular attention to relevant data regulations.

Network and IT security
This may seem simple but ensure that you have measures in place to help protect against external and internal attacks. For example, establishing anti-malware and firewall defences, intrusion and prevention and detection systems, filtering out malicious content and sites, monitoring and testing security in place. 

REACTIVE

Detection
In the best case scenario, as an organisation, you will detect a cyber incident yourself. It is much worse if it is released through the media. Once detection has taken place, you need to move swiftly.

Assess the cyber attack
This is sometimes more difficult than it sounds but key early stage decisions need to be made such as notifying the regulators or, if you are a large entity or the information is particularly sensitive, managing the media. It is worth noting that cyber-attacks often happen at weekends and bank holidays which make a response more difficult as detection is less likely.

Containment
Once a security attack or incident has taken place, the hacker may remain ‘within’ your business’s systems and therefore you may choose to take compromised systems offline. You may well also want to revert to backup systems or a disaster recovery / business continuity plan if you feel that the systems are severely compromised.

Investigation
The technical investigation will be carried out by in house / external IT, security and forensic experts but this should all be done under the supervision of the legal team to preserve legal privilege.

At the same time as the investigation takes place, consideration needs to be given to the legal position following the results of the investigations. For example, does the Information Commissioner’s Office (ICO) need to be notified? For regulated organisations, does there need to be a notification to your regulator? It is worth bearing in mind that regulators, including the ICO, want to be notified promptly. This is a careful balancing exercise between prompt notification and ensuring that it is not a false alarm.

Review
At the end of an investigation and you are clear that the cyber incident has been contained and dealt with, your business can reflect on the cause of the breach and identify the remedies that will prevent the same attack recurring. This is a review of software and human actions.

When you get to this point, the lessons that you learn can be taken and fed into your business’s proactive steps.

Of course the list is not exhaustive and there will be many other considerations and aspects which are particular to an individual business so it is key to seek advice and input from all your professional advisors.

You can call Maria Peyman on 01223 326596 or email her at: maria-peyman [at] birketts.co.uk

Cambridge deeptech investor IQ Capital, has held the first close of its £125 million third fund – IQ Capital Fund III – at £92m.

The fund will invest at Seed and Series A stages into UK deeptech companies with transformational deep technology, AI or disruptive algorithms at their core and led by visionary founders.

Following a ‘double dragon’ exit, the third fund takes the total capital under management by IQ to more than £175m.

IQCF III builds on the successes of IQ’s existing funds, which included the ‘double dragon’ exit in May to Oracle on the acquisition of Grapeshot in Cambridge – a deal that returned an entire fund twice over – enabling the first fund, IQCF1, to deliver a healthy 3.5x net return to its LPs.
  
IQ Capital’s second fund has invested in 22 deep-tech startups over the last four years, leading investments into deeptech companies such as Privitar in London and Cambridge duo Speechmatics and Fluidic Analytics. 

Deeply embedded within Cambridge’s thriving technology ecosystem, IQ Capital celebrated its 10th anniversary last year and will continue investing in founders of deeptech companies looking to launch or to scale their businesses. 

The firm’s partners – Max Bautin, Ed Stacey and Kerry Baldwin – have worked together for over 12 years and achieved numerous strong exits to technology business giants including Google, Apple, Oracle and Huawei and several high profile IPOs, including Autonomy.

Investors in the first close of IQCFIII include family offices, wealth managers, technology entrepreneurs and several CEOs that were previously backed by IQ Capital, alongside equity investment from British Business Investments, the commercial arm of the British Business Bank (the largest UK-based LP investing in UK Venture Capital).

Max Bautin, partner at IQ Capital, said: “When we launched our first fund over 10 years ago, we had the ambition to become the pre-eminent fund for deeptech in the UK. 

“Over the last few years, this sector has grown tremendously and produced a number of world-leading companies. We are seeing brilliant entrepreneurs bringing ever more experience and ambition to scale up their deeptech companies, so our latest fund will see even bigger successes.”  

IQCF III is a 10-year fund with a five-year investment period with ability to invest up to £10m per portfolio company in order to scale an original tech innovation into global commercial success.

• PHOTOGRAPH SHOWS: Max Bautin

Guardians of life science businesses in Cambridge and the UK, supported by a prominent Cambridge biotech backer, have urged the Chancellor to overhaul Entrepreneurs’ Relief to persuade disillusioned and disadvantaged investors to stand by the sector and pour more lifeline growth capital into the sector rather than walking away.

One Nucleus in Cambridge is one of five UK biotech membership bodies to urge Phil Hammond to make conditions more attractive for investors – or risk throwing away the UK’s life science edge on the global stage.

Serial life science entrepreneur David Grainger, of RxCelerate, has applauded the initiative but urged the Chancellor to go further and totally overhaul the existing climate so UK biotechs are not starved of lifeline cash and wither on the vine.

Tony Jones, chief executive of One Nucleus, was a signatory alongside counterparts at OBN, BioNow, Medilink Midlands and MediWales – which together represent around 2,000 active life sciences companies – to an open letter to Hammond in regard to recently proposed changes to Entrepreneurs’ Relief, which they argued only scratched the surface of the real issue.

While welcoming changes to Entrepreneurs’ Relief, the group explains that they are unlikely to significantly help UK BioMedTech companies and demand more radical reform. 

Entrepreneurs’ Relief reduces the amount of Capital Gains Tax on a disposal of qualifying business assets on or after April 6, 2008, as long as the qualifying conditions are met throughout a one-year qualifying period either up to the date of disposal or the date the business ceased. 

Qualifying capital gains for each individual are subject to a lifetime limit. The general rate of CGT on gains is 20 per cent, while Entrepreneurs’ Relief applies the reduced rate of 10 per cent.

If the business is owned by a company in which the entrepreneur disposes of the shares or securities, then throughout the qualifying period of one year the company must be:-

• The entrepreneur’s personal company – either a ‘trading company’ or the holding company of a ‘trading group’
• The entrepreneur must be either an officer or employee of that company (or an officer or employee of one or more members of the trading group).
• A company is a personal company if the entrepreneur holds at least five per cent of the ordinary share capital and that holding gives the entrepreneur at least five per cent of the voting rights in the company.

It’s possible for shares acquired under the Enterprise Management Incentive (EMI) share option scheme to qualify for Entrepreneurs’ Relief where the personal company requirement isn’t met, although in the case of shares derived from EMI share options, there is in fact no minimum five per cent holding required.

The five per cent qualifying threshold limit impacts different sectors in different ways. In particular, BioTech and MedTech companies often have to raise significant amounts of capital – many tens of millions – simply to pass the regulatory hurdles during the pre-revenue product development phase. 

The risks for investors during these development phases are high. Consequently, there are few investors willing to support such companies, and entrepreneurs frequently find the value of their company does not increase at the rate that they had hoped (even though the valuations for the few companies that ultimately succeed can be exceptional). 

In addition, such BioTech or MedTech companies are often founded by more than one founder with founder shares being divided between them (with the university institutions often claiming a significant proportion of the founding shareholding). 

This means that entrepreneurs behind these companies invariably have to accept that their shareholding will drop to below five per cent (and loss of Entrepreneurs’ Relief). As Entrepreneurs’ shareholdings approach five per cent, this dramatically affects behaviour (the founders retain influential voices on company strategy) and they will (understandably) allow personal and financial considerations drive company financing strategy in a way which may not be in the best interests of the company or the national economy as a whole.

Under recently proposed changes, where an entrepreneur’s shareholding drops below five per cent as a result of a dilutative financing round, that entrepreneur can crystallise the gain up to that point with respect to the reduced rate of CGT (subject to the various other qualifying conditions).

However, for many BioTech and MedTech companies, the fall below five per cent will happen before any meaningful gain in valuation has materialised so the crystallisation of any gain is likely to have little effect in preserving the 10 per cent Entrepreneurs’ Relief rate.

The group recommends allowing entrepreneurs to retain their relief so long as they have held at least five per cent of the shares for at least one year during the period of their entire shareholding, and that such relief permanently applies to those shares acquired up to the point that they fall below five per cent.

So once they are below five per cent, any further shares acquired do not automatically benefit from Entrepreneurs’ Relief under this rule, but those held up to that point continue to qualify. This would be subject to all the other qualifying conditions.

The group argues that this change should magnify the impact of Entrepreneurs’ Relief in the BioTech and MedTech sectors, resulting in:-

• An increase in the number of entrepreneurs willing to take the personal risks in starting BioTech and MedTech companies
• Entrepreneurs being incentivised to remain involved with those companies for the longer term
• Entrepreneurs remaining supportive of future dilutative financing rounds which in turn will ensure that more UK companies attract the scale of patient capital required to build large and sustainable BioTech and MedTech businesses, whilst resisting the urge to sell out early
• The consequential growth in these companies which will further contribute to skilled employment in the life science sector and UK GVA.

The group concluded: “The UK has established a vibrant life sciences sector but more needs to be done to secure its longer-term viability, to capitalise on the excellence of the UK life science research base and to ensure the UK maintains its leading position in global healthcare.

“We believe that rapid adoption of the measures we have outlined above will reaffirm a commitment to the UK life sciences sector, send an important message to investors, and ultimately make a significant contribution to UK health and wealth creation.”

Serial life science entrepreneur David Grainger, chairman of RxCelerate – the Cambridge based outsourced drug discovery and development platform – applauded the initiative but urges the Chancellor to go further.

He told Business Weekly: “This is an excellent and long-overdue initiative. For years, life sciences entrepreneurs, particularly those engaged in drug discovery and development, have been at a disadvantage compared to other sectors thanks to vast amount of capital required for drug R & D and the very high risks involved.

“Many entrepreneurs behind successful companies I have been involved with have failed to benefit from this tax relief that is intended to encourage people to take risks with their careers to drive innovation. The changes being called for here would address many of these issues.

“But the Chancellor should consider going further – enhanced tax relief beyond the 10 per cent rate for drug developers is needed to further defray the huge risk of starting a new company in this area. 

“Beyond that, current rules often result in returns from share disposal on exit being deemed as income rather than capital gain, which cam result in an unintended increase in tax take from successful entrepreneurs. 

“Some relatively small adjustments here, which would have very minimal cost in terms of lost tax take, could provide a huge incentive to the sector and in my view achieve far more than the recommendations of the recent Patient Capital review.”

• PHOTOGRAPH SHOWS: David Grainger