Parkwalk Opportunities EIS Fund

UK universities are amongst the world’s best, including four of the global top 10. As well as seats of learning, many are innovation hubs. 

In the past, this innovation tended to go uncommercialised, but this is changing. The University of Cambridge, for example, is seen as Europe’s most prolific technology hub, having produced 16 companies that are today valued at more than $1 billion, including two now worth more than $10 billion. 

In 2020, 371 deals were completed with UK university spinouts and a total of £1.35 billion invested. This is up from 169 deals worth £0.55 billion in 2011.  

The Parkwalk Opportunities EIS Fund allows investors to access this exciting area. The fund is managed by Parkwalk Advisors (“Parkwalk”), which claims to be the UK's most active investor in university spinouts and has strong ties to the UK’s leading universities, managing funds in conjunction with the tech-transfer departments of the University of Cambridge, the University of Oxford, Imperial College, and the University of Bristol.

Parkwalk has more than £360 million of assets under management and benefits from being part of IP Group plc, a FTSE 250-listed asset manager focused on intellectual property commercialisation. 

To date, Parkwalk has invested in 152 companies and achieved 42 full and partial exits, 19 of which were profitable with exit multiples ranging from 1.1x to 16x, although past performance is not a guide to the future.

Important: The information on this website is for experienced investors. It is not a personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value: you could lose all the money you invest.

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Highlights

  • University spinout portfolio with high growth potential
  • Proven management team
  • Strong ties to the UK’s leading universities
  • Targets five portfolio companies spread across a range of maturities and technologies - not guaranteed
  • Co-investment opportunities with institutional investors, including parent company IP Group
  • Strong track record of realised and unrealised returns, although past performance is not a guide to the future
  • Aims to be fully invested within 12 to 18 months, not guaranteed
  • Target holding period of four to eight years
  • Minimum investment £25,000, you can apply online

The manager

Parkwalk Advisors is a specialist university spinout investor with £360+ million assets under management. It was founded in 2009 and in 2017 acquired by IP Group, a leading intellectual property commercialisation company with net assets of £1.4 billion (June 2021) and a market capitalisation of £1.2 billion (December 2021). IP Group also acquired Touchstone Innovations, which was set up to invest in promising technology companies spun out of Imperial College and University College London. 

The combined group gives Parkwalk a strong hand when accessing deal flow and negotiating terms, as well as providing a possible exit route for investors. 

The investment committee consists of eight investment professionals including founders Moray Wright and Alastair Kilgour. The team has experience across banking, fund management, start-ups, venture capital, and drug development.

Meet the manage: Watch a video interview with Cassie Doherty of Parkwalk:

 

Investment strategy

Parkwalk’s niche is UK university spinouts, it invests in technology or intellectual property that the university then tries to commercialise. Universities are starting to cotton on to how valuable this can be.

Notable UK university spinouts include:

Company University Activity
ARM Cambridge Acquired by SoftBank in 2016 for $32bn
Vocal IQ Cambridge Acquired by Apple in 2015
Oxford Nanopore Oxford Raised £524m at IPO in 2021 with a £3.4bn valuation
Improbable Cambridge Raised $50m in 2018 at a £1.5bn valuation
Darktrace Cambridge IPO in 2021 with a valuation of £1.7bn

Parkwalk’s portfolio companies include spinouts from twenty universities across the UK. In addition to the Opportunities EIS fund, Parkwalk manages funds in conjunction with the technology transfer departments of the University of Cambridge, the University of Oxford, Imperial College and the University of Bristol. Parkwalk typically co-invests alongside large investors, including (in alphabetical order) Amadeus, Baillie Gifford, Cambridge Innovation Capital, Touchstone (Imperial) Innovations plc, Invesco Perpetual, IP Group plc and Oxford Sciences Innovation plc.

Parkwalk generally invests when the technology has been proven, but products have yet to be sold, and well before commercialisation. A typical initial investment is £1 million to £1.5 million, which will buy a 15–20% stake in a business. Each investor is expected to have at least five companies in their portfolio, with a mix of different technology and different stages of maturity, although this is not guaranteed.

Investee companies will typically have deeply embedded IP and are given the freedom to operate. Parkwalk will usually seek experienced, relevant management with the skills necessary to commercialise the product. However, investee companies don’t always have to be early stage. Parkwalk will also invest in later-stage companies, perhaps just before an AIM listing.

Investors' subscriptions are expected to be invested over a period of 12 to 18 months from the final receipt of subscriptions, although this is not guaranteed.

Target return

The fund's target return is unspecified, but Parkwalk seeks companies it believes could potentially deliver five times the original investment. Clearly, not all will do that. The performance fee is linked to a return of an investor’s original capital overall, not the performance of an individual deal.

Exit strategy

All the members of Parkwalk’s management team have backgrounds in capital markets or introducing companies to later-stage investors. As well as the more traditional exit options for EIS investment – such as an IPO or trade sale – Parkwalk’s relationship with parent IP Group could provide additional exit opportunities and liquidity for investors, although this is not guaranteed. 

Portfolio

The fund will aim to invest in a portfolio of at least five early-stage EIS-qualifying technology companies. 

Below are portfolio company examples from previous iterations of the EIS fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor's portfolio. 

Congenica – Parkwalk Opportunities EIS FundCongenica – a spinout from Wellcome Sanger Institute

Congenica was founded in 2014 by two researchers from the Wellcome Sanger Institute, a department of the University of Cambridge, and one of the foremost centres of genomics research and innovation in the world.

Congenica has developed a clinical genomics analytical platform called SapientiaTM, which enables the accurate, rapid and scalable clinical interpretation of complex genomic data. The platform can help clinicians and researchers diagnose rare diseases and develop prognoses and treatment options much faster. 

In 2018, Congenica was selected by Genomics England as the exclusive Clinical Decision Support Platform for research use for the UK NHS Genomic Medicine Service, the first national healthcare system in the world to offer whole genome sequencing as part of routine care. This contract could allow Genomics England to diagnose ‘rare diseases’ in days rather than the average seven years it currently takes in the west.

In November 2020 Parkwalk participated in a $50 million Series C investment round, co-led by Legal & General and Tencent, the Chinese tech giant, to fund the further development of the company’s clinical genomic analysis software and data platform.

Mind Foundry – Parkwalk Opportunities EIS FundMind Foundry – spinout from Oxford university

Mind Foundry is an artificial intelligence business spun out of the University of Oxford’s Machine learning Research Group. The business is developing ‘data science in a box’ to help organisations in the public and private sectors tackle real-world problems. 

Mind Foundry’s AI solutions are being used for a wide variety of purposes, from monitoring complex jet propulsion systems in the aerospace industry to working with governments to intelligently model and predict the changing requirements for Electric Vehicle charging infrastructure and helping insurers detect fraudulent claims. 

The company completed an €11.5 million funding round in October 2020 led by large Japanese insurer Aioi Nissay Dowa Insurance, following a successful project with its UK subsidiary. The group now plans to make the Mind Foundry platform a core part of its digital transformation strategy.

Parkwalk first invested in the business in February 2016 and has participated in multiple funding rounds. The most recent round, in October 2021, valued the business at £39.4m, a 36.8% uplift in valuation compared to the November 2020 round. Past performance is not a guide to the future.

Yasa – Parkwalk Opportunities EIS FundYASA – spinout from Oxford University (example of previous exit)

YASA develops revolutionary compact, lightweight and powerful electric motors and controllers. The products enable vehicle hybridisation and electrification, especially where there is limited powertrain space. 

The company supplies custom and off-the-shelf e-motors and controllers to automotive customers from its Oxford headquarters. YASA is a Ferrari Strategic Technology Partner and has supplied a custom electric motor for Ferrari’s first hybrid vehicle, the SF90 Stradale. The same core motor is planned for the F171, to be launched in 2021. YASA is also entering the aviation market and has partnered with Rolls Royce to break the speed record for electric flight.

Parkwalk first invested in YASA through a £1.8 million Series A funding round in August 2012 at a £5.7 million pre-money valuation. Since then, Parkwalk has supported the business through further funding rounds, most recently in August 2019, at a pre-money valuation of £72.5 million. 

In July 2021 Parkwalk announced that YASA had been acquired by Mercedes-Benz. The sale delivered returns of between 2x to 6x, depending on the round, and returned £45m to Parkwalk investors.

Tangetix Limited (example of previous failure)

As can be expected, not all investments work out. One example is Tengentix. Tangentix had a patented technology enabling delivery of game downloads in a more timely and cost-effective manner. The company was based on mathematical research from the University of Bradford. Tangentix raised substantial funding over various funding rounds (2013 to 2018) from a group of institutional investors including Parkwalk, the Rising Stars Growth Fund (part of Mercia) and Finance Yorkshire. The company struggled to gain commercial traction with its compression technology, despite apparent savings to suppliers of games through download cost reduction.

In late 2018 the company appointed Chris Maples as CEO, who was previously VP of Spotify Europe. He and the board instigated a new strategy of aiming to become an independent platform for video games (a ‘Netflix’ or ‘Spotify’ equivalent). Unfortunately, the cash runway within the company was not long enough to allow the new product to be launched, and the other investors were unable to continue financing the company. The company, therefore, entered voluntary liquidation resulting in a loss to investors.

Performance

To date, the Parkwalk EIS funds have achieved 42 full or partial exits, 19 of which have been profitable. The positive exits have helped drive a strong track record of returning cash to investors, although past performance is not a guide to the future.

For investors who have been invested for more than five years, investing in tax years 2010/11 – 2015/16, on average, for every £100 invested into Parkwalk EIS Opportunities fund, investors would have received £114 in realised returns, not including initial tax relief, and would have a portfolio balance of £64 remaining.

The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 8 December 2021, expressed on a £100 invested basis for the previous ten tax years Please note, individual investor portfolios’ performance will deviate from the average.

Source: Parkwalk, as at 08 December 2021. Performance figures are supplied by Parkwalk and are net of all fees, based on Parkwalk valuation methodology. Past performance is no guide to future performance. In the above figures, initial tax relief of up to 30% could also apply on sums invested after paying initial fees. – remember tax rules can change and tax benefits depend on circumstances.

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an “exit” for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.

Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

The manager believes that if a company fails, the intellectual property it owns could still have some resale value, but there are no guarantees. 

Charges

A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.

Investor charges
Full initial charge 5%
Wealth Club initial saving
Net initial charge through Wealth Club 5%
Annual management charge 1.5%
Administration charge 0.25%
Dealing charge 0.2%
Performance fee 20%
Investee company charges
Initial charge
Annual charge
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer

Parkwalk aims to deploy the money within nine to 18 months from investment. Historically, the average has been within 12 months, but there are no guarantees this will continue to be the case. As is typical with EIS and SEIS investments, it may not be possible to have all funds deployed before a deadline such as the end of the tax year.

Our view

The Parkwalk EIS fund has a clear investment strategy in a defined area: university spinouts. Its investments stretch from artificial intelligence for autonomous vehicles, to the world’s most efficient solar cells and electric motors being used by Ferrari. 

The investment team has plenty of experience in this field, and Parkwalk’s standing in the industry could allow access to opportunities other managers would be hard pressed to access. Investors have historically been well rewarded for supporting this high-risk area of the market, although past performance is not a guide to the future.

Parkwalk’s links to the UK’s leading universities and large institutional investors, such as parent company IP Group Plc., set it apart from many other EIS funds. These could provide investee companies with access to the pools of liquidity needed to commercialise their intellectual property, and potentially provide EIS investors with an additional route to exit although this is not guaranteed. 

In our view, this is a high-quality EIS fund offering within an exciting and hard to reach sector. However, the focus on intellectual property means these investments are very early stage, and this is a high-risk EIS fund offering. The prospect of investing in around five early-stage, cutting-edge technology businesses might appeal to those investors looking to complement a wider investment portfolio, where gaining exposure to university spinouts might be challenging. Additionally, the fund may appeal to existing Parkwalk investors who wish to increase the number of university spinouts within their portfolios.

Read important documents and then apply

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.

The details

Type
Fund
Sector
University spinouts
Target return
Not specified
Funds raised / sought
-
Minimum investment
£25,000
Deadline
Discretionary
Last updated: 21 December 2021

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