Parkwalk Opportunities EIS Fund
UK universities are amongst the world’s leading. Four of the world’s ten best are in the UK. As well as seats of learning, many are innovation hubs. In the past, this innovation tended to go uncommercialised, but this is now changing. Investors appear to be seeing the merit of investing in technology developed at world-leading institutions. The University of Cambridge, for example, has spun out 15 companies that are today valued at more than $1 billion. Two are now worth more than $10 billion. In 2019, 334 deals were completed with a total £1.25 billion invested into UK university spinouts, this is up from 169 deals worth £0.55 billion in 2011.
The Parkwalk Opportunities EIS Fund allows investors to access this exciting area of UK technology development. 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. It benefits from being part of IP Group plc, a FTSE 250-listed asset manager focused on intellectual property commercialisation. To date, Parkwalk has £306 million of assets under management – it has invested in over 120 companies and achieved 14 profitable exits with an average multiple of 6.7x, although past performance is not a guide to the future. In our view, Parkwalk is well placed in this specialist area.
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- 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 nine to 18 months, not guaranteed
- Target holding period of four to eight years
- Minimum investment £25,000, you can apply online
Parkwalk Advisors was founded in 2009 by Alastair Kilgour and Moray Wright, both experienced capital markets managers advising on takeovers, acquisitions and fundraising. In January 2017, Parkwalk was acquired by IP Group, a leading intellectual property commercialisation company with net assets of £1.16 billion (June 2020) and a market capitalisation of £792 million (August 2020). Later in 2017, IP Group 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 Moray Wright and Alastair Kilgour. The team has experience across banking, fund management, start-ups, venture capital, and drug development.
Watch an exclusive video interview with Enrico D’Angelo of Parkwalk:
Parkwalk’s niche is UK university spinouts, it invests in technology or intellectual property developed in a university by a team or an individual professor that the university then tries to commercialise. Universities are starting to cotton on to how valuable this can be.
More notable UK university spinouts include:
|ARM||Cambridge||Acquired by SoftBank in 2016 for $32bn|
|Vocal IQ||Cambridge||Acquired by Apple in 2015|
|Oxford Nanopore||Oxford||Raised $125m in 2016 at $1.25bn valuation|
|Cambridge CMOS||Cambridge||Acquired by ams AG in 2016|
Parkwalk has investments in more than 120 companies spun out of twenty universities. 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 freedom to operate. Parkwalk will usually bring in experienced, relevant management to commercialise the product.
Investee companies are knowledge-intensive, but 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 be invested over a period of nine to 18 months from the final receipt of subscriptions, although this is not guaranteed.
The fund's target return is unspecified, but every investee company has to have the potential to return 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.
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.
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.
Mogrify – spinout from Bristol University (recent investment)
Mogrify, launched in February 2019, has created proprietary direct cellular conversion technology which aims to transform the development of life-saving cell therapies by converting (transmogrifying) any mature human cell type into any other. The company intends to deploy this platform to develop novel cell therapies for musculoskeletal, auto-immune, cancer immunotherapy, ocular and respiratory diseases, as well as generating a broad IP position relating to cell conversions.
Parkwalk invested £6 million of a £14 million investment round led by Ahren Innovation Capital, an investment fund co-founded by leading scientific entrepreneurs. The funding round is expected to support internal cell therapy programs, and the development and out-license of novel IP relating to cell conversions of broad therapeutic interest. Mogrify will also increase headcount to 60 scientific, operational and commercial staff located at its state-of-the-art facility on Cambridge Science Park.
YASA – spinout from Oxford University
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. In May 2019 it was announced the YASA motor will power Ferrari’s first hybrid production sports car.
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 including; a £2.5m Series B round in December 2013, a £15 million Series C funding round in April 2017 and most recently a £3 million investment as part of a larger £19 million Series C investment round in August 2019, at a pre-money valuation of £72.5 million. Past performance is not a guide to the future.
Animal Dynamics – spinout from Oxford University (example of previous exit)
Founded in 2015, Animal Dynamics designs systems – such as unmanned aerial vehicles (UAVs) and small-scale drones – inspired by the evolutionary biomechanics of animals.
For example, Skeeter, a micro-drone designed for covert surveillance and surveying tasks, is based on the body plan of a dragonfly. It uses flapping ‘wing’ propulsion to maximise efficiency and allows for gliding and tolerance to difficult weather conditions. Compared to other (UAVs), Skeeter can fly for longer distances on less power over a greater range of conditions.
In addition to Skeeter, the company has two other projects, Stork and Malolo. Stork, the most advanced prototype, is currently at the trial stage whereas Malolo is still under development.
Parkwalk first invested through the Oxford Innovation II Fund in 2015. It was also involved in subsequent funding rounds. The company was sold through a secondary sale in March 2019, generating a return of 6.9x for investors after three years. Past performance is not a guide to the future.
OxSyBio Limited (example of previous failure)
As can be expected, not all investments work out. One example is OxSyBio, a novel synthetic biology company, in which Parkwalk invested in February 2018. The company was developing 3D printing tools for drug discovery and diagnosis, based on research conducted by Professor Hagan Bayley at the Chemistry Department at the University of Oxford and co-founder of Oxford Nanopore, the successful UK-based DNA sequencing company.
OxSyBio raised substantial funding from a group of institutional investors including Parkwalk, which was a minority investor. The funding round had several ‘hard’ targets to achieve to enable the next tranche to be funded. Unfortunately, the targets were not met and investors did not continue to support the company.
To date, the Parkwalk EIS funds have achieved 30 exits, 14 of which have been profitable and 16 have been lower than the amount invested, including 10 returning nothing. 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 – 2014/15, on average, for every £100 invested into Parkwalk EIS Opportunities fund, investors would have received £79.96 in realised returns, not including initial tax relief, and would have a portfolio balance of £61.14 remaining. The chart below shows the valuation as at 06 April 2020, had you invested £100 in each tax year. Past performance is not a guide to the future.
Source: Parkwalk, as at 06 April 2020. 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. So, for the tax year 2015/16, the total return including initial income tax relief would be £130 – 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 so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio.
The manager believes that if a company fails, the intellectual property it owns could still have some resale value, but there are no guarantees.
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.
|Full initial charge||5%|
|Wealth Club initial saving||—|
|Net initial charge through Wealth Club||5%||Annual management charge||1.5%|
|Performance fee||20%||Investee company charges|
|Initial charge||—||Annual charge||—|
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.
Parkwalk invests in some of the most innovative technologies, from artificial intelligence for autonomous vehicles, to the world’s most efficient solar cells and electric motors being used by Ferrari – this is a fascinating sector of the economy. The EIS fund has a clear investment strategy in a defined area: university spinouts. The Parkwalk 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. Previous Parkwalk Opportunity funds have included some interesting high risk, early investments in cutting-edge technology businesses, and investors have historically been well rewarded, although past performance is not a guide to the future.
Parkwalk is set apart by its links to both the UK’s leading universities and large institutional investors, such as parent company IP Group Plc. 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. Please note, due to the focus on intellectual property, these investments are very early stage, and this is a high-risk EIS fund offering.
In our view, this is a high-quality EIS fund offering within an exciting and hard to reach sector. The prospect of investing in 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 more challenging. Additionally, the fund may appeal to existing Parkwalk investors who wish to increase the number of university spinouts within their portfolios.
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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.
- University spinouts
- Target return
- Not specified
- Funds raised / sought
- Minimum investment