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, is seen as Europe’s most prolific technology hub, having produced 18 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 a total of £1.35 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 £375 million of assets under management – it has invested in 140 companies and achieved 40 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. 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 £1.3 billion (June 2021) and a market capitalisation of £1.2 billion (July 2021). 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. Parkwalk has assets under management of £375 million on behalf of more than 3,500 clients.
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.
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.
Notable UK university spinouts include:
|ARM||Cambridge||Acquired by SoftBank in 2016 for $32bn and more recently by Nvidia for $40bn|
|Vocal IQ||Cambridge||Acquired by Apple in 2015|
|Oxford Nanopore||Oxford||Raised £195m in 2021 at a £2.5bn valuation|
|Improbable||Cambridge||Raised $504m from Softbank in 2017|
|Darktrace||Cambridge||IPO in April 2021 with a valuation of £1.7bn|
Parkwalk has investments in more than 140 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 the 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 to 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 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.
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.
Congenica – 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 recent $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 – 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 a €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, most recently in October 2020 at a 79% uplift in valuation compared to the previous funding round. Past performance is not a guide to the future.
Ceres Power – spinout from Imperial College (example of previous exit)
Ceres Power spun out of Imperial College over 20 years ago and has subsequently gone on to become the UK’s most valuable cleantech company.
The company has developed fuel cells, a type of device that produces electricity from substances such as natural gas and hydrogen, with relatively low or zero carbon emissions. Where Ceres differentiates itself is its unique combination of advanced materials which provides high levels of efficiency at a lower cost. Furthermore, the flexibility of the design means the cells can be used industrially, domestically and within vehicles.
Parkwalk invested in September 2016 via its relationship with the technology transfer office of Imperial College. The efficiency and flexibility of design made the company an exciting proposition.
The company has since gone from strength to strength, with revenue steadily growing from £1.1 million in FY 2016 to £15.3 million in FY 2019. Parkwalk exited its holding in 2019, resulting in a 2.4x return (before tax relief) for investors after just over three years. Past performance is not a guide to the future.
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.
To date, the Parkwalk EIS funds have achieved 40 exits, 19 of which have been profitable and 21 have been lower than the amount invested, including 13 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 – 2015/16, on average, for every £100 invested into Parkwalk EIS Opportunities fund, investors would have received £74.21 in realised returns, not including initial tax relief, and would have a portfolio balance of £58.81 remaining.
The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 30 June 2021, expressed on a £100 invested basis for the previous ten tax years Please note, individual investor portfolios’ performance will deviate from the average.
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, or even be prepared for all companies to fail.
The manager believes that if a company fails, the intellectual property it owns could still have some resale value, but there are no guarantees.
Exit could take considerably longer than the three-year holding period. Equally, an early exit could affect EIS tax relief.
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 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 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