Parkwalk Opportunities EIS
UK universities are amongst the world’s leading. Four of the world’s ten best are in the UK, unsurprisingly including Oxford and Cambridge. As well as seats of learning, many of these top universities are also innovation hubs. In the past, this innovation tended to go uncommercialised but universities are starting to wake up to the value they could potentially generate. 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. This specialist area of university spinouts is the focus of the Parkwalk Opportunities EIS.
- University spinout portfolio with high growth potential
- Proven management team
- Investors will hold between five and eight portfolio companies
- Co-investment opportunities with institutional investors, including parent company IP Group and Woodford IM
- Minimum investment £25,000
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Parkwalk was founded by Alastair Kilgour and Moray Wright, both experienced capital markets managers advising on takeovers, acquisitions and fundraising. In 2009 they discovered a compelling company in which they wished to invest. The company was Xeros and the brainchild of a Leeds University professor. It had developed a “waterless” washing machine. It had found a way of washing clothes that used about 90% less water and about 15% of the usual levels of detergent. Parkwalk invested in 2010 and Xeros listed in 2014.
In January 2017 Parkwalk was acquired by IP Group plc, a leading intellectual property commercialisation company listed on the London Stock Exchange under the ticker symbol IPO. As at March 2019 the group has net assets of £1.2 billion and a market capitalisation in excess of £940 million. The involvement of IP Group should considerably strengthen Parkwalk’s hand in accessing deal flow and negotiating terms, as well as providing another possible exit route for investors.
Further strength could be provided by IP Group’s recent acquisition of Touchstone Innovations plc. Touchstone has its roots in Imperial College London. It creates, builds and invests in technology companies and licensing opportunities developed from scientific research from the 'Golden Triangle', the geographical region broadly bounded by London, Cambridge and Oxford.
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Parkwalk’s niche is UK university spinouts, especially knowledge-intensive ones. In other words, 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 spin-outs include:
|ARM||Cambridge||Acquired by SoftBank in 2016 for $32bn|
|Xeros||Leeds||$290m stock market valuation|
|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 companies spun out of twelve Universities. In addition to the Opportunities EIS fund, it manages funds in conjunction with the tech-transfer departments of the University of Cambridge, the University of Oxford and the University of Bristol.
As well as sourcing deals straight from the universities, Parkwalk generally co-invests alongside other large investors, including (in alphabetical order) Amadeus, Baillie Gifford, Cambridge Innovation Capital, Touchstone (Imperial) Innovations plc, Invesco Perpetual, IP Group plc, Oxford Sciences Innovation plc and Woodford Investment Management.
This makes the tie in with IP Group, which now includes Touchstone, such a strategic one. Neil Woodford, now of Woodford Investment Management and previously Invesco Perpetual, has over the years been a big investor into both IP Group and Touchstone as well as in some of their underlying deals. Indeed, Woodford IM is IP Group’s second largest shareholder.
Parkwalk generally invests when the technology has been proven, but products have yet to be sold, and well before commercialisation.
A typical investment is between £1 million to £1.5 million which will buy a 15%–20% stake in a business. When looking at a deal, one of Parkwalk’s team sponsors the deal and pitches it to the investment committee, who all have to agree for it to proceed. Each investor will have between five and eight companies in their portfolio with a mix of different technology and different stages of maturity.
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.
Whilst companies invested in have to be knowledge-intensive ones, they don’t always have to be early stage. Parkwalk will also invest in later-stage companies even as late as just before an AIM listing.
It is anticipated that investors' subscriptions will be invested over a period of between nine and eighteen months from the final receipt of subscriptions.
The fund's target return is unspecified, but every company invested in 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.
The backgrounds of Parkwalk’s management team are in capital markets, introducing companies to later-stage investors and/or helping the company float is second nature to them.
As well as the more traditional routes for EIS investment – such as IPO or trade sale – Parkwalk’s new relationship with IP Group plc could provide additional exit opportunities and liquidity for investors, although this is not guaranteed.
Portfolio company examples
Investors should be aware the companies described here are unlikely to form part of a new investor’s portfolio. They are outlined to give a flavour of the types of companies an investor might expect.
Xeros – a spinout from Leeds University
Xeros is best described as an almost waterless washing machine. Polymer beads replace about 90% of the water used in conventional washing machines. Not only does it use about 10% of the usual energy required and 15% of the typical detergent needed, the machine also gives a superior clean. In 2010 it came second in 100 Best Inventions by TIME magazine and was cited in the WWF’s survey of global “Green Game-Changers”.
Fuel3D – a spinout from Oxford University
Fuel3D has developed a “point-and-shoot” 3D scanning system which captures extremely high resolution 3D shapes and colour pictures. It is the first 3D scanner to marry pre-calibrated stereo cameras with photometric imaging to take and process images in a matter of seconds. The company was spun out of the renowned Department of Engineering Science at Oxford University for use in the medical imaging sector. Hardware and software engineers are working to bring the benefits of the scanner to consumers and professionals.
Arkivum – a spinout from Southampton University
Arkivum has developed a safe and straightforward process to manage data security. The business provides data archiving for a number of industries. Companies in healthcare, heritage and culture, and life sciences are among its clients. Backed by indemnity insurance, Arkivum gives 100% data integrity guarantee irrespective of the length of time the data needs to be held.
Within the Parkwalk Opportunities Fund the manager has so far exited nine companies, three profitability, including First Light Fusion, a spinout from Oxford University which aims to use nuclear fusion to generate limitless clean energy. The sale resulted in a double digit multiple return on investment for Parkwalk EIS investors, however, past performance is not a guide to the future, capital is at risk.
Source: Parkwalk Advisors. Valuations as of 21 May 2019, on all investments made across all funds per tax year. Total Return includes realised returns and unrealised returns. Performance figures exclude performance fees and tax relief. Returns calculated using Parkwalk's own valuations. Please note, data for the 2017/18 tax year is not yet available. Past performance is not a guide to the future.
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.
Fees & 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.
|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 management charge||—|
More detail on the charges
This is an interesting high-growth, high-risk EIS offer investing in technology-related spinouts from the UK’s leading universities. Parkwalk has access to deals many others cannot see. Parkwalk’s links to large institutional investors that also invest in this area sets this offer apart – and the recent acquisition by IP Group and potentially a tie in with Touchstone could considerably strengthen Parkwalk’s hand. We think this is a quality offer for wealthy or sophisticated investors keen to have access to the exciting world of university spinouts.
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
- Funds raised / sought
- £44.0 million / £60.0 million
- Minimum investment