Where will we find tomorrow’s pioneering deeptech entrepreneurs? Well many of them will emerge from the world’s best universities, armed not just with PhD degrees but also technologies and business ideas developed during their studies and research projects. For VCs, there is an opportunity to invest early in the work of post-graduate students. If, of course, they can identify founders whose ideas have commercial potential. The Creator Fund thinks it may have found an effective way to do just that.
Earlier this week, the British early-stage VC fund announced plans to expand its student-focused investment operations across Europe, from the Estonian university city of Tartu in the east to Madrid in the west. Nothing unusual about that. You might think. But in a European context, The Creator Fund is doing something a bit different. In a bid to sniff out PhD-level entrepreneurial talent, it is training other post-graduates to think and act like VCs in terms of sourcing prospects and analysing deals.
So what does that mean in practice? Well, Jamie MacFarlane had the idea for The Creator Fund when he was studying for an MBA at Stanford. “While I was there, I saw a category of U.S. VC funds investing in university research. I thought that was a game-changing model,” he says.
He returned to Britain. where he founded The Creator Fund in 2019 with the intention of adopting the Silicon Valley model of investing in students for the U.K. ecosystem. “We spent three years developing this model in the U.K.,” he says. In effect, that meant creating teams who could work within universities to source deals. The aim was to look beyond the usual-suspect universities such as Cambridge and to widen the net to encompass a wide range of institutions.
Building a team of PhD-level “student VCs” was crucial to the plan. These were the people who would be in at ground level, mixing with other post-graduates in refectories, labs and bars. Once chosen, they were schooled in the VC way of thinking. “We put everyone through a ten-point program,” MacFarlane says.
And as he sees it, those selected have already acquired all the really difficult knowledge. They are after all educated to a high level in their chosen fields. Learning about the arcana of the investment world – business assessment, cap tables, etc – is relatively easy. In addition, the PhDs are supported centrally by the Creator Fund Team.
To date, the fund has made 27 investments in sectors such as AI, Life sciences and deeptech. These include two in Europe, namely Turing Biosystems based in Lyon and Enlightra from Lausanne. Turing uses AI to identify cancers, while Enlightra has developed laser technology for ultra-fast data transmission.
Now officially launched in Europe, Creator Fund is active in 32 university campuses and aims to provide funding – in its own words – for a new generation of deeptech unicorns. Typically the fund invests between £100,000 and £700,000.
But what exactly is The Creator Fund looking for? Well, it’s not just the technology but also committed founders. “The biggest mistake that European investors tend to make is to focus on the technology and then bring in an external management team,” says MacFarlane. “What we’re looking for is massively motivated founder teams.”
Is that a bit too much to ask? A PhD student may be a scientific genius – or at least pretty smart when it comes to his or her subject – but that doesn’t necessarily mean that business acumen will be part of the skillsets package.
MacFarlane says the idea that researchers are not commercially minded is something of a myth. Many, he says, have business ambition in their DNA. “Some return to university after a few years in industry because they see a PhD as a means to start a business,” he says.
Spin-Outs And Student Startups
MacFarlane is keen to make a distinction between Spin-outs and student startups. Spin-outs tend to involve investment by the university, the involvement of a professor and the licensing of the IP by the institution. In the case of a student startup, the founders will be students and the university won’t have the same claim on the IP. Indeed, there may be no IP to negotiate. “We have 27 companies, and 55% have no university IP,” McFarlane says.
But what about timeframes? One of the risks associated with deeptech is the length of time it can take to commercialize research. MacFarlane says that is not always the case. He cites Turing Biosystems, which already has significant revenues working with the pharmaceutical industry.
The truth is that some research can be commercialized quickly, while some will be a long-term bet. In that regard, The Creator Fund is aiming to create a mixed portfolio with different horizons.
So what is the outlook for university-level investment? Well, it has to be acknowledged that commercialization of research is crucial to the development of deeptech and The Creator Fund is not alone in the field. For instance, the Plug and Play Tech Center, invests in university startups, not just in the U.S. where it is based, but also in Europe.
For his part, MacFarlane sees universities in the U.K. and Europe providing a rich source of new and ground-breaking businesses.