Risk and Reward in Early-Stage Tech Investments with George Robinson, Founding Partner of Oxford Investment Consultants

[00:00:00] Susannah de Jager: Welcome to Oxford+, the podcast series that takes you deep into the myths and truths of the Oxford investing landscape. I'm your host, Susannah de Jager and I've spent over 16 years in UK asset management.

Meet George Robinson: Founding Partner of Oxford Investment Consultants

[00:00:18] Susannah de Jager: My guest today is George Robinson. George is the founding partner of Oxford Investment Consultants, which advises on investments in spin out companies from Oxford and other UK universities. Since its founding in 2015, it has invested over 70 million pounds in 35 companies. He is an active investor in early stage technology and biotech companies with a particular focus on Oxford and was a founding investor and former board member of Adaptive Immune Therapeutics and Immunocore. He's also a founding partner of Technicos, a private equity partnership, which invests in spin out companies from the Oxford Institute of Biomedical Engineering. In 1993, he founded Sloan Robinson, an investment management business, which invests in listed equities globally with a particular focus on Asia and emerging markets. Prior to this, he worked for 15 years in Asia, initially for John Swire and Sons and then for Asian based stockbroker W. I. Carr in Korea, Thailand, and Hong Kong, where he was Director of Regional Research for the Far East. George is an Honorary Fellow of Keble College, Oxford, where he graduated with a B. A. in Engineering Science and is a former member of the Oxford University Endowment Investment Committee. George is an excellent guest to have on Oxford+ because he's such an active investor. He has a wealth of successes, partial successes and failures to draw upon, and I look forward to hearing all about them.

George, thank you so much for joining today.

George's Journey: From Listed Equities to University Spinouts

[00:01:36] Susannah de Jager: You didn't start your career looking at spinouts, you started your career in listed equities. Can you just give me a little bit of context, what made you switch to now focusing so much on this area?

[00:01:48] George Robinson: Well, I've always been interested in investing in unlisted companies, and it became a habit that I developed some time ago and I realised after a while that it's very difficult to invest in small companies because there's so little information available and you need to do a lot of work to understand them. So I originally got interested in investing in companies in Oxford through the Institute of Biomedical Engineering and a friend of mine, Lionel Tarasenko, was working there as the director and he got me interested in what they were doing and a little later we helped to set up an SPV called Technicos, which invested in spin outs from the Biomedical Engineering Institute and that's really how I got started in Oxford and then over the years I've invested in a variety of companies, some engineering, some in the medical sciences area, some in drug discovery and then in 2015, I decided to set it up as a business. So that I had other people who could help doing the due diligence and understand more about what we're doing and hopefully make fewer mistakes and make better investments.

[00:03:06] Susannah de Jager: So you talk a little bit in some of the notes you sent across about how interesting this space is and that you can really feel and sense the mission and the potential impact of a lot of the technology. You also speak about the fact that many investors just, do not have an appetite for the risk and the complexity. Do you think that there needs to be more done to educate other investors or do you think that that natural gap is what it is?

Challenges and Opportunities in University Spinouts

[00:03:30] George Robinson: Well, when you're dealing with university spin outs, they're usually a new technology that has been invented by a group of scientists who've been working on a problem that nobody else has been able to solve. So it's very hard for anybody to really understand what it is that they're doing. So that's the starting point, you're dealing with incredibly sophisticated new technologies that nobody understands very well, even the people in the field and so for people outside, it will be particularly difficult and I think that's the big challenge for trying to invest in these companies is that nobody really understands what they're doing and what the opportunity is. So the challenge for us, I think, is to educate people and I've always taken a view, I'm very happy to share whatever we're doing, whatever knowledge we've acquired with others to help get them up the learning curve.

[00:04:17] Susannah de Jager: Amazing.

Building a Strong Investment Team

[00:04:18] Susannah de Jager: So you spoke about building out the team in order to be able to do more scientific due diligence and make sure that you have kind of higher hit rate on them and to deal with some of the difficulties of the space that you just illuminated upon. What is the structure of the team now? How many people do you have? What kind of specialisations? Because even if you have very specialist people, as we know, these silos are very specific and deep, so what's the structure of your team currently?

[00:04:44] George Robinson: So we have a team of eight people altogether. We have four people who are analysts who help with getting to know the companies. We have one person who's a CFO, one who manages the business and myself.

[00:04:59] Susannah de Jager: And in one of the examples that you spoke about, Oxford Quantum Circuits, you talk about it literally being a research project. As you just said, many of these concepts are really just that, an academic concept. With a team of eight, do you have people going in all the time to the physics department, as in that case, or how do you build your pipeline?

[00:05:20] George Robinson: We get to hear about most of the companies that are being formed in Oxford. OUI are incredibly helpful. They create the companies, they check the IP, make sure there's nobody else in the world doing the same thing, or at least if there is that they have freedom to operate and it's fairly easy to find out from them what's coming in the pipeline and we also have a network throughout the university, we're good friends with OUI and various other investors in the community. So you get to hear about things and sometimes you hear about them before they're founded. So in the case of the Biomedical Engineering Institute, we meet with them from time to time and we hear about what's coming down the pipeline.

[00:05:59] Susannah de Jager: Amazing.

Navigating Market Fit and Commercial Success

[00:06:00] Susannah de Jager: So one of the things that you really stress is when you're talking about the company and the concept and the market fit, and you spoke a little bit there about contextualising the market fit and the competitors. How quickly do you feel that you have a sense that something's really exciting? Given that you can't necessarily understand the science always in the depth that it is at.

[00:06:23] George Robinson: Well, most new inventions sound incredibly exciting when you first hear about them, but you then have to do a sense check and a reality check and try and work out whether they will actually succeed commercially, because it takes years for a new idea that's been developed in the lab to turn into something that works commercially and actually on day one, you just don't know and there are companies that we've invested in where I was quite skeptical on day one that they would go anywhere because I thought this is a wonderful idea, but it's really early, it's like a research project. We shouldn't be seeking outside capital to invest in this and then five years later, they're doing a Series A valued at 80 million pounds and your little seed investment has turned out to be quite valuable, at least on paper.

[00:07:08] Susannah de Jager: And it's so interesting to hear you say that actually, if I were to recast that, it's pretty hard to know sometimes what will do really well and what will not and that's just part of the risk profile of this space.

Overcoming Technical and Commercial Hurdles

[00:07:20] George Robinson: Exactly and the first challenge is just a technical challenge. Can you turn what appears to be something that works in the lab into something that works when it's scaled? Can it be manufactured cheaply enough? And can you get over all the technical hurdles along the way? Because to manufacture something, at scale means you have to do a huge amount of development work along the way and sometimes it actually just doesn't work and that does occasionally happen and also we sometimes find that things that appear to work, don't work when you put them into trials in people for medical devices. So there's lots of things that can go wrong along the way, but on day one, you can't really anticipate that, you just have to hope for the best and accept that not everything you invest in is going to work.

[00:08:07] Susannah de Jager: So one of your companies, Organox, which is focused on preserving and assessing organs for transplant, you talk about, that you had a certain level of cynicism about whether clinicians would adopt it, and then they did and in other cases, non adoption is the main issue that you've come up against. It's a really interesting point around, sort of, is there a market or are you going to have to educate the market? And you seem to have a preference, understandably, for there's a market and people want it. But there is a gap that I hear about quite often where something might serve very well the end user, but to do with the structural peculiarities of, to give an example, the US healthcare market, clinicians may not want to adopt it either from a practical or from a commercial perspective and what serves their interests best. In that scenario, have you seen people be able to push through that or as a business venture, would you say that's going to just be so exceptionally difficult?

[00:09:07] George Robinson: So after your technical risk and you've got your product working and hopefully certified and approved, you then have the challenge of, getting people to use it and pay for it and it's the payment that's the real problem because these new drugs or devices are not free, somebody has to pay for them, and there's an inbuilt resistance in the payment system to taking on new devices and reimbursing new things, and it's a particular problem in the UK. So we have all these start up companies in the UK producing devices, drugs, and whatever, but once you've got your approval to use them and give them to patients, you've then got to get approval to have them reimbursed by the NHS. So getting reimbursement from NICE is particularly difficult because they are understandably very careful about the way they spend government money and they like to see health economic studies and these can take years. It's a very good example that Organox, the company we were talking about which produces an amazing device that preserves livers when they're being transplanted, extends their lives, enables them to be assessed so that they have a much higher transplant rate than they had before. They don't have to discard livers that previously they didn't think would necessarily work because they can check that they work. When they got approval in the US, it actually took off very quickly, much faster than we thought it would because in the US, the whole system is much more entrepreneurial, doctors are keen to try out new things and also, the system is open to reimbursing new devices. Whereas in the UK, Organox is a significant player in the market, they probably have a 30 percent share of liver transplants, but they're still not being reimbursed by NICE. Whereas in the US, there's full reimbursement, the price is higher, and everybody wants to try it out.

So, they were extremely fortunate that they were doing something that was actually badly needed. Everybody, was happy to use this device because it meant that more livers could be transplanted, but it also meant that surgeons and their teams didn't have to work through the night doing transplants. They could just come in the morning and do it as a planned procedure and this challenge of being accepted commercially is a huge sort of hurdle to overcome for most companies. I mean, that was an example of one that works very well. There are others where the product goes into the market and nobody wants to buy it and then you've got to try and sell it and that, again, depends a lot on the people and the teams that are built and one of the things that most companies go through, is having developed their product and they're looking to sell in the market, they have to go into the US market because it's a much bigger market and they pay.

[00:11:47] Susannah de Jager: Yeah.

[00:11:47] George Robinson: And so then the big challenge is setting up an operation in the US to sell and distribute, and that's not an easy thing to do.

[00:11:53] Susannah de Jager: Before we move on to the team and location side of things. Another thing that I hear quite a lot from entrepreneurs is that there's a lot of momentum sometimes in particular sectors and areas. When you're evaluating an idea, how much importance do you put on the popularity of a sector?

[00:12:11] George Robinson: So there's certain things that Oxford is particularly good at, and, one of them is medical sciences. Probably 70% of the research budget here of 800 million pounds a year is going into medical science and within that area there'll be clusters of excellence and it just happens that one of the things that Oxford has always been very good at is anything to do with T cell engineering peptides. Cambridge were the first people to discover and commercialise antibodies and that became a huge industry in Cambridge. But T cells is more something that happens in Oxford. So that's an example of where Oxford is the center of a cluster. We have a robotics institute, there's lots of interesting things coming out of that. The engineering department has always produced some interesting, spin outs. So it really depends on the group of scientists and what they're doing and you'll find groups of scientists in Oxford who have been working in Cambridge and vice versa. It depends on where they happen to be and the people that they're with. So hopefully that explains a little bit of what we're looking for.

[00:13:17] Susannah de Jager: Absolutely. So going back to what you were discussing earlier around team and location and primary market that you might focus on. For ONI, your company that produces low cost super resolution microscopes, you speak about the fact that your headquarters for that company are now in California, but with the R&D still in the UK. Can you talk a little bit around that decision making process? What drives that?

[00:13:44] George Robinson: People often worry about companies that are founded in the UK being bought and taken elsewhere. But of course, the ideal thing is that the center of gravity stays here, at least the bit that matters for the UK, which is the research and development function and the sales function will probably move to the US because that's where the market is. So ONI is a very good example of that, they started in Oxford, they produce these amazing super resolution microscopes that are the size of a Mac mini and they replace or complement or an alternative to much larger optical microscopes which take up half a room and need a full time lab technician to look after them. So in a sense they're democratising the world of microscopy and doing to the world of super microscopes what Bill Gates and Steve Jobs did to the world of computing by democratising PCs instead of large mainframes and they started it in Oxford. They have fantastic product, but they have to sell all over the world and in the end, your biggest market is in the US and you can't easily tackle that from here. So they moved their headquarters to California and all the people that are selling and marketing the product will be based there and will have been recruited from large US companies. So that's a very good example of what good looks like.

[00:15:03] Susannah de Jager: Yeah and it makes a lot of sense and you spoke about the clustering around the R&D being very important and that retention in the UK, allowing them to feed off the academic excellence here. But your point around domestic market in the US is one that we hear a lot and so that makes sense. I mean, stating the obvious, of course, reform in the NHS and NICE would probably be nice to have.

[00:15:28] George Robinson: Yes, it would be very nice, but it's a very complicated issue and I'm sure lots of people are much better qualified than me have thought about it. But if I was running the government, I would try to find a way of encouraging the NHS to fast track the approval of the reimbursement of new technologies, particularly to help UK companies, but it should be good technologies from somewhere.

[00:15:53] Susannah de Jager: Indeed. Going back to the team focus and when you see particular kind of areas of excellence, the US are very good at both commercialising marketing and they have their domestic market. You have reinvested in a number of the teams that came outta Adaptimmune and Immunocore how. How important do you think track record is? How much weight do you put on that versus the technology?

[00:16:17] George Robinson: Well, every startup is a journey for the people who are working there, and almost by definition, they haven't done it before and so if they have done it before, it makes life a lot easier and you can certainly have a lot more confidence that the product that they're developing or the idea that they have might at least work and that they know what they're trying to do, because they'll be solving a problem they've been thinking about for a long time and most of the companies that we hear about in Oxford are spin outs from the university. What that means is that the work was developed by somebody who was being paid by the university who was working the labs, the research grants came through the university.

So when the company is spun out, it's partly owned by the university. But of course, there are other companies that are formed here, which weren't the results of a particular project that was done in the university labs, but by people who are part of the cluster who once were researchers at university, they may even have created spin outs and those companies are just as interesting as some of the spin outs themselves.

[00:17:23] Susannah de Jager: Absolutely. You're talking about people you've got experience of there, which is obviously the best way to know how they're going to operate, the experience they've got and what their best qualities and potentially their worst qualities are. I liked in one of the notes that you sent across that you spoke about the qualities that you look for in good leadership teams. I wonder if you could talk us through some of those because obviously beyond just being excellent, some of them aren't necessarily that obvious to people.

[00:17:50] George Robinson: So the most important thing with the leaders of these companies is that they are open and honest about what they're trying to do, what are the risks that they face, what are the things they worry about. and not just try and convince you that the new invention is the best thing that's ever happened is going to be a massive success, because inevitably they have to get you excited in order to get you to invest in the first place. But once you have invested, you just want to have an open relationship with them and the great thing about private companies is there's no issues of fair disclosure which you'd have in public companies so they can tell you everything and you can see their monthly accounts and they can tell you what's going well, what's not going well and the most important thing is to work with people who are just completely straightforward and honest about it, and tell you what their highs and lows are, what they worry about, what might go wrong, as well as all the good things that are happening because inevitably, the journey is not an easy one, and they don't know what's going to happen as they go along and they will face difficulties and challenges along the way, they have to make decisions and that's what their investors are there for really, is to listen to them and to help them to make the right decisions and also to anticipate when they need their help and when they're going to need more money and the other thing that's very important is to evolve the team as you go along and if they feel that a member of the team isn't working, then it's nice that they should share that with you and so you all understand what needs to be done.

[00:19:25] Susannah de Jager: So it's really a marriage, it's a collaboration at this stage where you're investing between the investors and the team and you talk about board composition too in the early stages being very much investors and main execs.

The Importance of Team Evolution

[00:19:37] Susannah de Jager: I think it's really such an interesting thing talking about the evolution of a team because one hears this quite often that there's a moment where perhaps the incumbent CEO is no longer appropriate for the next stage of growth, that they need to have self awareness to perhaps see what their own skills or limitations are. How often are you in these stages having to replace the core team or at least supplement them with other very senior hires? Or do you think that tends to come later?

[00:20:05] George Robinson: The team will evolve over time. The most difficult thing is when you have a company with one dominant shareholder because they sort of feel they're in charge and they never want to go, and they'll listen to you and then not necessarily do the right thing. One of the great things about the companies that we have in Oxford is they normally have three or four shareholders on day one, they have the university, the founders and then two or three other investors. They could be individuals or they could be small venture funds, but it means right from the get go there's not one person who's in charge. So everybody has to be listened to and everybody has an opportunity to contribute and in that situation it becomes reasonably obvious when somebody is struggling or they're out of their depth or they need a bit more support and it's done in a very nice way over a period of time you work out that things have to change and then you have a word with the CEO or the management team and work out what needs to be done and things can happen, but it's incredibly important to be able to do that, because it's the person who takes the company forward for the first two or three years isn't necessarily the person who's best suited when the business changes from, let's say, being a company that's developing a product to a company that's selling a product and then when the company goes to the next stage and takes in larger amounts of money in its series B and C and its perhaps preparing to go into the US market or thinking about a trade sale or a listing in the future, that person is going to be a completely different person leading the company from the person who is there on day one. So, one just has to adapt as one goes along and sometimes the person who starts on day one can lead it through that entire process, but that's relatively rare.

[00:21:57] Susannah de Jager: Yeah, I always like the analogy of peacetime and wartime prime ministers, which I think sort of serves the same.

[00:22:03] George Robinson: And then you have the d'entrepreneurs who are academics who want to become entrepreneurs and academics, understandably, always think that they can learn about new subjects and that means that they can learn about business and how to do it and they can be very good for a bit, but it's relatively unusual to find an academic who is really successful as a CEO of a company, but sometimes they're just needed for the first year or two because they know how everything works and they can teach everybody, but they have to know how to back out, and it doesn't mean they have to remove themselves completely, but they have to step back and let a full time CEO come in and run it. They can stay on as a CTO. they can be on the board and so on, and then that works very well.

[00:22:46] Susannah de Jager: Thank you. So you as an investor, you've spoken a bit there about how you interact on the evolution of the team. In terms of your team of eight people, how involved are you in other ways? Do you get involved in the operational, obviously on the strategic side, but do you give connections? Do you bring other investors? JVs? Are you sort of networking for them in other ways, or is it quite hands off?

[00:23:09] George Robinson: Well, the first thing we can do is just turn up at board meetings, and that's an opportunity for the management of the company to talk to a group of people and tell them what they're doing on a regular basis and in that forum, you can hear about their progress, you can see how they're spending the money, and you can discuss what they're going to do, what are the challenges facing them, how are they going to allocate capital, what are they going to focus on? And I think just being there and being able to offer common sense and good advice is incredibly helpful. Now, of course, inevitably, You go to the next stage, which is that they need to do their next funding round, and we can try to help with that, we can introduce them to other investors potentially, we can point them in the direction of people that they should go and talk to, we can give them feedback on the way they're presenting themselves and we can help them to chart their path in lots of different ways, but in terms of day to day operational management, we generally leave them to get on with it and do their own thing, they ought to be able to do that themselves. But where they need help, we can help them to recruit people to come in and that's quite important really because if you sit on the board of a company, the one thing that you can do is to choose or help to choose the people who are going to run the company and be a part of that process. So we will always participate or often participate in the process where we're looking for a new marketing person, looking for a new CEO, looking for a new CFO.

[00:24:44] Susannah de Jager: Perfect.

Funding Challenges and Strategies

[00:24:44] Susannah de Jager: So you talk a bit about funding risk and in the UK, it's quite a well acknowledged problem that early stage capital is relatively readily available, but scale up capital is less so. What do you see in your companies?

[00:24:57] George Robinson: To start with, nearly all spin out companies are supported by private investors. They're the only people who are prepared to take the risk and they'll do it because they know the founders, or because they are happy to invest in a portfolio of early stage companies in the expectation that some of them are going to work and the UK government offers really good tax incentives with the EIS scheme, which enables people to effectively claim back some of the tax that they would pay if they invest in listed companies and that's a very good incentive to get people to invest. It's relatively difficult to find people to invest their money without those incentives. So that's the starting point is they have to be funded privately and then we get to a point where you can interest some. venture funds, but it's still largely the case that these early stage companies have to depend on individuals to fund them.

[00:25:59] Susannah de Jager: And higher up the scale? I mean, it's interesting in your notes around Immunicor, you refer to how not having institution investors early enabled independence and then went on to a hugely successful series A, a record breaking series A at $320 million. It's interesting that the inference there is that institution investors would've forged a different path. How do you see those different investor groups defining outcomes?

[00:26:26] George Robinson: Yes, well, it's a very good example. So, Immunocore has been one of the most successful companies to come out of Oxford, but in its early days, because it was tried and untested science, and because they hadn't put cancer immunotherapy drugs into humans, it was very hard to find investors and we were fortunate that there was a group of us based in Oxford, and it included one of the colleges, St. Cat's, who were prepared to fund that company for the first seven years in the event that we couldn't find other investors and we did try quite hard. We talked to lots of venture capital companies, we talked to lots of people who might have been interested, but they all said, this is really interesting what you're doing, but why don't you come back to us when you have done your phase one trials or when you've got a bit further and you've got some hard evidence that it actually works and this is the problem with all these companies is nobody who is a fiduciary who's responsible for other people's money, wants to invest in companies that have unproven technology, even though it looks very good and what tends to happen is that the first round of funding that's raised is raised in expectation that it'll make enough progress that new investors will want to come in.

But it doesn't always happen. So, many companies find themselves in a position where they're doing their Series A and it's a real struggle finding investors. So, in the case of Immunocore, we were very fortunate there was a group of investors who signed up to supporting it, if they had to and in the end they had to. But, they got it to the point, well, it had phase one results where the data looked very good, where suddenly it was a much more interesting company and then they went out and they did a series A where they raised over 300 million dollars, which was an extraordinary amount of money at the time and the company sort of went from there and, and did very well. Although even later on when that money was all spent, it was quite hard to raise the pre IPO money and it was only when they got some really good phase two data that showed that their first drug was almost certainly going to be approved that suddenly there was a lot of interest and they were able to raise several hundred million dollars and list it on Nasdaq. So you're always facing this problem that the next lot of investors don't actually want to invest until you have de-risked it to the point where they feel they're not taking very much risk.

[00:28:45] Susannah de Jager: So it's really interesting to hear you describe that because one sees this time and time again that it's hard, right, to raise this money. You describe there a kind of benign group of very supportive investors, which is obviously wonderful. Thinking about the evolution within the Oxford landscape, we've got the Ellison Institute of Technology coming in who have their sort of four pillars that they're going to be focused on. How do you think that funding model is going to change some of these effects that you're describing?

[00:29:14] George Robinson: Well, if you have a pool of capital that's earmarked to investing in interesting technologies within the university environment, there's a much higher chance that that money will find its way to the companies and they'll be prepared to take the risk and so it's fantastic that they are there and that they have that intention because it will be hugely helpful because up until now, the only big pool of capital that we have in Oxford is OSI, who have been a terrific force for good. They've invested close to a billion pounds into Oxford companies and if they hadn't done that, many companies wouldn't have evolved to the point where they have got to and every year, there's probably twenty five to thirty new companies being created in Oxford. But if you add up all the companies that have been created over the last ten years, it's probably more like a hundred and fifty companies and they're all growing and most of them are being successful, but that means that they still need to raise money because they haven't got any revenue. So, the amount of money that they need, for just pure venture funding is probably in the order of five hundred million pounds a year. There's no one institution in Oxford that has pockets deep enough to fund that, nor would it be desirable. We need lots of investors, which is why it's fantastic to have new funders like the Ellison Institute come in and look for the opportunity to invest.

[00:30:40] Susannah de Jager: You spoke earlier about qualities of a good founder and co founders. Something else that you bring in, which speaks to this humility and listening to the market is around valuation. I'd love you just to talk through a little bit how you think people at this stage, anyone listening that's an entrepreneur ought to think about how they present a initial funding round and the valuation.

[00:31:03] George Robinson: So we often find entrepreneurs who just think their company is worth five million pounds or ten million pounds. They have no basis for saying that, but they're just hoping that somebody will be so excited about the technology and what they're doing that they won't question the valuation. Well that obviously doesn't work out very well because if they've overvalued the company and they're trying to raise more money down the line, the new investors coming in aren't going to pay the same price as the old investors and you have a down run and that's not a good result for anybody. So the methodology which we use is quite straightforward. You look at how much money has been raised by the company through equity, how much money they have been able to get in grants from Innovate UK or other grant giving bodies and then you add that all up cumulatively and it's reasonable to treat that as the book value of the company. It's not a hard book value because all the money gets spent, but they've spent the money developing intellectual property, so there should be, all converted into goodwill, and then you pay a multiple of that and if you look at the capital history of successful spin out companies in Oxford, you'll find that typically, when they're raising new money, the valuation of the company after the new money has been taken in, which includes the cash, is somewhere between one and a half and three and a half times the invested capital.

So it's, if you're raising new money at the same price of all the money that's gone in already, in other words, at book value, that's not a good result. But if the company is doing well, they will be able to raise at a much higher multiple. So Oxford Nanopore is a very good example. Gordon Sanger did a brilliant job raising money over many years before the company started generating revenues and he always managed to raise money at about three times invested capital. There are other companies which will raise money at one and a half to two times and it slightly depends on the nature of the business and what they're doing and the more asset heavy the company is, the more fixed assets they need, the lower the multiple generally, but for asset light businesses, particularly software businesses, the multiple can be higher. But we always look at that, we go to companies house, we look at the cap table, we put it together, and we just work out how much money has been invested and then take a view on whether that money has been well spent. You can't just take everything that's been spent. If you've had to write off some of that investment or they've changed tack, you might want to reduce it a bit.

[00:33:31] Susannah de Jager: That makes a lot of sense. I think that's very helpful to have a sort of benchmark for how people should think about that. You also talk about when people are in this stage, it might take a year to raise initial funding, they're going to have to expect to get lots of knockbacks and no's, it won't be a good fit for everyone. You've spoken about that the pool for these kinds of investments is just quite small and you talk about maybe taking 50 meetings and if I'm honest, that even sounded maybe a little bit conservative, but I did wonder and I often wonder this, what's the difference between sort of persistence and obstinance? You know, there's lots of things that you talk about being needed for a company to be viable. If you're a founder, how should you filter that feedback? Because some will be just not a good fit and some will be, you really don't have a good venture here.

Evaluating Market Potential and Competitors

[00:34:18] George Robinson: I think the most important thing for founders when they're trying to raise money is to show that they have thought quite carefully about what they're doing and what the market might be. I always say to people, if you're trying to create a new company, don't do it unless you think you have some idea of who your customers might be and preferably you've actually talked to them and found out whether they might be interested. So I think that's the first thing, if you find a founder who's just...

[00:34:44] Susannah de Jager:  In love with their own idea.

[00:34:45] George Robinson: Yeah, they've created the company and they just assume that everybody's going to want it, you've got to slightly question what they're doing because they haven't thought through to that next stage. So, the more they can think about it, the better and we often see presentations, where the company has just getting started, it's got no revenue at all and they talk about being in a market that's worth tens of billions of dollars for diagnostics or antibodies or whatever. But they don't make any effort to tell you what the tiny little subsection of that market is and how much of it they think they could potentially occupy.

So I think being realistic about the market's really important because as an investor, your first risk is the technical risk, is it going to work? Are they going to get regulatory approval and so on? But your second risk is, is it going to sell? Is anybody going to buy it? And the more the founders or the CEO can demonstrate that he actually understands that market, that he's not just assuming there's a massive market out there for what he's doing, the more reassurance he can give to his investors and of course, later on, when you're trying to raise money, a series sort of B-C, the company's got revenues. The investors are going to want to see purchase orders, know who the customers are going to be and so on. So you may as well start thinking about that on day one.

[00:36:02] Susannah de Jager: Yeah and I liked again, in the notes you sent across, you had almost a sort of checklist for creating a company that speaks to a lot of the things you just articulated. So IP and if they don't have IP, why not? Technical risk, regulatory pathway, market knowledge, and fit competitors and I liked in particular that you drew out if there are large competitors in the space, how to think about that and I wanted to just focus on that one point for a moment, because you can have a brilliant idea, but if you're up against Samsung or AstraZeneca, it may be that it never sees the light of day, unless they want to buy you out. How do you work out between those two, whether it's worth pursuing if they're up against a big player?

[00:36:44] George Robinson: It's not easy.

[00:36:46] Susannah de Jager: I think your phrase was run for the hills!

[00:36:50] George Robinson: Well, there are certain industries which are just very hard. So one is the display industry. So we come across companies occasionally which are operating in that space, they want to create a new product which might be part of the supply chain of the display industry, or might complement it. So we had a company which made reflective displays using phase change materials, which didn't require any light to illuminate them and it was a wonderful product, but the problem was the only people who were going to be interested in it were Samsung, AU Optronics in Taiwan, E Ink in Taiwan and the more we went along, the more clear it was that there were only about five companies in the world that might be interested and as they were sort of contacted, it just became clear over time that they regarded this as a sort of interesting adjunct to what they were doing, but it wasn't something they needed to have and so that none of them were interested in supporting it and very difficult to forge your own path in an oligopoly, where there's just a few companies who dominate everything

And it's often the case that the new technologies either got to be licensed or bought by existing big player, or you've got to find somebody else who's not in that market who wants to come in and be in that space.

But if they're going to come in at a later stage, they're going to want to see a business that's got revenues and is going somewhere. So they don't want to take on an idea, they want to take on a business that works. So these, it can be really difficult, this commercial risk and you have to, in the end, take a view on, will there be companies out there that would see this as a nice addition to their portfolio?

[00:38:27] Susannah de Jager: But it's quite a binary outcome.

[00:38:29] George Robinson: It's quite a binary outcome and again, it helps if the management of the company has done some work on this and can give you some reassurance that somebody might want it. Now, of course, in the drug discovery space, the big pharma companies, on balance, are happy to outsource most of the early stage R&D to people who are hoping to produce a drug that works and when it gets to its phase one trials and it's starting to look interesting, they might well come in then and share the risk by co-investing or even buy it, but before that you're on your own and it's a very risky space and I think something like five percent of all new drugs that's developed end up getting approved, so you have to be quite brave to play in that space.

Spotlight on Oxford PV: A Promising Solar Technology

[00:39:13] Susannah de Jager: Just to wrap up, I would love to hear if you have a sort of pet favorite company at the moment or a pet favorite sector that you are particularly excited by.

[00:39:22] George Robinson: So probably the most exciting company we have in our portfolio at the moment is Oxford PV and Oxford PV makes very high powered solar cells, which produce about 20 percent more power then the underlying silicon because they put a layer of a perovskite on top, which absorbs light in the blue end of the spectrum and Oxford PV was the first company in this space. There's lots of people around the world researching it and lots of companies around the world who want to produce silicon perovskite tandem cells, but all of the important IP actually belongs here in Oxford and belongs to Oxford PV, so it's very hard for anybody else to manufacture this and sell it globally without getting a license from them and they are developing their own product and in the first instance they're targeting specialty products which are very high value added and in particular the space industry. So it's not yet a done deal and it's not certain but there's a reasonable chance that we'll find Oxford PV solar panels orbiting the earth over the next year or two and becoming a big part of the supply chain to the space industry. But that's just the start. They can also produce solar panels that look and feel exactly the same like any existing solar panel, they just produce 20 percent more power and within a few years, hopefully, they will be a big part of the industry.

[00:40:45] Susannah de Jager: Amazing. That sounds very exciting.

Conclusion and Farewell

[00:40:48] Susannah de Jager: Well, George, thank you so much, I could have gone on and asked you about every company, but I think this has been a really good whistle stop tour of what you look for and how you identify really interesting ideas. So thank you.

[00:41:01] George Robinson: It's a pleasure. Thank you very much for having me.

[00:41:03] Susannah de Jager: Thanks for listening to this episode of Oxford+, presented by me, Susannah de Jager.

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