Oxford technology where last-minute needn’t mean second-best

For 36 years now, founder Lucius Cary and the team at Oxford Technology Management have been helping generations of original thinkers to push the boundaries of science and technology. Their unusual blend of commercial know-how combined with a sympathetic understanding of scientific processes has delivered more than 150 start-ups since 1983.

Human nature being what it is, many investors wait until near the end of the tax year before thinking about making tax-efficient investments in order to reduce their tax bills. Every year for the last 5 years Oxford Technology has been approached by investors in March saying “I have now worked out my tax bill and would you be able to invest to reduce my tax bill and give me a spread of investments?” The answer is always yes. We have invested up to £500,000 in 5-6 EIS opportunities for individual investors at very short notice.

This year we thought we would be more proactive and create the Oxford Technology Last Minute 2020 EIS Fund. We could accept up to £11m of investment and invest this amount in EIS investments before 5 April 2020 in companies which we know well and in which we are already investing from one of our existing funds. We will be able to accept applications until 22 March.

The companies for investment will include some of the following:

Combat Medical manufactures devices for the treatment of bladder cancers. The standard treatment for bladder cancer results in up to 78% recurrence of tumours which then require increasingly drastic surgery. Combat’s treatment reduces recurrence rates by up to 4 times. Oxford Technology believes the value will increase dramatically with new evidence from the clinical trials and when they are able to access the US market. Combat’s treatment has now been used more than 40,000 times in 30 countries. It is no longer a start-up.

Expend is an award-winning expense management platform and prepaid Mastercard® that provides businesses with easy, fast and flexible expenses automation. Several large accountancy firms now recommend Expend to their customers. Several strategic partnership talks are taking place with the potential for millions of new users. Sales are now growing fast, at around 10% per month.

Bioarchitech is developing a novel virus to kill cancer cells. The CEO, Dr Geoff Hale, has an international reputation in therapeutic immunology. Bioarchitech is raising a Series A round to fund trials.

Atelerix has a gel which allows cells to be shipped without being frozen. Cryopreservation is expensive, time-sensitive and damaging to the cells. Recent testing showed Atelerix will preserve T-cells for at least 10 days while exceeding viability levels set by the FDA. Atelerix may enable the development of drugs, easier administration of stem cell therapies, and better handling of pathology samples. Atelerix has achieved its first sales and is growing.

Active Needle Technology adds an ultrasound drive to a needle, so the amount of force required to insert the needle is much reduced, resulting in less pain upon insertion and less risk of overshoot. The first product for Core Needle Biopsy, which deflects less and so more accurately collects the correct tissue, is undergoing CE marking. The second product under development is for tattooing with less trauma

Oxford Technology invests in high risk, high reward science start-ups near Oxford and we have been doing this since 1983. Our twelfth fund, OT(S)EIS, started in 2012 and remains open for investment. It takes advantage of the SEIS and EIS schemes, which are ideally suited to this activity. OT(S)EIS has now made investments in 40 science start-ups. Three of these have failed, leaving 37 active companies, some of which are now growing strongly with sales in the US and China, as well as in Europe.

In every case, the initial investment was an SEIS investment, made right at the start when the risks were at their highest. Typically, the companies consisted of just the one or two founders at the start and often we were the only investor to begin with. The largest today has 94 employees. Almost all the investments are within an hour’s drive and this enables us to get actively involved. We aim to have frequent management meetings rather than formal quarterly board meetings. We get actively involved to help set the pricing and sales strategy and may visit initial customers. The founders may be awardwinning scientists, but they may not have negotiated a sales agreement before. Having been actively involved with more than 150 start-ups since 1983, we have unrivalled experience in this, and if we are not able to solve a problem ourselves, we often know someone who can.

As our investee companies grow, they often need more capital. Our OT(S)EIS fund is structured in such a way that we can lead the fundraising and provide some of this follow-on capital from the fund.

Lightpoint Medical provides a good example. Lightpoint has developed a technology which enables surgeons to see whether tissue is cancerous or healthy during an operation. The cancerous tissue shows up as red on the special camera. In one case the founder, himself a doctor, was with a surgeon in the operating theatre for a prostate operation which was being done by keyhole surgery, but not using Lightpoint technology. The camera revealed a growth on the nerve bundle. “Now I have to play God.” said the surgeon, “If that growth is benign, I can leave it. But if it is cancerous, I should cut it out. But if I cut it out, that will result in serious adverse consequences for the patient, probably including incontinence and no more erections. At the moment I have to guess, but your technology would be able to tell me if it is cancerous or not.” It is not hard to understand why surgeons the world over are keen to use Lightpoint technology in their operations. Lightpoint is now in use in the UK, Holland, Germany and the US.

We were the first external investor in this excellent company when we made an SEIS investment of £75,000 in June 2013. Then we were able to make a follow-on EIS investment of £75,000 in March 2014 at a significantly higher share price. The fact that we were investing ourselves in a company which we knew well by this time, having had regular meetings with the founder during the intervening months was encouraging to other investors and more than £1m was raised in this round. We have continued to support this company, our most recent investment being of another £27,000 in March 2019. Naturally, if a company is not going well, then we do not make follow-on investments. There is never any point in making bad investments for the sake of it.

Lightpoint is currently raising £5m of which it has already raised £2.4m and we would be able to invest some of any money subscribed to the OT Last Minute Fund in Lightpoint. All the documentation is ready and we know the company well. Of course, some risk remains. But the risks are now a hundred-fold less than at the start when Lightpoint was an idea with no product and no sales.

The 5 or 6 investments will be selected from our existing portfolio. We cannot be precise about which companies will be included today, and exactly how the investment will be split between them. If one of these companies raises all the capital it seeks soon, the Oxford Technology Last Minute Fund may not be able to invest. Events like these are beyond our control.

We will be able to provide investors with a portfolio of 5 or 6 EIS investments which are at the high risk/high reward end of the investment spectrum, but which are now a good deal less risky than when our original SEIS investment was made, a few years ago, and which was almost always at a time before there were any sales, let alone profits.

Lupe Technology is about to go into production with what it believes to be the best vacuum cleaner in the world. More than 1,700 units have already been sold via a Kickstarter campaign.

Oxwash has opened its first laundry in Oxford, believed to be the most energy efficient and greenest laundry on the planet. The founder was previously working on life support systems for living on Mars for NASA. Washing is at room temperature. The cleaning agent is Ozone, generated on site. Water is recycled. Delivery and collection is by electric three wheeler bike. All microplastics are filtered out so they don’t get discharged to the ocean. One of the founders of Twitter has just invested. The plan is to open thousands of units globally.

Animal Dynamics is a spin out from Oxford. The founders are experts on the way birds and insects fly and how fish swim. The aim is to use this knowledge to make better flying machines and more efficient means of propelling ships. Propellers are massively inefficient when compared to what nature can achieve. The company has now got to sales and is growing fast. There is no guarantee that Oxford Technology will make investments into any of these companies, as circumstances change quickly within start-ups. However, the Oxford Technology Last Minute 2020 EIS Fund will make at least 6 more EIS investments in the 2019/20 tax year. The fund will remain open until 22nd March 2020, unless the fund maximum (£11m) is reached.

Details of all these companies can be found by downloading the latest OT(S)EIS quarterly report from www.oxfordtechnology.com

For more information about Oxford Technology click here.

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