Where can we find the trailblazing deep tech entrepreneurs of tomorrow? Many of them will emerge from the world’s top universities, armed not only with doctorates, 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 postgraduate students. If, of course, they can identify founders whose ideas have commercial potential. Tthe creator fund thinks it has found an effective way to do just that.
Earlier this week, the UK’s early-stage VC fund announced plans to expand its student-focused investment activities across Europe, from the Estonian university town of Tartu in the east to Madrid in the west. There’s nothing unusual about that. You would think. But in a European context, The Creator Fund does something different. In an effort to spot entrepreneurial talent at the PhD level, it trains other postgraduates to think and act like VCs in terms of sourcing prospects and analyzing deals.
So what does that mean in practice? Well, Jamie MacFarlane got the idea for The Creator Fund while studying for an MBA at Stanford. “While I was there, I saw a class of US venture capital funds investing in university research. I thought that was a groundbreaking 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 UK ecosystem. “We spent three years developing this model in the UK,” he says. That basically meant creating teams that could work within universities to find deals. The aim was to look beyond the usual suspect universities like Cambridge and broaden the net to a wide range of institutions.
Building a team of PhD-level “student VCs” was critical to the plan. These were the people who would be on the ground floor, mingling with other graduate students in dining rooms, labs, and bars. Once elected, they were schooled in the VC mindset. “We put everyone through a ten-point program,” says MacFarlane.
And as he sees it, the selected people have already acquired all the really difficult knowledge. After all, they are trained to a high level in their chosen field. Learning about the secrets of the investment world – business appraisal, cap tables, etc. – is relatively easy. In addition, the PhD students are centrally supported by the Creator Fund Team.
To date, the fund has created 27 investments in sectors such as AI, Life sciences and deep tech. Of these, there are two in Europe, viz 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 transfer.
Creator Fund, now officially launched in Europe, is active on 32 university campuses and aims – it says – to provide funding to a new generation of deep tech 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 dedicated founders. “The biggest mistake European investors often make is to focus on the technology and then bring in an outside management team,” says MacFarlane. “What we’re looking for is hugely motivated founding teams.”
Is that a bit too much to ask? A PhD candidate 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 skill set.
MacFarlane says the idea that researchers aren’t commercially minded is kind of a myth. Many, he says, have business ambition in their DNA. “Some return to college after a few years in the industry because they see a PhD as a means of starting a business,” he says.
Spin-outs and student startups
MacFarlane likes to distinguish between spin-outs and student startups. Spin-outs usually 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 are students and the university does not have the same claim to the IP. It is indeed possible that there is no IP to negotiate. “We have 27 companies and 55% don’t have a university IP,” says McFarlane.
But what about deadlines? One of the risks of deep tech is the time it takes to commercialize research. MacFarlane says that’s not always the case. He cites Turing Biosystems, which already has significant revenue from partnering with the pharmaceutical industry.
The truth is that some studies can be commercialized quickly, while others are a long-term bet. The Creator Fund strives for a mixed portfolio with different horizons.
So what is the outlook for college-level investment? Well, it must be recognized that the commercialization of research is crucial to the development of deep tech and The Creator Fund is not alone in this field. For example, the Plug and Play Tech Centerinvests in start-up universities, not only in the US where it is based, but also in Europe.
In turn, MacFarlane sees universities in the UK and Europe as a rich source of new and pioneering companies.