Capital adventure

David Mott, investment director of Oxford Capital Partners, is keen to point out that this means Oxford is second only to Boston in the scale of the sector.

Formed in 1999 by the father and son team of Edward and David Mott, Oxford Capital Partners (OCP) deliberately located in Oxford to be at the very heart of the action.

While there are many business angels in the area, OCP is one of only two venture capital (VC) firms in Oxford - in contrast with Cambridge, which has attracted many of the big-name players.

Mr Mott said: "Nobody knows why they went to Cambridge and not here, but make no mistake, Oxford is part of any serious venture capitalist's investment strategy, regardless of their location."

OCP formed at the height of the boom in biotech, whose bubble burst two years down the line. But this did not stop OCP from investing.

"Many of the companies had a hard time and returns became smaller, but we helped them to survive as better businesses.

"The key to successful investment is identifying the right companies, investing and obtaining returns as fast as possible. Our returns are in the top 10 per cent in Europe. And by spreading our exits, we even out the cash flows and build a successful portfolio."

The OCP strategy is one of bespoke investment. The company is happy to be a sole investor, but will attract and bring in co-investors, be that private equity or institutions, to match an investee's aspirations.

Syndication with other investors offers advantages to OCP and its companies alike. For OCP, it spreads the investment risk - for the company, it means avoiding total reliance on any one investor.

Investment is very much an international business and syndicate members are frequently from overseas.

Mr Mott regularly hosts delegations from Japan, Singapore, India and even Russia.

One fall-out from the loss of confidence in biotech in the early 2000s has been the difficulty of attracting funds for drug discovery.

From idea to lead compound can be five to seven years and high risk - many venture capitalists are looking for lower risk and faster returns.

Dr Rebecca Todd, OCP's investment associate on life sciences and healthcare, said: "Drug discovery needs large funds over long periods.

"Our funds tend to be smaller and our investment time window shorter. The firms that will offer monies to drug discovery have larger funds and longer windows."

While funding may be difficult, there is no shortage of ideas, or would-be entrepreneurs.

This new breed has learned not to put all its eggs in one basket, pursuing a number of leads simultaneously, bringing products to market quickly to generate income and mixing contract research with their own projects, to offset cash burn.

While OCP receives many approaches during the year, it networks strongly too, keeping in touch with key entrepreneurs and local organisations like the Oxfordshire Bioscience Network (OBN) and the Oxford Investment Opportunity Network (OION).

Potential Mr Mott speaks highly of OBN's recent Biotrinity event and its quality guest list. He is also a fan of Oxfordshire's annual science and technology fair, Venturefest, and feels it still has untapped potential.

OCP looks to invest in a company at what Mr Mott terms a point of inflection'.

This could be at any stage in an organisation's life cycle, but tends to be at the more advanced phase, when perhaps there is a first generation product but not yet any sales. A typical investment is about £1m.

Dr Todd said: "Better a company that has spotted a gap in the market and created a product to fill it than one that has invented something and is casting around trying to work out how to sell it."

Strong intellectual property is very important, as is the management team and knowledge of how to commercialise products.

Pivotal is alignment of interests, so that investors, directors, managers and staff are all pulling in the same direction. For most companies, an OCP staff member sits on the board.

The OCP model is different from many other venture capital firms. Usually, VC staff are analysts with no particular sector knowledge.

OCP is a science and technology investor and deliberately employs a team of scientists and entrepreneur managers from different sectors and backgrounds - they are practitioners.

Their backgrounds and experience mean they feed off one another. The investment team is multi-disciplinary, bringing both different perspectives and synergy.

OCP is also hands-on, working alongside companies. That is a key factor in their success.

Most VCs will raise a fund, invest it, then raise another. OCP raises a new fund every year.

It raises gateway funds from high net worth individuals for investment in companies that qualify for Enterprise Investment Scheme (EIS) status.

The scheme offers tax incentives to investors and OCP is the biggest manager of EIS funds in the UK.

As well as being a strong supporter of the Oxfordshire economy, OCP is active further afield, with many investments in Europe and a joint venture in Qatar, which it perceives as a growth area for science.

From minnow to big fish in just eight years. Truly a capital venture.

n Contact: David Mott, 01865 860760, dmott@oxcp.com