Mark White, BA, MBA, is Midven’s investment director and is an investment committee member of the UK Innovation & Science Seed Fund. Mark has more than twenty years of experience in investment with extensive experience in UK investment banking and emerging markets.
Q: How did you get into venture capital?
I was previously managing a £20m emerging markets fund in South Africa. I decided to come back to the UK in 2001, but this was a time when everything, including private equity, was contracting. I had two options – a job in a pension team, which would be safe and well paid, but not necessarily exciting, and an offer to run the investment side of NESTA, a UK-based innovation charity. NESTA at the time was frankly chaotic and all too often hampered by internal politics, but it was a challenge I found difficult to resist. Sorting it out turned out to be real fun – I recruited a team of very bright and energetic people, including Andrew Muir (now my colleague on UKI2S and Stephenson Funds), and we managed to turn NESTA into the most active technology seed investor in the UK at the time. This got me hooked on science and engineering early-stage investing.
Q: How did you come to join UK Innovation & Science Seed Fund?
NESTA went through a full scale restructuring at the hands of an incoming CEO – the result was that pretty much the whole of the team I had put together was out and is now scattered around the VC world. Andrew had already left the NESTA team about a year earlier to join Midven, and he contacted me to see if I was interested in joining up with him again.
Q: What you look for in an investment?
I look for range and depth in a potential investment target, as it’s important to remember that the initial application isn’t always the one that succeeds – I have worked on around a hundred deals and I would guess less than a fifth of those ended up exactly where they expected to in terms of technology application and target market. It is also critical to allow for founder optimism – as a very rough guideline it will take a company three times as long as the founders think to succeed and will cost three times as much as they originally project. So the original proposition does need to be strong enough to withstand a lot of delays and dents in the business plan.
So I favour companies that start with a technology that can be used for more than one application and, equally importantly, the makings of a team that will be adaptable. The business model is very often the thing that needs to be got right – I’ve seen several interesting technologies fail simply because the way in which potential clients wanted to buy was not one that the management could quickly adapt to. It may be financial (e.g. a preference for buying the solution as a service rather than buying the equipment as a capital item) or it may be more of a cultural thing and a reluctance to embrace new technologies. Whatever the reason, adoption cycles are always longer than the champions of the technology think, and as an investor you need to be prepared for this.
For example, The Electrospinning Company, which is based at the Rutherford Appleton Laboratory in Oxfordshire, UK, designs, develops and manufactures nanofibre-based products that are being incorporated into medical devices to promote cell growth and so enhance the healing process. When we initially invested in the company, it had more of a product focus and at various stages it has tried to develop both electrospinning equipment and nanofibre-based products that it could manufacture in some volume. We have recently helped refocus it on what its customers actually want, which is its ability to help them develop novel solutions and then to manufacture low volume (but high value) semi-bespoke materials highly consistently. This is its second or third attempt to establish itself as a high growth company, but we have believed throughout that high quality manufacture of specialist performance nanofibres has a place. Let’s hope we have finally got the positioning right!
Q: What are the current trends in investing?
Over the past few years we have seen a shift away from funds and an increase in angel investment, supported by government’s tax breaks such as the Enterprise Investment Scheme (EIS) and Seed Enterprise Investment Scheme (SEIS). This process has recently been accelerated by the arrival of crowd-funding platforms such as Syndicate Room, which we see pretty positively.
Elsewhere we have seen increasing amounts raised by listed (or soon-to-be-listed) ventures such as Oxford Sciences Innovation, Cambridge Innovation Capital, Mercia Fund Management and of course Neil Woodford’s Patient Capital. We obviously welcome the increasing levels of capital for the sector but are concerned that there is a very mixed picture developing across the UK with much of the available capital concentrated on a few locations.
Q: And the Brexit question. How do you think it might affect early-stage companies?
Aside from the obvious possible macro-economic consequences from an economic downturn and increased difficulties accessing export markets, I think the two things that concern me are the impact on talent recruitment and the pipeline of innovative science. The researchers I have spoken to are very concerned about the likely impact on pan-European collaboration and, in particular, the likelihood that UK universities will no longer be eligible to lead such collaborations where EC funding is heavily involved. This is an area in which UK universities have scored highly in the past and a downturn in collaborative science and UK leadership would clearly be a backwards step for our long-term position and the flow of commercially viable technologies in a few years’ time.
A more immediate worry relates to the UK’s ability to attract the science and technology skills we need. Almost all of our companies employ from a wide pool of nationalities and would really struggle if the UK becomes more of a difficult work destination. Last year we estimate that our companies’ workforce grew at 32% across the portfolio. That is an exceptionally high rate of expansion and can only be satisfied if there is a wide and deep pool of high technology skills available.