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Q&A: Simon Hunt, Chairman of IPSO Ventures

Thursday, March 13, 2008

With its first investment spin-out in the bag, AIM-listed business-backer IPSO Ventures is intent on tying up partnership deals with universities. IPSO’s Chairman, Simon Hunt, told SmallCapNews.co.uk why it’s a strategy that sets it apart from traditional private equity players.

SCN: IPSO backs university spin-outs using Framework Agreements with the universities themselves. Tell us about that business model?

SH: This is a well tried model which has proved to be very successful in the past and which plays to the experience and skills of the IPSO team.

The long term nature of these agreements allows us to build a deep understanding of each individual university and work closely with their academics and Technology Transfer offices, to uncover interesting research projects in which to invest at the same time as providing them with additional pertinent skills.

The IPSO team has an excellent track record in business development; corporate finance; mergers and acquisitions; investment banking; venture capital and management team building.

All our knowledge and skills are used to the benefit of partner universities, as well as the resulting spin out companies.

SCN: You raised you first round of external funding in May 2006 and in March the following year joined the Alternative Investment Market (AIM). What made you decide to take that funding route?

SH: The funding in May 2006 provided IPSO with sufficient initial capital to complete several investments as part of our strategy to grow towards a listing on AIM.

The AIM listing increased IPSO’s credibility and profile amongst universities and provides a mechanism for funding future partnerships.

SCN: What are your general thoughts on the AIM market? And has it been an enjoyable experience for IPSO?

SH: AIM has seen a number of companies listed over the last few years which were perhaps too early stage to benefit from a listing. However, it is very suitable for a company like IPSO with an experienced team and supportive investors.

Our model requires additional rounds of funding around further Framework Agreements to which AIM is particularly suited. Our investors are longer term and understand our strategy. So yes, it has been an enjoyable experience so far.

SCN: The private equity industry’s reputation has been battered recently. Has that presented a problem to you when negotiating with universities?

SH: ISPO’s target is very different from that of private equity (well established, cash generative companies, which can support substantial gearing). So, the media battering directed at that industry has not affected us.

Our potential partner universities recognise that our role and investment activity is very different from that of private equity mainly because we provide a lot more than just investment funding.

We work very closely with our spin out companies from start up through to exit. It is for these reasons that universities see us an appealing option.

SCN: Your agreement with Loughborough University saw its first spin-out deal in the shape of Axilica late last year. Are there plans for further university Framework Agreements in the future?

SH: As announced at the time of the investment, we are very excited about the opportunities for Axilica, which has developed an electronic design automation (EDA) software programme which simplifies and speeds up the process of designing semiconductor chips.

During the initial phases of IPSO’s development we invested a great deal of time building relationships with a significant number of universities and research establishments.

We believe that this was a worthwhile investment in the future development and growth of IPSO and we are confident that we shall progress our plans for additional agreements.

SCN: The market for backing university spin-outs is becoming far more active, with a number of new participants and developments in the last year. How confident are you that you can carry forward your plans in the months and years ahead?

SH: There is a lot of momentum to create businesses from university research both from the Government and from universities. We believe that IPSO is well placed and structured to capitalise on this.

There are a large number of interesting sources of valuable research available to us and we are confident that we can move forward with our strategy.

www.ipsoventures.com