Successful exits and investment risks, according to Oxford Technology’s Director Andrea Mica – IFA Magazine

In this exclusive interview with GBI Magazine, Andrea Mica provides us with an insight into Oxford Technology’s role within the investment market.

Mica discusses Oxford Technology’s journey to become a key player in the industry, outlining their successful exits and explaining how their strategy has developed over the last decade.

He also reveals the risks associated with investing and explains how advisors can invest their clients’ money.

Q: Tell us a little bit about Oxford Technology’s background, and the experience you’ve got in this space.

Oxford Technology has been going since 1983. Lucius set it up as a response to what he saw, which was a lack of people interested in investing in science and technology. I’ve been doing this separately since 2000, and with Lucius since 2013.

The key thing is helping science and technology-based companies right from the start. We recently spoke to a company that’s designing a new prosthetic hand, who said they’d never come across an investor who would ask questions about the engineering of their product, and how they might improve it. That’s important to us because if a product doesn’t work well, it’s not going to sell. You should be interested in the things you invest in.

It always seems odd to me that some other investors at the stage that we are investing in don’t think about how the science and technology impacts the overall market. We’ve always stuck with early-stage investing, we’ve built up our experience there, and we also see it partly as a duty to provide that experience into the early-stage market.

We’ve seen hundreds of investment opportunities a year that we look into in some detail. We look in depth at around 20 every year, then invest in about six. We learn from the ones we don’t invest in too, and hopefully, we manage to exchange little bits of wisdom with them on the way.

Q: Does that experience help you fine-tune the selection process and help you build your criteria?

There were several companies early on that we invested in, with technically excellent products, that just never got any traction. Over the years, we have become much more sensitive to the market and commercial dynamics. Does everyone in the decision chain benefit from this, or is there someone who could block it and lose out enormously? If there is, that’s a red flag, and it will lead us to investigate that very carefully, earlier rather than later, to avoid making the same mistake again.

Q: What can you tell us about your exits and future evaluations?

We’ve had many different types of exits. We’ve had some exits where companies we invested in have attracted big investors who wanted more of the company than the company was willing to offer. In that case, we’ve made some secondary exits.

In those cases, we tend to offer the opportunity to our investors to decide whether or not they want to give up their shares, because they may not need any cash. They may be big supporters of the company and believe there’s another big upside. Or they might say, “No, I’lI take some cash now”, and then they may get an eightfold return, or even a tenfold return, more if you take into account the effect of SEIS and EIS.

We’ve had a couple of very good exits, one in particular where we invested very early in that company. We put in the money to do the first experiments to show that it would work and turn into a medical product. That was snapped up. The total value for that deal, if it hits all the milestones, will be £400 million. So far the company has had £30 million plus shares on an investment of less than £5m. Already, our early investors have had more than a tenfold return on their money and that could easily go up into the hundreds of fold.

Q: How many exits have Oxford Technology successfully delivered?

We’ve had six exits so far. A mix of secondaries and primary exits. That’s since we started in 2013. They’re now starting to mature and they’re starting to come out. We expect that to go up.

There’s very good value to be had, but it takes time if you’re investing in things right from the very beginning. The value of some companies shot up very quickly, but there hasn’t been an opportunity to exit. Companies can indeed go down as well as up, but we can see that quite a lot of companies that we invested in during the early years now looks like we’re getting to the point where we might exit. Bigger fish are circling, which is a good thing.

Q: Where does the risk lie?

We invest in science and technology, which a lot of people worry about because it’s new and it’s novel. In reality, the risk rarely sits in the science. Sometimes it does, when people are doing new things and discover entirely new science while developing their product.

Sometimes science means that you have to take a detour. Quite often, we’ve had risk come from things like Covid, which affected exits as it caused a shortage of electronic components. That kind of risk can hit all kinds of companies, but the science is not where the risk lies.

The SEIS gives you some cashback at the beginning, and the ability to write off losses against income so that you get quite a lot of money back when it goes wrong. This allows you to make use of the upside of science, where if someone has a 20-year exclusivity given by a patent to do something, you can do very well financially after that.

We think it’s a great scheme, and it should be used to good effect by supporting things that can return very big numbers, even if they seem risky to those who aren’t in the know.

Q: Why should advisors be getting in touch with Oxford Technology?

We get results. We’ve guided some of the companies away from trying to chase big intermediate rounds that bring in conditions that are painful for their companies. The previous results don’t always reflect what’s going to happen in the future.

With all the appropriate warnings in place, we’ve got results. There’s a reason for those results. We aim to make successful companies and get money back to investors.

Q: How can advisors invest their clients’ money?

We produce a quarterly report so people can see the things that we invest in. Our investment papers are available online, so people can download them, send us the forms and send the money, and we can start investing at any time.

We’ve got two funds. The first is the SEIS fund, which is SEIS and EIS, and is spread over three years. Our experience tells us that if we don’t combine the two, we end up creating some interesting companies that don’t get supported and go to the wall.

We also have the EIS fund for people who would like to invest in companies that we’ve already invested in. We can take the money and can invest their money by the end of the tax year. With 50 companies, there’s always someone who’s looking for money. We pick the ones that will give the best returns for the investors.

To find out more about Oxford Technology’s EIS fund, access your complimentary of the EIS Annual Report 2024 here

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