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Parkwalk sees merit in spin-outs

Venture capital and enterprise investment scheme specialist Parkwalk Advisors has established an EIS fund which invests in technological innovation and intellectual property through university spin-out companies.

The Parkwalk Twenty12 fund follows the same investment strategy as its UK technology fund III, an EIS fund aimed at direct investors. The only real difference between the two EIS funds is that the charging structure of the Twenty12 fund caters for adviser commission while the UK technology fund III does not.

Parkwalk’s investment strategy revolves around unquoted companies that originate from UK university research departments. These unquoted companies will have developed technology or intellectual property that is useful in a commercial sense. One example is Xeros, which has developed a virtually waterless laundry system that provides cost benefits as well as environmental benefits.

Parkwalk, which was founded three years ago, says university spin-outs are not necessarily at an early stage as years can be spent developing a project within a research department before it even appears on Parkwalk’s radar. During this time the project will have gone through a filter process within the university, so that flaws will have been identified and ironed out. Parkwalk believes that this filter process makes the companies it invests in lower risk than those that come to the attention of generalist EIS funds.

British universities have historically come up with successful concepts but have not been so good at commercialising them. As a result, many universities have set up technology transfer departments and companies such as IP Group and Imperial Innovations have been set up to invest in, structure and manage university spin-out companies.

Investing in such a specific part of the unquoted technology sector may not appeal to all EIS investors and some may feel that a more generalist approach best diversifies risk. However, this narrow focus drives the fund’s ability to potentially deliver higher returns.

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