Parkwalk Knowledge Intensive EIS Fund III

Parkwalk Advisors (“Parkwalk”) is the UK's most active investor in university spinouts. It has strong ties to the UK’s leading universities, managing funds in conjunction with the tech-transfer departments of the Universities of Cambridge, Oxford, Imperial College, and Bristol. These partnerships could provide investors with unique access to the spinout sector.

The Parkwalk Knowledge Intensive EIS Fund is managed by the same team as its stablemate the Parkwalk Opportunities EIS Fund. It follows broadly the same investment strategy, although it will invest in at least 10 companies (compared to at least eight).

Across all its funds Parkwalk has more than £450 million of assets under management and benefits from being part of IP Group plc, a FTSE 250-listed asset manager focused on intellectual property commercialisation. 

To date, Parkwalk has invested in 169 companies (November 2023) and achieved exit multiples of up to 16x from its 27 full exits – 17 of which were profitable. Past performance is not a guide to the future, there have also been write-offs. 

• Tax certificates expected 12–18 months after the closing date
  
• Target return is unspecified 
• Estimated holding period of four to eight years, not guaranteed
• Target portfolio size of at least 10 companies 

The manager

Parkwalk Advisors is a specialist university spinout investor with more than £450 million in assets under management. It was founded in 2009 and in 2017 acquired by IP Group, a leading intellectual property commercialisation company with net assets of £1.3 billion (June 2023) and a market capitalisation of c.£450 million (October 2023). IP Group also acquired Touchstone Innovations, which was set up to invest in promising technology companies spun out of Imperial College and University College London. 

The combined group gives Parkwalk a strong hand when accessing deal flow and negotiating terms, as well as providing a possible exit route for investors. 

The investment committee consists of nine investment professionals including founders Moray Wright and Alastair Kilgour. The team has experience across banking, fund management, start-ups, venture capital, and drug development.

Before your subscription is invested, the cash will be held by the custodian, Mainspring Nominees Limited. After investment, shares will be held by the nominee, MNL (Parkwalk) Nominees Limited. 

Investment strategy

Parkwalk’s niche is UK university spinouts. It invests in technology or intellectual property developed by UK universities, helping inventors and the universities themselves to commercialise their research.

Parkwalk’s portfolio companies include spinouts from 20 universities across the UK. In addition to the Opportunities EIS fund, Parkwalk manages funds in conjunction with the technology transfer departments of the University of Cambridge, the University of Oxford, Imperial College and the University of Bristol. Parkwalk typically co-invests alongside large investors, including (in alphabetical order) Amadeus, Cambridge Innovation Capital, Invesco Perpetual, Oxford Sciences Innovation and Schroders.

Parkwalk generally first invests in a company when its technology has been proven, but products have yet to be sold, and well before commercialisation. A typical initial investment is £1 million to £1.5 million for a 15–20% stake in a business. Later investments may be £2 million to £20 million, usually as part of a larger funding round. 

Investee companies will typically have deeply embedded IP and are given the freedom to operate. Parkwalk will usually seek experienced, relevant management with the skills to commercialise the product. It will also invest in later-stage companies, perhaps just before an AIM listing.

While the fund's target return is unspecified, Parkwalk seeks companies it believes could potentially deliver five times the original investment – not guaranteed.

Portfolio

Each investor is expected to have a portfolio of at least 10 early-stage EIS-qualifying technology companies, with a mix of technologies and stages of maturity (from Series A to Series C), although this is not guaranteed. 

Since launch, Parkwalk has invested in 169 companies across its funds. The current portfolio is weighted towards Digital Health & MedTech, AI, Big Data & Software and Life Sciences. 

The two previous Parkwalk Knowledge Intensive Funds have invested in 20 companies to date (November 2023), all co-investments with the Opportunities Fund.

Top 10 sector breakdown by investment cost (%) 

Below are portfolio company examples from previous iterations of Parkwalk’s EIS funds. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor's portfolio. 

Bramble Energy – spinout from UCL and Imperial College London

Bramble Energy was founded in 2015 by UCL Engineers Dr Tom Mason and Dr Vidal Bharath. 

The company has designed and built a new hydrogen fuel cell. Its Printed Circuit Board Fuel Cell (PCBFC) requires fewer components than a traditional fuel cell and draws on established manufacturing supply chains. That means PCBFCs are easier to manufacture at scale and cheaper to the end user, making hydrogen a viable alternative fuel. 

The technology could be particularly useful in areas like light commercial vehicles fleets, where maintaining high levels of utilisation is key, making long charging periods for electric vehicles impractical. However, the company is also looking to expand into the portable energy sector, where batteries have struggled to challenge the traditional dominance of diesel generators for long-term deployments.

The company has been commissioned to apply its technologies in various settings, including replacing diesel engines in boats and integrating fuel cells into vans. These projects delivered the company’s first revenues and saw it feature in the Deloitte Fast 50 in 2023 – listing the UK’s fastest growing businesses.

Parkwalk first invested in the business in 2018, following on in subsequent rounds, the most recent of which saw the firm raise £40 million from a group of investors that included Parkwalk parent IP Group, BGF and HydrogenOne Capital. 

Enhanc3D Genomics – spinout from the Cambridge Babraham Institute 

Enhanc3D Genomics spun out from the laboratory of Florida State University professor Peter Fraser – although the company, and co-founder Dr Stefan Schoenfelder, Group Leader at the Babraham Institute, are based in Cambridge. 

Enhanc3D Genomics’ technology uses molecular biology and machine learning to map the 3D structure of the human genome. The technology targets “non-coding” DNA – a section of the genome which regulates gene expression. Historically, it has been difficult to link these non-coding elements to specific genes because they are often located far apart. However, Enhance3D can capture these previously unseen relationships by using its high-resolution models to interpret the genome’s complex folding patterns. 

The platform is expected to have a wide range of potential applications. However, Enhanc3D will initially focus on identifying novel biomarkers to aid diagnosis and treatment targeting for cancer, ageing and autoimmune conditions. 

The Parkwalk Opportunities and Knowledge Intensive Funds invested in August 2022 as part of a £10 million round.

YASA – spinout from Oxford University (example of previous exit)

YASA develops revolutionary compact, lightweight and powerful electric motors and controllers. The products enable vehicle hybridisation and electrification, especially where there is limited powertrain space. 

The company supplies custom and off-the-shelf e-motors and controllers to automotive customers from its Oxford headquarters. YASA is a Ferrari Strategic Technology Partner and has supplied a custom electric motor for Ferrari’s first hybrid vehicle, the SF90 Stradale and well as the 296 GTB. YASA is also entering the aviation market and has partnered with Rolls Royce to break the speed record for electric flight.

Parkwalk first invested in YASA through a £1.8 million Series A funding round in August 2012 at a £5.7 million pre-money valuation. Since then, Parkwalk has supported the business through further funding rounds, most recently in August 2019, at a pre-money valuation of £72.5 million. 

In July 2021 Parkwalk announced that YASA had been acquired by Mercedes-Benz. The sale delivered returns of between 2x to 6x, depending on the round, and returned £45m to Parkwalk investors. Past performance is not a guide to the future.

Undo – previous failure

Undo Ltd – a spin-out from the University of Cambridge – developed tools used by engineering teams to debug software programs. The company had several blue-chip clients and was extending its product to different programming languages. 

However, sales conversion and product development were slower than anticipated and an extension funding round was undertaken in 2019, followed during the pandemic by a government Future Fund convertible loan investment. The company made progress developing its main product and grew revenues by over 30% per annum but required further funding in 2021 which it was unable to secure. 

A rescue buyout was finalised in August 2022, with the value of Parkwalk’s stake written off.

Performance

Parkwalk EIS funds have achieved 27 full exits with multiples ranging from 0.1x to 16x. Of these, 17 have been profitable. There have also been eight partial exits and 24 write-offs. Past performance is not a guide to the future. The positive exits have helped drive a strong track record of returning cash to investors.

The first chart below shows the average performance of the total subscribed into the Parkwalk Opportunities Funds each in each full tax year from 2013/14 (or from when the current strategy was adopted if later). The second shows the performance of the two previous Parkwalk Knowledge Intensive Funds.

The charts are based on the latest valuations provided by the manager, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.

Performance per £100 invested in each tax year – Parkwalk Opportunities Funds

Performance per £100 invested in each tax year – Parkwalk Knowledge Intensive EIS Funds

Risks – important

This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice. 

EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.

There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an exit for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.

To claim tax relief, for a knowledge intensive EIS fund you will need an EIS5 certificate. Certificates can be issued once the fund has invested 90% of its capital, which it is required to do within 24 months of the close. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks. 

Charges

A summary of the main charges and savings is shown below. Some of these will be payable by the investor, whilst others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.

Our view

The Parkwalk EIS funds have a clear investment strategy in a defined area: university spinouts. Its investments stretch from artificial intelligence for autonomous vehicles, to the world’s most efficient solar cells, to electric motors being used by Ferrari. 

The investment team has plenty of experience in this field, and Parkwalk’s standing in the industry could allow access to opportunities other managers would be hard-pressed to access. Investors have historically been well rewarded for supporting this high-risk area of the market, although past performance is not a guide to the future.

Parkwalk’s links to the UK’s leading universities and large institutional investors, such as parent company IP Group plc, set it apart from many other EIS funds. These could provide investee companies with access to the pools of liquidity needed to commercialise their intellectual property, and potentially provide EIS investors with an additional route to exit although this is not guaranteed. 

Compared with the Parkwalk Opportunities EIS Fund, the EIS KI Fund provides investors with greater clarity on the timing of income tax relief, a single tax certificate, and greater diversification (it targets a minimum of 10 investee companies, compared to eight in the Opportunities EIS fund).

In our view, this is a high-quality EIS fund within an exciting and hard-to-reach sector. However, the focus on intellectual property means these investments are typically very early stage and high risk.

Wealth Club aims to make it easier for experienced investors to find information on – and apply for – investments. You should base your investment decision on the offer documents and ensure you have read and fully understand them before investing. The information on this webpage is a marketing communication. It is not advice or a personal or research recommendation to buy any of the investments mentioned, nor does it include any opinion as to the present or future value or price of these investments. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.