Coffee and Danish with Jens Tholstrup of Oxford Investment Opportunity Network

Now, he heads up OION (pronounced ‘onion’), an acronym for the Oxford Investment Opportunity Network, which was  founded in 1994. It has around 350 individual angel investors and helps fund 30-40 companies each year, many of them local. OION holds regular events where companies have the opportunity to pitch for investments of between £200,000 and £2,000,000. A recent success story is Learning with Experts, which raised £800,000 following a pitch to an OION event in London.  

When asked about the state of investment for Oxfordshire businesses, Tholstrup points to the many successes of Oxfordshire’s world class companies but explains that conventional wisdom says the UK is great at innovation but less good at scaling up successful small companies. Hence, the problem must be a shortage of later-stage capital. This conclusion, he believes, is flawed because once a company gets to the stage where it is eligible for institutional funds, the supply of money becomes widespread and large. 

He feels there’s a perception that early-stage investment is inherently risky, but believes there are a number of things that can mitigate risk in these types of investment. In his view, the chief problem is one of scale: institutional investors don’t want to make investments of less than one to two million, but start-ups don’t always have that sort of funding requirement. So OION occupies the space between family-and-friends bootstrap funding and venture capital and institutional investor organisations. 

On how well current sources of finance match the county’s strategic aspirations, Tholstrup is forthright: “The ambition for Oxfordshire is to be one of the three leading global innovation hubs. But we don’t have an early stage financing network that is commensurate with that ambition.” 

He explains that at a pre-institutional level, funding relies largely on angel investors (high net worth individuals) but warns that their investment appetite can wax and wane. While there is a strong and growing interest in early stage investment, recent political uncertainty has not been helpful. Data from HMRC, using the uptake of Enterprise Investment  Schemes as a proxy, shows there aren’t enough angel investors to fulfill the ambitions of the many budding entrepreneurs. In the 2018 Budget, when the allowance for property-backed deals was removed, the focus for EIS-qualifying investments shifted and is now much more focused on knowledge-intensive or technology businesses.

He points to another part of the challenge: demographics. Often, people are not in a position to become angel investors until their 50s or 60s. By that stage of life, the lengthy cycles of early-stage investments, which often may not provide a return until after subsequent rounds, can be a disincentive. Tholstrup observes that the best investors are those who have had a liquidity event and want to put something back, or younger entrepreneurs who have sold up and are looking for the next opportunity.

Some  issues  are specific to Oxfordshire. Through Oxford University Innovation and Oxford Sciences Innovation there has, in the past few years, been a lot more support for university spin-outs. This has been a big success story. But, he points out, there are dozens of companies not connected with the university that may not want to go through its system because they have not relied on university-funded research, and don’t want to give away equity or IP to the university. There is a tendency to think that because OSI has £600m to invest, any spin-out is automatically catered for. The dynamism of the campuses at Harwell and Culham, the county’s motorsport and games industries are evidence of the energetic, wider ecosystem.

Another challenge lies with the connectedness – or lack thereof – of the local investment ecosystem. While the university is understandably taking care of its own, the investment community does not receive the type of support available in London, where the Greater London Fund has significant sums to disburse for early stage investment. National policy, Tholstrup maintains, tends to regard the golden triangle of Cambridge, London and Oxford as being sorted and directs its funds elsewhere. 

Jens Tholstrup at Venturefest 2019. Pic: Ed Nix

As he points out, establishing angel networks – there have been several initiatives – relies on an underlying level of activity. In any case, he claims, running an angel network is not a shortcut to making money. OION has a small team and works hard to stay at breakeven. This limitation has prevented it from being able to monitor the trajectory of the companies it has helped to get invested, something Tholstrup would like to be able to do. 

Undoubtedly though, the network has made a major contribution to the success of many companies.

The expertise and contacts of the angels is often as of much value to the companies as the funds themselves. “We need to keep adding to the pool of investors,” says Tholstrup. “We have a pretty efficient web interface to enable people to register. We get introductions from our sponsors and, occasionally, from the UK angel network but mostly from word of mouth. 

“Unless we keep renewing, the network atrophies. When an investor arrives, they may make two or three investments right away and then wait – and of course, they may have to wait for a successful exit.”

OION’s investors have benefited substantially from the opportunities and one of the keys to the success has been the willingness to syndicate. Often an investor with experience of a particular sector or technology will take the lead and create the confidence for others to follow, building momentum for a positive outcome. Oxford-based Learning with Experts was a recent example, and there are a set of companies finalising deals with OION’s investors following its recent sessions in September and October. 

So watch this space. While there are some major challenges to growing a productive investor network, there is clearly much happening in Oxfordshire outside the academic and institutional hubs and the power of networking and collaboration cannot be underestimated. After all, Ole & Steen was also founded in the early 1990s, yet didn’t take off until 2008, when two experienced Danish bakers joined forces, scaled up and grew their enterprise to an international group of bakeries. Sweet success indeed. 

About the Author

Antony David

A chemistry graduate, Antony spent most of his career using and then making equipment for the music and broadcast industries. He was managing director of Oxford-based electronics and software company, Solid State Logic.