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Fusion IP plans to double university spin-offs

Published: 17:01 16 Apr 2013 AEST

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Fusion IP (LON:FIP), the firm that commercialises hi-tech ideas spun out of Britain’s universities, has just released interim figures, but they already feel like yesterday’s news.

The report covers the six months until the end of January, but since then Fusion has moved on, having raised £20mln in new funds and begun new partnerships with Nottingham and Swansea universities.

The company is now aiming to ramp up the number of companies it creates with its four university partners dramatically over the remainder of the year.

“The £20mln will allow us to fund the current portfolio but will also allow us to fund spin outs from our new university partners and current university partners, so we should see quite a significant increase in the number of companies we are spinning out,” says chief executive David Baynes.

“But we'll also probably see an increase in the amount of money we are putting into our current portfolio because, clearly, we are better financially armed.”

In the past, the company has tried to spin out two companies a year but now aims to double this to four, if not more.

“In the short term it may be more than [four],” says Baynes, “because when we first engage our university partners they tend to have a backlog of projects - so it's exciting times”.

With a portfolio that now includes 23 firms, speculation is building that it could soon be time to sell some off, with the potential for some very significant returns.

Last year Fusion sold SIMCYP for £6.4mln on an investment of just £20,000.

The broker Cenkos has been running the rule over several companies in Fusion’s portfolio and thinks the firm could cash out on a number of the projects in the next 18-to-36 months, either through stock market flotations or trade sales.

Baynes says this conclusion is a reasonable one.

However, he adds that time horizon means plans are not yet under way to sell as he would anticipate wrapping any deals up “rather more quickly than that”.

“We have about 10 [companies] in the strongest grouping and I think what we've seen is …they’re getting stronger and getting more mature and certainly in the sort of timescales you're talking about it is realistic to expect floats and additional sales,” he told Proactive Investors.

He points out there is a very practical reason for this.

“We always said we wanted more [relationships with] universities and that's because you need enough new universities so that you’re getting enough new companies at one end, so later down the track you're getting a sale every year, which is where you probably want to be getting to,” he says.

So Fusion has to hope the good ideas keep being churned out by British academics.

Baynes has every faith the gems will keep coming.

“As a country we are extremely good at it and we've always have been,” he says.

“There's a report we saw from a Japanese think-tank that looked back over the last 30 years and it looked at the best 100 ideas that had been created over that 30 years and 40 out of 100 came from Britain.”

Instead, his concern is what happens to these ideas when they emerge.

“We're outstanding at this, what we haven’t always been so outstanding at is making economic benefit out of it,” Baynes says.

“All these great idea have come from Britain are often owned and commercialised in America, Japan and China and everywhere else."

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