At Oxford Capital, we talk about making two types of investment: High Potential and Early Growth.
In each of these areas there are common characteristics that we seek – obvious examples would be the strength of the team, the quality of the product, the track record of execution – but there are also points of difference.
High Potential deals may often be pre-commercial. In other words, the company has not started selling a product yet. In these cases, we are usually making the judgement that the quality of the company’s science or technology combined with the magnitude of the problem it is trying to solve make the company worth investing in. Investments in High Potential companies can often take a long time to bear fruit and carry a high degree of risk. But the other side of the equation is that the price of the initial investment will be attractive, and the size of the eventual payback could be significant.
Oxford Capital recently made a further significant investment in our portfolio company, Oxford Biotherapeutics (OBT). OBT has been in the portfolio for a long while and when we first invested it displayed all the characteristics of a High Potential company. OBT is developing cancer treatments that combine the natural immune responses of the human body with drugs, to selectively target and treat cancer cells.
Clearly cancer therapies represent a large market and the potential of treatments that can operate in a targeted fashion represents a promising area of development. Current therapies such as chemotherapy and radiotherapy can be effective in destroying cancer cells but they are unselective and can also have effects on healthy tissue. By combining cancer-killing drugs with antibodies that target the unhealthy cells, OBT is seeking to make significant improvements in our ability to fight cancers. For those after a more scientific explanation, details can be found at www.oxfordbiotherapeutics.com
The laboratory and clinical work needed to create these novel therapies is both time consuming and expensive. However, OBT has done a very good job of persuading key pharmaceutical partners to co-fund the development of its drug pipeline. Several therapies are now going through clinical trials. The company is moving into a phase where it is starting to realise its potential and we are delighted to continue to support OBT’s work.
I blogged before about our recent investment in Push Doctor which represents a different take on healthcare investments. I believe that Push Doctor also has high potential but it displays all the characteristics of what we call an Early Growth deal. I should point out that we are not exclusively a healthcare investor but hopefully these two examples show the two sides of the coin quite effectively.
When evaluating Early Growth companies I am looking at a slightly different set of criteria, to establish whether the business is showing signs of gaining traction in its chosen market. Does a company’s website have great organic traffic? Are users engaging with the product? Is there a validated willingness to pay? Is there a customer acquisition and conversion funnel that can be scaled? Is there a network effect taking shape? In the case of Push Doctor, the answer in each case is ‘yes’.
As Benchmark Partner Matt Cohler has said in the past, “My job is not to predict the future, it is to see the present first”. I think this encapsulates the two sides of our strategy well. High-potential is grounded in reality but is about trying to anticipate the future. Early Growth investing is about seeing the present first by being trained to spot the leading indicators of success.
If you have a business which might fit one of these descriptions, please get in touch. We would love to talk to you.