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Might Oxitec hold the answer to the Zika crisis?

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The Rio Olympics is fast approaching and the world is closely watching how Brazil is handling the Zika outbreak. Against this background, it was interesting to see the results of the latest trial of Oxitec’s technology.
Oxitec, an alumnus of the Oxford Capital portfolio, can dramatically cull disease-carrying insects, by releasing genetically modified ‘sterile’ males into native populations. The modified insects produce offspring that can’t survive to reproductive age. So when Oxitec’s insects successfully mate, the size of subsequent generations is reduced.
In their latest trial, which took place in a region of Brazil, Oxitec used its Friendly™Aedes mosquitoes to reduce the population of insects which carry dengue fever. The trial showed a 90% reduction in instances of the disease.
This could be great news in the fight against Zika, which is carried by exactly the same species of mosquito.
Oxford Capital first invested in Oxitec ten years ago, and last year the company was bought by Intrexon for a headline price of $160m. In Venture Capital, it is easy to get caught up in the latest piece of exciting tech or the next big money spinner. But Oxitec’s story is a good reminder that Venture Capital can also help to turn University research into companies that have the potential to improve and save lives all around the world.

Estimated reading time: 2 min

 

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk.

What are the key risks?

  1. You could lose all the money you invest
    1. If the business you invest in fails, you are likely to lose 100% of the money you invested. Most start-up businesses fail.
  2. You are unlikely to be protected if something goes wrong
    1. Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here.
    2. Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here.
  3. You won’t get your money back quickly
    1. Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.
    2. The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.
    3. If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.
  4. Don’t put all your eggs in one basket
    1. Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.
    2. A good rule of thumb is not to invest more than 10% of your money in high-risk investments. https://www.fca.org.uk/investsmart/5-questions-ask-you-invest
  5. The value of your investment can be reduced
    1. The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.
    2. These new shares could have additional rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

 

If you are interested in learning more about how to protect yourself, visit the FCA’s website here.