Northern Gritstone, the new investment business focused on university spin-outs in the north of England, has announced a first close of £215 million.
With plans to raise £500 million overall, the company said it will continue to welcome further backers over the coming months.
The company, chaired by former Goldman Sachs investment banker Jim O’Neill and led by chief executive Duncan Johnson, is expected to begin deploying capital and making its first investments in start-ups over the coming weeks.
Northern Gritstone said it has attracted funding commitments from a diverse base of investors encompassing local authority pension funds, high net worth individuals, institutional investors and real estate investors active in the tech and science ecosystem of the region.
These include Greater Manchester Pension Fund and West Yorkshire Pension Fund as part of Northern LGPS, M&G, Columbia Threadneedle, Lansdowne Partners, and Bruntwood as well as Andrew Law, the CEO of Caxton Associates, and Keith Breslauer, managing director and founder of Patron Capital, both in a personal capacity.
Now the first close has been achieved, Northern Gritstone plans to begin making its initial investments into its proprietary pipeline of science and innovation based businesses located in the North of England.
Having launched in July 2021, Northern Gritstone was founded by the Universities of Leeds, Manchester and Sheffield to support the commercialisation of science and IP-rich businesses originating from these three research-led institutions.
Many of the opportunities are seen in sectors such as advanced materials, health technology, cognitive computation and AI.
Northern Gritstone was founded with the philosophy of “profit with purpose”, combining attractive returns for shareholders with wider positive, societal and economic impact, including supporting high-skilled job creation in the north of England.
It announced the appointment of its first chief investment officer, Marion Bernard, in December and this month added James Hadley as chief financial officer.
In its fundraising Northern Gritstone was advised by Lazard Venture and Growth Banking led by Garri Jones. Its legal advisers are Macfarlanes and Pinsent Masons.
Northern Gritstone chair Jim O’Neill said: “The strong endorsement of Northern Gritstone we’ve seen from investors is testament to the huge scale of the opportunity in northern England’s world class science and innovation hubs and the spin outs they are producing.
“By investing in Northern Gritstone, asset managers are directly buying into the brightest prospects for Britain’s future economy.
“Today marks a significant milestone as Northern Gritstone continues to build its investor base allowing the company to deliver its philosophy of profit with purpose which underpins all we seek to do.”
Northern Gritstone CEO Duncan Johnson said: “There is rightly huge excitement about the innovative, science-led spin outs emerging from our leading research universities and the ecosystems they support, and this has been reflected in our conversations with investors so far.
“We are greatly encouraged by both the size of our first close, and also the range and quality of investors that the Northern Gritstone proposition has attracted.
“Whilst fundraising will continue, this first close and the backing that Northern Gritstone has received from investors so far, allows us to begin making our first investments shortly.
“It also importantly enables us, alongside our friends and colleagues in the wider northern venture ecosystem, to accelerate the development of a northern innovation hub to rival the UK’s Silicon Fen and ultimately Silicon Valley.”
Chief financial officer at the University of Leeds and non-executive director of Northern Gritstone Jane Madeley said: “This successful first close for Northern Gritstone speaks to the ground-breaking nature and world-class quality of research and innovation taking place at all three universities.
“It recognises the tremendous strength of our pipeline of spin-out enterprises. These cover a broad range of emerging technologies that will be critical in offering innovative solutions to global challenges.”
Deputy President & Deputy Vice Chancellor at the University of Manchester and non-executive director of Northern Gritstone Professor Luke Georghiou said: “Northern Gritstone will transform the investment landscape for our spin-out companies and for the North of England more generally.
“Our academic entrepreneurs, supported by the University’s Innovation Factory, have produced record numbers of spin-outs in the past two years.
“This huge potential can now be far more easily realised as the investments will enable them to scale-up businesses which are there to solve the world’s problems.
“These include new treatments for devastating medical conditions, transformative applications of data analytics to farming and exploiting the amazing properties of graphene across multiple applications to name just a few.”
Vice-President for Innovation at the University of Sheffield Professor and non-executive director of Northern Gritstone Dave Petley said: “We are delighted that Northern Gritstone has received such strong endorsement from investors, who have recognised the immense potential in our universities’ world-leading research and innovation.
“This investment power will help to unlock solutions to the world’s most pressing challenges through the rapid scale-up of spin-out companies at the forefront of a range of sectors.
“This is a significant milestone for Northern Gritstone, and for economic growth and prosperity in the North of England.”
Head of M&G’s Catalyst Team Alex Seddon said: “British universities have a growing reputation for exceptional research capabilities, successful spin-outs and innovation hubs but institutional capital has remained concentrated in the south.
“The momentum around Northern Gritstone is fuelling a thriving northern venture ecosystem, widening access for investors to back exceptional talent from across the UK.
“Northern Gritstone’s philosophy of ‘profit with purpose’ is aligned with our own approach to investing – channelling capital into innovative companies working to create a more sustainable world.”
Northern LGPS chair Ged Cooney said: “Northern LGPS is pleased to support Northern Gritstone which we see as well positioned to deliver us appropriate risk adjusted returns whilst providing a significant catalyst to economic growth in the North of England utilising the talent from its world class universities.”