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Editor’s note: Oxonica, a spinout from the UK’s University of Oxford, has developed two distinct products for the energy and cosmetics markets. The six-year journey, as CEO Kevin Matthews explains, included some lean times. The company has since raised about $18 million.
May 16, 2005 — Oxonica was spun out from the University of Oxford in mid-1999. The company was initially funded by a small number of high net-worth individuals or business angels. In the early years, the company struggled to identify a clear commercial technology. I joined Oxonica in early 2001 and quickly took a number of steps to clearly define a set of commercial goals and strategies. The markets we honed in on were:
- Envirox Fuel Borne Catalyst — A nanocatalyst optimising fuel economy and reducing emissions.
- Optisol UV Filter — A range of ultra-stable UVA absorbers with enhanced free radical scavenging, with immediate applications in sunscreens and other cosmetics.
- In addition, we maintained a development activity in biomarkers.
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The company was now clear on the direction it wanted to move in, but required further funding to support commercial development. A second business angel round was completed in the second quarter of 2001 to strengthen the balance sheet and provide the necessary cash resources to support the company until it was able to complete a substantial venture capital round.
Oxonica sought its first VC round in September 2001; however, as a result of 9/11, the environment deteriorated rapidly in the ensuing days, with funds becoming substantially more risk averse. In consultation with Oxonica’s corporate finance adviser, First Stage Capital, the view was taken that we needed to get the Oxonica story in front of as many VCs as possible. We recognized that a number of funds would be modifying their investment strategy, including the stage of business at which they would be willing to invest.
Over the following three months I met with around 55 VCs, with 30 second- and third-round meetings. This crystallized one term sheet from VCF Partners and a number of companies interested in syndicating. We were able to choose an optimum syndicate, which included the venture capital arm of the chemical giant BASF.
At this point the company was essentially cashed out, closing 2001 with the equivalent of less than one month’s burn in the bank. The due diligence process then took a further six months to complete and the company barely survived this period. We had been extremely cash focused through late 2001 and had initiated a number of actions that allowed us to continue to generate income through this extremely difficult period. We never missed a salary run and continued to grow and position the business.
The VC round was finally closed in June 2002, raising more than $6.5 million and this was Oxonica’s last external round. Further growth capital was obtained through two rights issues: the first in January 2004, which raised more than $7 million and the second rights issue in January 2005, securing about $4.7 million.