Startup creation firm Allied Minds announced a partnership Thursday with GE’s venture arm to jointly invest in promising technologies.
The deal speaks to broader trends in how companies get formed and funded beyond traditional means like venture capital and the public markets, and where large enterprises fit into that equation.
Boston-based Allied Minds is a public holding company traded on the London Stock Exchange that forms, funds, and operates early-stage tech and life sciences ventures. When it got started over a decade ago, it initially targeted technologies emerging from universities. In 2012, it expanded its focus to include nurturing research from labs affiliated with the U.S. Department of Defense and other federal entities.
Now Allied Minds is diving into technologies incubated within big companies. And it’s working directly with one of the world’s biggest: industrial giant GE, which recently relocated its corporate headquarters to Boston.
“We’re really happy with the U.S. universities we work with and the U.S. government,” Allied Minds CEO Chris Silva says in a phone interview. “This provides another leg on a three-legged stool: U.S. innovation coming out of industry.”
Basically, the partnership means that Allied Minds and GE Ventures will collaboratively identify and invest in technologies coming out of Allied Minds’ network and from within GE, says Silva (pictured above).
Specifically, Allied Minds will get the exclusive first option to license certain technologies that GE develops in-house and wants to spin out. Allied Minds and GE Ventures will co-invest in those startups. In turn, GE Ventures may invest in some of Allied Minds’ existing subsidiaries, as well as invest in new startups alongside Allied Minds. GE Ventures also has an option to invest in future Allied Minds stock offerings, Silva says.
The move “strengthens our network in terms of the types of innovation we will see and what we can invest in,” Silva says. It also means Allied Minds’ portfolio companies get access to GE’s capital, technology, and expertise.
“GE has been looking for different models to try to take advantage of the innovation economy,” Silva says. “It’s very exciting. They have some tremendous technology capabilities, especially in healthcare, transportation, energy, and big data, among others.”
Allied Minds’ stock is traded under the ticker symbol “ALM.” (Silva says the decision to trade on the London Stock Exchange instead of a U.S. exchange is mainly because the company’s business model is more common in the U.K. and better understood by investors there.) The GE news sent Allied Minds’ shares up more than 7 percent on Thursday, closing at almost 335 British pounds (more than $434). GE’s stock (NYSE: GE) closed Thursday at $29.53, down about 1 percent.
Allied Minds has an interesting business model, one that is similar to other technology commercialization firms such as PureTech Health—also based in Boston and traded on the London Stock Exchange—and U.K. firms Imperial Innovations and IP Group.
Unlike a traditional venture capital firm, Allied Minds takes a much larger role forming and operating the companies it funds. It licenses the technology and creates a subsidiary company around the tech that is majority-owned by Allied Minds. It recruits executives to run the startup, and Allied Minds funds the company until it has a self-sustaining business, Silva says. The ultimate goal, of course, is to help the subsidiary eventually get acquired or go public.
Allied Minds currently has 25 subsidiaries—one third in Boston, a third in California, and the rest spread around the U.S., Silva says.
None of Allied Minds’ companies have been acquired or gone public, but some investors have already made money on the firm, Silva says. The company first raised capital in 2007, a $15 million round at a $40 million pre-money valuation, he says. Allied Minds was valued around $500 million when it went public two years ago, Silva says. It’s currently valued at more than $900 million.
Still, it seems Allied Minds is looking for more ways to support its companies and potentially speed up their time to market (and an exit). Through a two-year-old joint venture with Bristol-Myers Squibb, Allied Minds is helping the big pharmaceutical company identify and develop therapeutics from university research. The joint venture aims to advance the drug candidates to an initial clinical trial, at which point Bristol-Myers Squibb has the option to buy the business. The two companies have committed $110 million to the joint venture so far, according to a recent Allied Minds financial report.
That means Allied Minds doesn’t have to shoulder the huge costs and risks of shepherding a drug all the way through clinical trials and onto the market, and it can see a return on its investment in those ventures more quickly, Silva says. And by combining forces, the partners can ideally identify and commercialize emerging technologies more quickly and efficiently than they would on their own.
“Hopefully it’ll be the same with GE,” Silva says.