Edinburgh provides lesson in venture capitalism

Edinburgh University is one of Britain's few academic institutions to have dabbled in venture capital. Its success has been astounding with its fund growing more than 30 times in value in a decade.

In 1985 the university set up Quantum Funds, believed to be the first venture fund to be run by a UK university. The initial fund contained Pounds 150,000. It has now been run down, but peaked at around Pounds 5 million, a testament say its organisers to the potential of venture capital.

Keith Winton, deputy director of UnivEd Technologies, Edinburgh University's industrial liaison company, says the fund, which included money from the university as well as several local institutions eventually funded five ideas from start-up.

Two of the projects failed to get off the ground, a third was a minor success covering its costs. The fourth was sold as a licensed technology to a major company, netting the fund Pounds 500,000.

But the fund's biggest success came from a new method of capturing video imaging. VSLI Vision was floated on the Stock Exchange three years ago for Pounds 45 million. Quantum Funds had equity in the company worth, Dr Winton suggests, Pounds 5 million.

Quantum Funds was run down after worries about the complicated share-holding system and a lack of future investment. Dr Winton says that top research universities could benefit from such funds, but warns: "It really is very risky money. One needs to accept that you might spend Pounds 300,000 and end up with nothing."