FirstCapital Seminar: From Research to Revenues - Technology Transfer from UK Universities

London, 17 July 2001

How can Britain derive maximum benefit from the world class research being carried out at universities across the country? This was the theme of FirstCapital’s breakfast seminar held at the Institute of Electrical Engineers.

More than 220 invited guests representing technology transfer officers from universities, venture capitalists and business angels came to hear a keynote speech by the Minister for Science and Innovation Lord Sainsbury of Turville on the Government’s position on this issue, demonstrating widespread interest in the subject.

In his opening comments Jason Purcell CEO of FirstCapital, which co-hosted the event with RSM Robson Rhodes, called for business angels and venture capitalists to continue committing investment to UK early stage technology companies. Citing companies such as Virata, Oxford Glycosciences, Autonomy and ARM as role models he emphasised that, in a knowledge-driven economy, defensible intellectual property is a core competitive advantage.

Lord Sainsbury stressed the importance that the government placed on the role of university innovation, which it sees as a key component of its strategy to secure continued economic growth. He pointed to several government initiatives designed to increase the number of university spin outs including University Challenge funds, Science and Enterprise Challenge, the Higher Education Innovation Fund, Small Business Research Initiative, small business R&D tax credits and science park initiatives.

Lord Sainsbury also commented on the cultural change that is taking place in the UK, pointing out that 10 years ago academics were almost never involved (or interested) in spin-outs. He cited the success to date of the University Challenge Seed Funds, introduced in March 1999 to illustrate this change in the landscape. In the first year of operation, the Challenge Funds approved 127 projects for funding and committed £8.3 million of investment. 44 new spin-outs were created, 13 new patent applications were made and £4.8 million of investment was attracted from third parties.

Also participating in a panel discussion on the issue were Iain Wilcock of venture capital firm Quester, Walter Herriot of Cambridge based incubator St. John’s Innovation Centre and Dr Tim Cook of Isis Innovation, the technology transfer arm of Oxford University.

Iain Wilcock stressed the need for venture capitalists to take a more flexible approach to funding spin out companies from universities. If conventional risk models are applied to academic research, then probably nothing would ever be funded by investors. University startups often have no business plan, a very sketchy revenue model and no clear working product. Furthermore they often need a great deal of help in building a management team credible for outside investors. He commented: “Venture capitalists can’t just play the usual role of a gatekeeper who says “No” if an entrepreneur doesn’t make the grade. They need vision and the willingness to enter into a dialogue.”

Walter Herriot recommended that the focus on encouraging technology start-ups should be widened to encompass the cluster effect which builds around a university, and more could be done to help those who aren’t able to directly draw on university resources. Cambridge University, for example directly accounts for about 10% of the start-up activity in the region, but sits at the centre of one of the world’s foremost technology clusters.

Herriot also commented that the main problems are at seed and pre-seed funding stages. The Government’s University Challenge Fund scheme has gone some way to addressing this, in the universities which have access to the scheme. It has also been suggested that some of the newly wealthy employees of successful companies such as ARM and Autonomy will personally invest in start-ups. They will then transfer some of their technical expertise and experience of growing a young company to a new wave of entrepreneurs. However Herriot showed some cynicism about this, arguing that in Cambridge most of these people are in fact buying fast cars and driving up property prices.

The comment was made that there tends to be a greater correlation between the number of spin-outs and the size of the tech transfer departments rather than the amount of research output. There are now more than 60 university technology transfer offices across the country.

Dr Tim Cook stressed that the quality of the tech transfer department is crucial in creating new companies. He talked of the importance of internal promotion to persuade researchers of the benefits of commercialising their work (Oxford will only commercialise the research output if the researcher wants to do it). Tim also argued that many of the investor criticisms of Universities were not useful. First and foremost the commercialisation of science is not a priority for universities and nor should it be. Furthermore, it should be no surprise that researchers are difficult to manage, as academics are all selected on their originality and independence of thought.

In preparation for this seminar FirstStage Capital surveyed 37 UK universities. The results show that there has been a threefold increase in spin out activity from these universities since June 1998, with 310 new business created since then. These up-to-date statistics endorse the claims of the government that encouragement of the enterprise culture in academia is now bearing fruit.