From lab to marketplace
By Martin Arnold
Published: December 3 2008 23:25 | Last updated: December 3 2008 23:25
Tech transfer do's and don'ts
● Do employ a technology transfer boss who has run a successful university spin-out, so he or she knows what it takes and how the world of academia works.
● Do be patient. Expect the business plan to be revised many times. Manage expectations. Be prepared for a spin-out to have a long gestation.
● Do keep in touch with your investors. Find out which ones have money that they are looking to invest and what they are
most interested in. Keep a constant watch for new investors.● Do be prepared to partner with a larger technology transfer office at another university or venture capital group, particularly if your university lacks resources.
● Don't create spin-outs just for the sake of meeting a target or writing the press release. A
failed spin-out is worse than no spin-out.● Don't forget that the objective should be to transfer the technology to society in the least risky way. Often that is by licensing to an established company, not via a spin-out.
● Don't spin out a company against the will of researchers. Even if you have a patent, much of the intellectual property is in their heads and you need them on board.
● Don't mislead the researchers on how much effort they must put into spinning out a company.
● Don't imagine investors are always looking to put money to work. Be patient and wait until they are ready.
Malcolm McCulloch, an engineering professor at Oxford University, remembers exactly when he thought up the idea behind the latest technology spin-out to emerge from British academic research.
His eureka moment came when he noticed that he was using less petrol after switching his car's digital display from mileage to fuel consumption. Professor McCulloch felt there could be a similar drop in home electricity bills if people could see how much power each device was using. So he decided to make one.
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| Inventor Malcolm McCulloch |
He ended up with the "smart meter" behind Intelligent Sustainable Energy, an Oxford University spin-out that will today announce it has raised ￡1m ($1.5m) from Navetas Energy Management, an investment and consultancy firm.
"For me, the really exciting aspect was to see what was initially just a twinkle in the eye and a squiggle on the back of an envelope turn into something commercially viable that could really change the world," says Prof McCulloch.
The start-up funding from Navetas will help Intelligent Sustainable Energy to turn its laboratory prototype, which Prof McCulloch has been testing in his home, into a product that it expects to start selling in 2010.
In a grim financial climate the fundraising is a coup for Isis Innovation, the technology transfer company of Oxford University, one of the UK's most successful groups at commercialising ideas from university laboratories. In the past eight years, Isis has helped the university raise more than ￡335m to create about 60 companies. With a staff of 52 and a budget of ￡2.5m, it concluded 74 licensing and option deals last year alone.
Straddling the worlds of entrepreneurship and academia, technology transfer offices first emerged several decades ago in the US, bringing venture capital financiers in to support the brightest ideas from universities such as Stanford, MIT and Harvard. Now they are seen as a vital part of any country's efforts to catch up with the US in the number and quality of new companies created from university research, as they all seek to uncover the next Google.
Technology transfer turns raw research from the laboratory into a commercially viable product. It helps academics to create a professionally run company that can attract investors.
This means validating the market potential by signing deals with commercial partners and introducing the academics to suitable venture capitalists. To assist with the latter, Oxford Innovation Society, a networking club, holds meetings and dinners with academics to discuss potential spin-outs. More than 100 venture capital firms and companies are members.
It also means finding an experienced entrepreneur to run the company. Chris Shelley of Navetas will become chief executive of Intelligent Sustainable Energy, for example, with Prof McCulloch staying on as a non-executive director.
Winning funding is another matter. While Intelligent Sustainable Energy's smart meter technology – which distinguishes between devices by their voltage and amplitude – benefits from high demand for energy-saving devices, it still took months to secure finance.
Prof McCulloch drew on Isis's ￡11m fund to cover initial set-up costs. He also benefited from its in-house legal, accounting and tax experts, who advised on the complexities of company contracts and ownership structures.
The credit crunch seems certain to make it harder for universities to raise money for spin-outs. Even before the financial turmoil, many universities were complaining of a funding gap, as venture capital businesses such as 3i and Apax Partners pulled out of early-stage investing to focus on bigger deals.
In return, venture capitalists have criticised UK universities for lagging behind their US peers in their efforts to encourage academics to patent, license and ultimately spin out new technologies.
But this criticism seems outdated to many in the UK. "There is this myth that the UK is behind in technology transfer," says David Secher, chairman of the University Companies Association (Unico).
UK universities produced 3.6 start-ups per $100m of research in 2004, against 1.1 in the US, 1.4 in Canada and 0.7 in Australia, according to research by Paul Wellings, a professor at Lancaster University.
Cambridge University, which benefits from being at the heart of a cluster of high-tech companies based in Silicon Fen, has long led the way in the UK. But others, such as Oxford and Imperial College London, are catching up fast.
So far this year, Isis has received 202 "disclosures", or research ideas, of which 68 have resulted in patent applications. "We are not judging [the] science but we are judging the commercial applications," says Tom Hockaday, director of Isis Innovation.
Oxford has chosen to keep its technology transfer activity in-house. Other universities, such as Leeds, Glasgow and Cardiff, have outsourced the activity to specialist venture capital firms in return for preferential access to spin-outs. Some, such as Imperial, have even floated their tech transfer offices on the stock exchange.
Mr Secher at Unico says that teaming up with a venture capital group is a good option for small universities that lack resources. "It is very hard for an office of four or five people to cover the full spectrum of technology," he says.
Isis also earns fees from Isis Enterprise, a division of the company that advises other universities and governments on how to set up their own technology transfer operations. David Baghurst, head of Isis Enterprise, says universities must remember that their main role is not to make money from research but to transfer it in a useful form to society.
As a result, Mr Baghurst says it is often less risky to license a technology to an established company rather than spin it off in a fledgling start-up. "It is almost always preferable to find a local business to license a technology," he says.
He adds that state intervention can often backfire, citing government schemes in Japan and Germany that measured success by the number of spin-outs created. "The result is that you get a lot of companies that are just not viable," he says.
Yet when technology transfer clears the first hurdle, as it did for Isis and Intelligent Sustainable Energy, then, Mr Baghurst says, "it is worth it for everyone in the journey and can actually be quite good fun".
Web links
Paul Wellings report on Intellectual Property and Research Benefits
Copyright The Financial Times Limited 2008
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