UK universities getting better at commercialising research

4 mins read

The relationship between universities and new technology start-ups is crucial and the UK has been relatively poor at the commercialisation of ideas, let alone commercial success. Should it be about the jobs that are created or should the financial returns from technological innovation be the sole driver of whether university research is worthwhile?

In an interview with the Financial Times earlier this year, Katharine Ku, director of Stanford University’s office of technology licensing, suggested that universities in the UK should look at loosening their grip on what is created, suggesting that ‘spinout’ companies needed to be judged on the ‘impact’ they make. “I definitely think that tech transfer, from a university perspective, should not solely be about the money,” she said.

Some critics of the approach taken by UK universities to commercialising their research suggest they are demanding too large an equity share putting academics and researchers off from setting up their own businesses.

In the US, universities typically look for a 10% stake in a new business. In the UK, universities will look for up to 50%. Why the difference? According to Ku, it is because of the level of support universities in the UK are required to provide, for example, more of the ‘heavy lifting’ in terms of funding and support.

But could this approach be changing? Bristol University has launched an Enterprise Fund to support academic spinouts, while University College London manages a spinout fund worth more than £50million and similar groups exist at the University of Cambridge and Imperial College in London.

Oxford University is the UK’s most successful university in terms of creating spin outs – 26 in the four years to 2014. However, that compares poorly when you look Stanford in the US, which created 24 in 2015 alone.

In what was seen as a significant move Oxford University’s technology commercialisation subsidiary, Oxford University Innovation (OUI), established Oxford Sciences Innovation (OSI) in 2015.

A £300m fund, OSI looks to develop research from the university’s mathematical, physical, life sciences and medical sciences divisions and then commercialise it. The fund also provides capital and scaling expertise to businesses.

The university already had a good track-record of developing science and technology businesses through OUI, with more than 100 spinout companies based on technology developed by university researchers appearing since 2000. Successful spinouts include Oxford Nanopore Technologies, NaturalMotion, Velocys and Oxford Immunotec.

Speaking at the fund’s launch, OSI chairman David Norwood said: “The agreement and the strength of the investors creates an opportunity to turn world-leading science into market-leading companies and the opportunity to create significant value for all stakeholders that are involved.”

British technology companies managed to raise $3.6billion from VCs in 2015 – not insignificant – and a recently established fund intends to make targeted investments in up to 12 robotics start-ups each year across a such sectors as construction, logistics, agriculture and domestic robots.

Called the British Robotics Seed Fund, and managed by Sapphire Capital Partners in partnership with High Growth Robotics, it look, via partnerships with robotic laboratories and incubators, to identify investments and provide mentoring services to robotics entrepreneurs and start-ups.

It is the first investment fund to specialise in UK-based robotics start-ups.

Looking to the US, it has been suggested that UK universities should focus on what is being described as a ‘new tier’ of spinouts. This involves universities looking to license inventions for a fee, rather than taking an equity stake.

The downside with these types of start-up, however, is that they would get little further help from the university – but other bodies exist to take their place.

According to the Higher Education Funding Council for England, which has responsibility for government funding to universities and colleges ,about £10m of public money is spent each year specifically on tech transfers. A further £150m is spent on commercialisation projects including, via the Higher Education Innovation Fund, the funding of organisations such as SETSquared Centres which support early-stage, high-technology, high growth potential ventures.

Each centre provides start-up ventures with access to entrepreneurs, industry specialists and investors, along with business mentoring and are attached to partner universities, including Bath, Bristol, Exeter, Southampton and Surrey.

Over the last 10 years, SETSquared has supported around 1000 companies, helping them raise more than £1bn.

The Bristol SETSquared Centre, set up by the University of Bristol, is based at the Engine Shed in the heart of the city’s Enterprise Zone and is the largest of the centres and home to 65 ventures.

“The Engine Shed is about creating a viable and effective eco system,” explains Nick Sturge, its founder. “We are interested in working with partners and bringing investors, businesses and commercial ideas together.”

The SETSquared centre looks to combine student’s research skills with the commercialisation of technology and business incubation, of which ‘incubation is the most visible part’, Sturge says.

“From my experience at SETSquared and now at the Engine Shed, UK universities are getting better at commercialising ideas. Bristol, for example, has developed the iCURe programme to support innovation.

“It offers the chance to develop a researcher’s entrepreneurial skills, providing up to £50,000 to support commercially promising research which is then validated in the marketplace.

“Where there is evidence of strong demand, the research will be licensed or spun-out into a company.”

According to Sturge, more money is now being targeted at scaling up new businesses supported by a more pro-active eco system, whether that is identifying talent or encouraging leadership skills.

The UK government has a £4.7bn science budget supporting a number of programmes across the tech sector backing the creation of spinouts, entrepreneurship and broader research collaborations.

The New Productivity Fund announced in the 2016 Autumn Statement, will look to provide £23bn between 2017-18 and 2021-22, part of which will go to the Industrial Strategy Challenge Fund.

Covering a broad range of technologies, funding will be decided by an evidence-based process and will be delivered by Innovate UK and the Research Councils and by UK Research and Innovation when it is established.

While more detail on the breakdown and proposals regarding funding have yet to be disclosed, the fund is expected to look at backing projects covering a number of priority technologies, such as robotics and artificial intelligence, industrial biotechnology and medical technology, satellites, advanced materials manufacturing and other areas where the UK has a proven scientific strength and where there are significant economic opportunities for commercialisation.

Another scheme designed to support small businesses in the UK is the Small Business Research Initiative. This connects small, innovative businesses with government departments and, through it, companies can win a government contract of £1m or more. They can use this to demonstrate and develop new technologies with funding of up to £100,000 to test an idea and up to £1m to develop a prototype.

Whether the UK’s universities adopt a more hands-off approach to spin outs as they look at more innovative ways of funding, more ideas and discoveries than ever before are being commercialised.