The third equity gap

Tidu Maini, Pro Rector of Imperial College London

In the US in particular, leading universities with a focus on science and technology have become almost synonymous with the creation of significant economic and social impact. However, internationally, we are experiencing an unprecedented period of change as science-based innovation becomes increasingly dependent on our ability to work across disciplinary and geographical boundaries.

Recent experience in the UK suggests that whilst there is a growing recognition that investing in science and commercialising intellectual property can lead to the creation of wealth, it is less clear as to what unique drivers are really needed to stretch the million dollar ventures that are now emerging from our universities to become the global billion dollar industry success stories of the future?

It is conventional wisdom that the successful exploitation of new ideas from science critically depends on a combination of drivers from government, academia, industry and in particular, the financial sector. Much less is said and done about drivers such as targeting the research of the very best institutions and working collaboratively on a global basis not only in research but also in the commercialisation of the outputs.

In the US, scaling up of science projects and scaling up of the commercialisation in a rich entrepreneurial ecosystem leads to the billion dollar companies. A culture of risk taking and acceptance of failure also clearly helps the process. Further, the example of large endowments by successful alumni to their universities teaches young students that their aspirations in science can lead to business success and wealth. This coupling of science-based endeavour with success in business is made at the universities and is a phenomenon not commonly seen in Europe.

So where are we to date…?

My own experience in academia and industry suggests that our leading universities like Oxford, Cambridge and Imperial to name just a few, have the potential to create similar large-scale industry success stories. Although a much smaller nation, we are perhaps one of the most efficient in terms of generating scientific wealth, with a strong history of producing ground-breaking research from relatively modest inputs and typically with very little help from any generous endowments or voluntary investments.

There have also been very real signs that economic wealth is being created from science-based innovation. Over the last two or three years in particular, a succession of UK university spin-outs floated on the stock market with a cumulative value of some 2 billion dollars. This would have been unheard of just a few years ago.

But there is certainly plenty of room for improvement and very little room for complacency. One only needs to look at some of the world’s fastest growing economies such as China and India to appreciate the changing environment for science-based innovation. Big changes are happening in terms of the talent and technology being created in universities.

This year there are likely to be just over 150,000 Science, Engineering & Technology undergraduates in the UK, whilst in India, it’s nearer 450,000. In recent years, the UK saw its number of university spin-outs rise from a handful to around 200 per year. Over a similar period, China has produced some 2000 science & technology “university-related enterprises” per year.

So where are the equity gaps…?

The first equity gap exists between our most talented scientists and the world-class research that they could conduct and eventually commercialise. Without significant and targeted investment in science, we are unlikely to see growth in valuable new research and intellectual property.

Most governments have limited resources so it is important they target the investments to the very best establishments and not confuse the funding with the wider commitments to the educational system. We also have a tendency to believe that serendipity is a natural driver for science-based innovations of the future. Unfortunately it is not, and we need to explore more active than reactive approaches to stimulate and support the commercialisation of university research.

My experience with my own institution to address the first equity gap is to concentrate on creating flexible models that make it easy for business to sponsor our research in the first place – we now manage to attract more research income from industry than any of our peers in the UK.

The second equity gap exists between our most promising science and inventions and the technologies that they could create. It is essential that  targeted investment are made in capacity building for commercialisation of research, providing seed funds, proof-of-concept development, incubators, and links with the venture capital sector. To bridge the second equity gap, we should concentrate on more novel approaches to technology commercialisation that make it easy for investors to work with us.

At my own institution our technology transfer business has created enough scale and is now itself quoted on the stock market with an agreement with the university giving it exclusive rights to a pipeline of scientific invention until at least 2020.

But it’s the third equity gap that I would like to focus on here. This exists between our most capable ventures that do eventually emerge from our universities and the global businesses that they could and should become.

I see three paths to bridging the 3rd Equity gap (i.e. taking a company from a few million to a billion dollar enterprise):

•    The first path is to try and ride the wave of sector growth – this happened with the era of rapid growth in IT, Life Sciences and Telecoms although the dotcom crash of 2000 left many lessons to be learnt about pursuing this path

•    The second path is for global companies to invest heavily in the top universities or spin outs to take advantage of their huge depth of multidisciplinary talent and accelerate the growth of new companies – examples of this include the $200m investment in Carbon reduction (sequestration) at Stanford University by Exxon, Schlumberger and GE, the $200m investment by GSK at Imperial College in imaging sciences to test the efficacy of drugs, or BP’s investment of $500m at UC Berkley California, to create a new Energy Biosciences Institute

•    The third path is to somehow couple research and commercialisation of top universities in the US or Europe, with those from China and India to take advantage of the huge science base and the fastest growing economies

In other words, globalisation…

So where do we go from here…?

If our science-based innovation is to really make an impact on our economies and address global challenges such as climate change, infectious disease and energy security, then we must pool our resources to bridge not just the intellectual and innovation gaps but the international one too.

To start with, a strategic fund of significant size, scope and with built in commercialisation commitments is urgently required. This will help break new ground in international collaboration in science and innovation. The resources will be big enough to be used to leverage the raising of funds from alternative sources for commercialisation of university research.

I believe this will fast become the only way to fund the most ambitious programmes, attract the best talent and permit the transfer of knowledge and creation of wealth in our society.

In the development of such a strategy I see the following as crucial drivers alongside our inevitable pursuit of excellence in world-class research:

1.    The application of new expertise in the commercialisation of university research

2.    The creation of new networks with the global corporate and investment community

3.    The development of new product and business development strategies for emerging technologies

4.    The acceptance of failure.

From my perspective in the UK, there is a window of opportunity here for us to contribute to all of these but our billion dollar success stories of the future will depend crucially on our partners in emerging economies such as China and India as much as in the US and Europe.

It is time to scale up our thinking on science.