Size Matters

Initiatives introduced by the UK government to encourage universities to commercialise their ideas may not be having the desired effect. Although the number of spin-offs continues to increase, especially in the bioscience sector, newer companies are finding it increasingly difficult to create value.

The problem, according to some battle hardened veterans in the Welsh business community, is that simply encouraging universities to set up companies can lead to ideas being prematurely packaged into new ventures with little chance of success. The push for spin-offs has come from government funding initiatives for technology transfer. Higher Education Reach Out to Business and the Community (HEROBaC), launched in 1998, and the Higher Education Innovation Fund (HEIF), launched in 2001, made commercialisation the third thrust of universities after teaching and research.  “As these programmes came in, academics were encouraged to look at spin-out too soon, before the technology was mature, and this has made it much harder to survive,” according to Sharon Thomas, Healthcare & Life Science Specialist, at the Welsh Assembly Government (WAG).

Speaking at a meeting in London last week, hosted by WAG, Thomas said that businesses set up in the 1980s tended to be more mature before spin-off. It is these companies that are continuing to grow today. “In Wales we have had only two bioscience spin outs that have not succeeded, and have gone under. Both spunout in the early 2000's,” she said.  The idea behind the government initiatives was to create a further stream of funding for universities from the intellectual property (IP) they generate within their walls.  But having IP is not enough. The general idea that if you have IP, you can make money out of it is simply wrong, said Paul Smith, director of Biostatus, an imaging company that spun out of Cardiff University in 2001. “There are no problems with new ideas and technology, it is new products and services, and finding out what clients need that is the problem.”

While in the past, spin-offs may have been cosseted prior to launch, “Newer companies are often launched too quickly, with no established client base and without proper knowledge of their products,” according to Thomas.  One of the problems is that by default technology transfer offices tend to centre their activities around academics,  who do not necessarily have the skills to recognise how their ideas can be turned into a product.  Successfully nurturing an idea requires not just sufficient time, it needs proper commercially-driven management. A business road map is essential, said Jon Dickens, who currently holds directorships in five biopharmaceutical companies. At the same time academics need to be groomed by the right people. “Academics can be naïve about what is needed, about how to do deals with big pharma,” he said.  Dickens suggested also that new companies should try to bring non-executive directors on board as quickly as possible. “It is important to have a good board to plug any knowledge gaps. There are a lot of good people out there who are retired and not looking for a lot of money.”

But there is a delicate balance to be attained between successfully nurturing an idea and waiting too long. “Once an idea has been patented, the window of opportunity is quiet small, around 18 months,” according to Nick Lench, Director of the Wales Gene Park.

Dickens agreed, “If you take too long in an academic environment, it is easy to lose sight of what the client wants. You can very easily go a long way down the wrong road.”  HEROBaC allocated £20 million a year for the establishment of activities such as corporate liaison offices. This was followed by HEIF, which brought together a number of existing funding streams. This was extended in 2004 (HEIF2) when £185 million was awarded.