First find an agent

University tech transfer offices are trying to do the impossible. And as a result they are ending up with almost nothing. Better to sell the IP to a company that has the expertise they lack, says Biofusion CEO David Baynes.

A new breed of tech-transfer company has begun to appear in Britain - the intellectual property agent, with a lock on the discoveries from a particular group of universities or departments. The biggest is IP2IPO, with a stake in IP from Oxford's chemistry department, the University of Bristol, and parts of three other U.K. universities. Another is Biofusion. Last January Biofusion signed a ten-year exclusive agreement with the University of Sheffield to take all university-owned medical IP to the marketplace.

The approach is controversial. Some universities, such as Cambridge, avoid such deals on the grounds that they could hamper intellectual freedom. Better to cut deals individually, researcher by researcher and investor by investor, as the circumstances warrant. Not surprisingly, the companies themselves disagree. Thomas Lau, news editor of Science|Business, talked to Biofusion CEO David Baynes about his company and the controversy.

Lots of criticisms are directed against universities' spin-out companies, especially from venture capitalists. Do you think they are justified?

I think it's very, very difficult for universities to commercialise IP. They haven't got real merchant expertise and they haven't got real money. Most universities have a tech transfer office. Their job is to set up companies but they have no money. I couldn’t do that. I don't know how you can do it.

What is your business model?

Our business is about commercialising IP that is coming out of universities. Our first deal is with Sheffield University. Anything you might see ending up in the hospitals or a medical device - we actually own the rights. We own the shares that would have been owned by the university. The way the model works is we raise a sum of money. And we have expertise. We meet with [the university] once every three weeks as a formal process, about the opportunities that have been identified by the tech transfer office for us.

They are very good ideas normally, but not necessarily good commercial ideas. They are basically more like a research project. If that happens then we tend to say: let's see how it develops, then we will commercialise it. [Another] category is that the idea that is interesting and the IP is secured and the academics are committed, and the commercial market is big enough. We set up the company. The university now has to transfer the idea of the company. The academic will subscribe to up to 40 per cent and then we end up with 60 per cent.

Universities are very good at encouraging research but they have not been successful with the benefits of commercialisation. And that's because they are not venture capitalists. They've got no fund and no venture capitalist expertise. So they did all the work. They create the idea in the first place and identify the opportunities. They set up the company and when the venture capitalist comes then they will become out of sight, and they end up earning 1 per cent of the existing capital. So what we have done is we make the university a shareholder.

How much do you usually invest in these companies?

We normally put about ₤100,000 in the beginning, which would be put in a convertible loan. The model is we probably won’t spend more than half a million on any one company.

Are you approaching other universities as well?

Now we only have an agreement with Sheffield University. But the whole idea of Biofusion is to roll out with other universities. There are others who take the university out to the public and develop the IP. The big difference between us and the other models is that we look into the interest of the university by making them a shareholder. So we are talking to a number of universities saying if you give us an agreement we will give you a big stake-holding in Biofusion and we will then get a capable fund to invest in your company. We are talking to a number of universities at the moment. We will probably end up with a deal with three or four universities, probably no more than that.

How many companies do you have in your portfolio?

We have nine companies in our portfolio at the moment. I think out of nine there are about six that will either get a sale or an IPO. Some will take one year and some will take two years

There is a debate at Cambridge University about IP. What is your take on it?

I think Cambridge is very unusual. Cambridge is the only university [in the UK] where the IP is owned by the academic. Actually at most universities like Sheffield it is owned by the university. I think it makes sense that the institution should own the IP and distribute that significantly to the academics. Of course the institution has to make sure the products are commercialised properly. So the idea is Cambridge probably needs to own its IP if it is going to successfully commercialise it.