Going for a spin, anyone?

12 Oct 2005 | Viewpoint
Take care: not all spin-outs end in fame and glory. The path from academia to industry is strewn with pitfalls…

Lionel Milgrom: spinning out is not a walk in the park

Take care: not all spin-outs end in fame and glory. The path from academia to industry is strewn with pitfalls…

Starting and running a university spin-out company should be easy, with a good idea and a good university behind you. But as I leant to my cost, “spinning out” years of academic research into a biotech start-up company is not necessarily a walk in the park, especially if you have no prior business experience.

It all started over four years ago at Imperial College London. A combination of chance meetings, good ideas, disappearing research funds, and a large draught of Imperial’s heady entrepreneurial spirit, convinced four of us where our destinies lay. So we presented a business case to Imperial Innovations (Imperial’s technology transfer arm), which gave us £25,000 to write a business plan. If it was good enough, they said, we could then try convincing the University Seed Challenge Fund to stump up another few hundred thousand pounds to get started.

We didn’t really know what a business plan was, so we spent the £25,000 doing some proof of principle and hiring someone to help write the plan. This proved wise because, by playing devil's advocate, he made us realise our strengths and weaknesses. By the time the plan was finished, we had a solid, presentable case.

The angel arrives

But come the day and we watched helplessly as our world-beating PowerPoint presentation repeatedly crashed. When the photocopier also jammed, we gave up on hi-tech and resorted to hand waving. Amazingly, it worked but the challenge fund decided we needed more funding than they could provide. Enter a business angel we had encountered earlier during a previous Imperial Innovations networking session, and within three days, we had the extra cash: our “puppy” – PhotoBiotics Ltd – was almost ready to fly.

Company factfile

PhotoBiotics Ltd

Website: www.photobiotics.com

In a nutshell: “PhotoBiotics is developing novel PDT photosensitiser systems, tuned to absorb longer wavelength light and coupled to new biotechnologically generated agents that can specifically target tumours and pathogenic organisms.”

Launched: June 2001.

Initial funding and backers: £500,000 from the University Challenge Seed Fund and private investors.

First, however, Articles of Association and a Shareholders' Agreement had to be drawn up and all the company’s operating structures put in place. Routine perhaps, but a real pain when one has spent a lifetime doing research….and avoiding admin. And I was the one charged with running this new venture, with the grandiose title of Managing Director. Here, Imperial Innovations helped again by putting me in touch with the necessary but expensive financial and legal services, which rapidly (and worryingly) ate into our funding.

Then there was the science. Involving a radically new interdisciplinary approach to cancer therapeutics, it looked great on paper, but took time to iron out – in business speak, significant milestones were not hit on time. If the science had been academically funded, our progress would have been hailed as a breakthrough. As it was, we had to carve out and protect our new technology, something many spin-out companies take for granted before they even start. I found it hard to adjust inwardly to this change from academic to business criteria. And, as luck would have it, the company ran out of funds just before a full programme of trials could be implemented. The full horror of university spin-out company life then sank in.


We had picked the worst possible time to go looking for further funding. With war looming in the Middle-East and stock markets falling, investors turned and ran. Biotech was no longer flavour of the month. During the earlier boom, too many biotechnology investments had failed to deliver. Though our science was impressive we were viewed with suspicion, and told to come back when we had “proved our technology”. But to do that, we needed more finance. Catch 22.

My real lessons in business began when we were temporarily saved from oblivion by some small-time biotech investors. Their involvement gave them equity and therefore some control over company direction. They wanted to reset certain of our scientific priorities to make them more rapidly marketable. But because scientific progress could be slow (sometimes due to unforeseen glitches from there being no incubator space: the company shared research facilities with students and post-grads). they mistakenly felt their suggestions went unheeded.

The putsch

Investors are generally wary of academics running companies with no perceived business experience. Understandable perhaps. And, unknown to me, our investors had made further investment in the company conditional on my removal as managing director, and an experienced commercial manager being brought in. The blow fell as a complete surprise during an ordinary board meeting – what is known in the trade, as a “boardroom putsch”.

I feel I could have done with some advance warning (even if I had previously and publicly expressed my dislike for the job), and the whole thing left a bad taste. I now realise that it was pretty much par for the course in business. Ironically, a year after my removal, the company is now into its third managing director, and I’ve been invited back into the fold as a (unpaid!) consultant. So what goes around comes around, but I’m glad not to be running the show any more.

So what have I learnt? First, the investment community at large have the courage of sheep, and all the compassion of predators, showing easy bravery during good times and predictable cowardice in bad. Most (but no all) have little real understanding of science – just as long as they think it can make money.

Second, scientific progress does not march to a business rhythm, so if necessary, universities need to nurture their early-stage spin-out “acorns” beyond the seed-funding stage, if only to protect their investment. Third, the days of cloistered “blue-sky” academic research are numbered if the spin-out company becomes the sole model of how universities fund themselves in the future; anything deemed “unproductive” in the short-term will be allowed to go to the wall.

And finally, if you go to bed one night an academic and wake up next morning in charge of a spin-out company, then follow these simple rules: believe nothing, question everything, trust no one. And, never publicly demonstrate weakness: it really is “lonely at the top”. For those academics contemplating the spin-out company route to realising their dreams of world-beating, lucrative science, let this be a warning.

Dr Lionel R Milgrom is an academic research chemist, author and writer, and a sometime Visiting Scientist at Imperial College, London.

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