Alta Innovations, the tech transfer office (TTO) of Birmingham University, is one of the younger actors on the spinout stage. Founded in 2008, the organisation has nevertheless come a long way. It owes much of its success to the vision of chief executive James Wilkie, who joined Birmingham University in 2007 from industry, where he first started out as a research scientist before becoming a corporate venturer.
Wilkie said moving into tech transfer was an obvious choice. “It was quite natural to come across the other side of the table and start to be the individual who is representing the assets of a university to corporates and businesses, and to be looking at how you can gain value from intellectual property (IP).”
Wilkie puts Birmingham University, with an annual turnover of roughly £577m ($815m), just below Oxford University, Cambridge University, Imperial College, University College London and Manchester University.
Birmingham University has some 1,100 active research academics, about half of Oxford’s number, and taking that into consideration, the institution “punches above its weight in the Russell Group”, according to Wilkie, who continues: “We are fifth for records of invention this year and sixth for the number of new patent families.”
The success of Birmingham University was not a given. In 2007, the tech transfer office functioned with only a few staff members and struggled with the fact that spinouts typically take between eight and 15 years to produce a return on investment.
“There was a much less structured approach to intellectual property,” Wilkie explains, a situation that required significant changes – so radical, in fact, that he shut the old TTO down and launched Alta Innovations in its place. It now has about 30 full-time members of staff.
He continues: “One of the things we put in place is a proper pipeline, which we report to the university’s executive every six months.” That pipeline contains the full width of research from things that Alta is contemplating patenting to the research that has been licensed and put into spinouts.
Wilkie also recognised that it was not just the university’s executive that needed a better insight into how the tech transfer office works: “One of the key things that has been an absolute passion of mine has been to make the intellectual property development process transparent to the academics.
“If it is transparent, they can get it, they can understand where they are in the process, they can understand who is doing what, why we need to involve a patent lawyer, why they are having to talk to some investor or why their idea cannot go any further until they find an external commercial manager to come and get some sweat equity to put it into shape.”
That transparency obviously demands an established methodology, which Alta Innovations has put into place, from informal help to the formal process.
“I have teams of people who can help to find investors, trying to shape management and thinking,” Wilkie explains, “but then at the point at which someone wants to set up a company, in which the university will end up with a shareholding, we have a kind of ‘dragon’s den’ where the investor, the putative CEO, and the founding inventor all do an internal pitch to convince us it is the right way to take this opportunity.”
The transparency is paying off – Alta Innovations recently surveyed everyone with whom it has interacted to date and, with a 20% response rate, discovered that an impressive 96% of academic users would recommend the service to a colleague.
“I really was proud of the team at that moment,” Wilkie says. “The key thing here is to make sure that you have the academy on your side. It does not matter whether the TTO functions as its own department or whether it is like ours, held in a separate wholly-owned legal entity.”
Alta Innovations is a wholly-owned agent of the university, an approach different from peers such as Oxford’s Isis Innovation, which is assigned IP from the university to trade on the value of that asset. While Isis Innovation can receive royalties and generate share value in spinouts, Alta Innovations keeps all IP in the name of Birmingham University.
That means it is unable to make a profit from licensing and spinout activities, despite bringing in decent sums – £17m last year. Instead, that cash goes directly to the university departments concerned.
Of course, Alta still needs to fund its operations. To that end, it operates a research park and incubation facilities. It also operates academic consultancy services, taking a 15% cut, though that money does not cover costs and is merely a device to safeguard the university’s legal status as an education charity.
Wilkie explains: “If individual academics want to be a private consultant, they have to pay something to the university for their use of the charitable assets, like office, email and their university titles, because quite often the title professor is given by a university and not owned by an individual.”
Alta also gets paid by the university to be its agent, income that is based on results. “We have key performance indicators we have to meet – number of patents, profitability of the other operations,” says Wilkie. “We operate pretty much cash-neutral for the university. Most years I actually give them a big donation in the form of gift aid. I cannot retain profit within the company – it goes back to the university.
“We do employ staff on terms and conditions that are not university staff terms. They are bonused, but internally within Alta. Those bonuses relate to our key performance indicators but they are not directly related to any income streams that flow to inventors.”
Wilkie is quick to point out the importance of that setup. “It means when we have conversations with the academy, I can say to them I am actually merely an extension of the educational charity. We are here to help them develop their IP and commercialise it, we do not personally gain from the activity.
“That is our philosophy. We are transparent and we work alongside the academy – and it works really well for us.”
The collaboration with the academy has been a fruitful one. “We had far fewer spinouts when I got here in 2007. We had been typically setting up between two and three a year, and closing some down. Currently, we have 37 spinouts. They have a current valuation of about £172m, and since August 2015 they have raised £11m from third parties.”
One of these spinouts is Irresistible Materials, created in 2010, which is working on technology to use ultraviolet light to push semiconductor manufacturing beyond current roadblocks. GUV reported its acquisition of £235,000 of funding in 2014.
That success has led to Birmingham University agreeing to providing Alta Innovations with its first internal seed fund of £5m, in addition to a £250,000 annual commitment from the university for proof-of-concept research, an amount that is typically spread between 15 to 20 projects.
The seed fund will invest in connection with consortia and is the first time Birmingham “has had a slightly more than early-stage interest”. It is modelled on two vehicles from other universities – Oxford Spinout Equity Management and Edinburgh University’s Old College Capital, which GUV profiled a few months ago.
The £5m fund has a life of five years, and should it produce decent returns, Alta will reinvest. Wilkie points out, however, that his “principals understand that the usual timeframe for a return in this kind of sector is eight to 15 years”. He continues: “What this is really about is that it is helping us retain value in the early stages, in what we sometimes call the definition phase – the stage where you need to attract reasonable series A money.”
Birmingham University also benefits from about £125m in annual research funding, and the various research councils and medical charities across the UK provide between £4m and £5m in translational funding each year.
Birmingham was also instrumental in the founding of Mercia Fund I, a University Challenge Fund set up in association with Warwick University. Wilkie says he is confident the fund will be one of the few challenge funds to go evergreen (for more on Mercia, listen to GUV’s interview with Mark Payton, managing director of Mercia Fund Management).
Wilkie, who has also collaborated closely with IP Group, Fusion IP and Imperial College London TTO Imperial Innovations, points to another fund that intrigues him – Oxford Sciences Innovation (OSI), a £320m behemoth created under the leadership of Tom Hockaday.
But Wilkie is cautious about the potential in the UK of patient capital – investments made with the hope of returns in the longer term. “The challenge is pipeline. They may have to look outside the UK. If you look at the number of investable ideas coming out of a UK university, even a really good one, it is not that many. OSI is obviously very focused on Oxford spinouts and region, so I am really interested to see how that goes. It is very good and I think the UK is extremely well served for patient capital. I am interested to see if OSI will work with other patient capital funds in the UK or abroad. I suppose they could invest in startups set up by alumni in other countries.”
Wilkie returns to an earlier comment about why he switched from corporate venturing to university tech transfer: “The more enlightened TTOs over the past five years have shifted from an emphasis on commercial success to being a part of the university’s reputation management and building.
“I do not care whether the outcomes are policy or economic, get an exit and realise some hard cash, or patient outcomes for improvement of quality of life or survival rates – those are all good outcomes for us.”
Finally, Wilkie says he is glad the university’s executive understands and shares that view, but acknowledges that the understanding is also due to Alta’s success to date. “At the moment I am operating the TTO without ever costing them money. If I was in a loss-making situation, there would have to be a deeper understanding.”
Alta Innovations has big plans to make sure it avoids that situation, something we will look at in a second article in this series published online – www.globaluniversityventuring.com