Innovation through collaboration may have been the theme of this year’s two-day summit, but there was another emerging theme picked up by several speakers and panels throughout the two days – patience. Indeed, spin-out investments are a long game, as it can take an average of 18 years before an investor sees a significant return on investment.
On the first morning, editor-in-chief James Mawson welcomed guests with an overview of the industry before handing the stage over to Shelley Harrison of Coller Capital, who is also an executive-in-residence at New York University’s Centre for Urban Science and Progress (Cusp). Harrison noted the importance of collaboration, saying that while we “think we are getting smarter and smarter” that was merely a technological rather than a moral advance. Cusp is now collecting data from New York shopping centre Columbus Circle to analyse and apply to the construction of new facilities.
Harrison stayed on stage for the following panel, which included fellow speakers Alison Campbell of Knowledge Transfer Ireland, Regina Summer of the Swedish Network for Technology Transfer and Support (Snitts), and Tony Raven of Cambridge Enterprise and PraxisUnico.
The panellists pointed out several significant traits in technology transfer, with Summer remarking that in Sweden so-called innovation centres are being funded by the government rather than third parties or universities themselves, and researchers benefit from “professor’s privilege” – their research belongs to them. Through these centres, a total of 266 contracts with companies have been established to date, and the country plans to push ahead with this licensing model.
In the UK, a total of 17 universities have established direct access to venture capital funding, through organisations such as IP Group, SetSquared and Mercia Fund Management. In the US, the University of California system recently changed its policy on direct investments and launched the $250m UC Ventures fund, while GlaxoSmithKline is opening an office in Boston to support the research ecosystem and engage in scientific partnerships. As Raven insisted, the benefit of these collaborations and the benefit of commercialisation needed to be felt in society, with the financial reward to the university incidental.
Elsewhere, the panel on Investment in the Future, led by James Mawson, featured Peter Keen of Cambridge Innovation Capital, Enrico D’Angelo of Parkwalk Advisors, and Gonçalo de Vasconcelos of Syndicate Room.
Here, most importantly to outside investors, Keen noted that on top of spin-out investments being a long game, it was also important to realise that as an outside investor one should join acompany’s series A round only if you knew you could stick around for a potentially bigger series C round, or later, as it was only the most recent investors who tended to profit most from an exit, due to stock dilution. This fear of dilution was also a recurring theme during a discussion on clean-tech by Tom Whitehouse of London Environmental Investment Forum, and Stephen Brooke of Ombu Goup.
The importance of a series A round was given a slightly different analysis by John Spindler of Capital Enterprise during a panel on how governments can support tech transfer when he remarked that it took a lot of funding even to get to that stage. To convince investors during a series A round, a company needed metrics – which it typically would not be able to afford until it had secured the funding. The UK specifically was facing a problem here – while there was a community of angels, they simply did not have enough cash, a problem mainly for life sciences spin-outs which required big pre-seed investments.
Some of Keen’s thoughts were mirrored in the discussion on Melding Academia and Industry, led by Global Corporate Venturing editor Toby Lewis and including Jackie Maguire of Coller IP, Andy McCartney of Microsoft Ventures, Andy Shannon of Start up bootcamp, and Andy Hill of Intelligent Ultrasound.
Hill illustrated how he encountered unexpected costs at Intelligent Ultrasound, and found it problematic asking his investors for more money. His situation was aggravated by the reality that there was no mentor to guide him through the spin-out process. It was 18 months before he could afford to take a salary.
McCartney echoed these worries, saying the ecosystem needed more collaboration, and different actors needed to work better together to set up incubators and accelerators. It was time to move beyond a world where we looked at actors as “Microsoft gives you laptops, Google gives you server space”.
Hill added that technology transfer was too often perceived as a hurdle to clear, which researchers resisted. This view recurred on the second day of the summit, when founder of Cambridge spin-out Enval, Carlos Ludlow-Palafox, noted in his conversation with Roger Ashby how academics at Cambridge did not support his ambition to turn his research into practical applications rather than write research papers on his findings.
Jackie Maguire, meanwhile, pointed out that in this case, emerging economies had a major advantage over the western world, as they are starting out with a blank canvas unhindered by legacy policies and rules.
While McCartney insisted on the importance of identifying promising students and investing in their start up ideas, angel investor Sherry Coutu, in her talk, took it one step further and explained that high school students needed to be the focus.
By 2020, the UK alone would require one million additional science, technology, engineering and mathematics jobs, while the EU would need an additional 4 million app developers by 2018. Already, 990,000 jobs in the UK today could not be filled because employees did not have the right skills, and Coutu noted that universities needed to do a much better job of reaching out to future undergraduates.
One university which has cracked fast growth is Amity University, whose chancellor Atul Chauhan followed Coutu. He said the university was driven by research and expanding at an unseen pace. Established 10 years ago through the Amity Foundation, he said the university now had seven campuses in India and three abroad, including one in London, all of them focused on research. In the past four years, the university had filed 542 patents, more than any other Indian university. He said the goal was to establish a further 21 campuses across India within the next decade, including one in each state.
Following a showcase of spin-out companies, including Edinburgh’s PureLifi, the progress of which Global University Venturing hase been monitoring closely, the first day’s talks finished with a keynote by Sir George Buckley, former chief executive of 3M.
Sir George’s biggest challenge to innovation-averse corporations and organisations was a simple wake-up call – IBM managed to grow to being a huge company, but also a weak one because it failed to keep innovating. Responding to the fear that investing in innovation courted failure, he said not investing at all amounted to giving up before trying – the very reason the UK’s engineering sector was crumbling. Other speakers agreed, as Simon Gibson of Wesley Clover Corporation would later challenge the audience: “Name a British network equipment supplier.”
For universities, he saw a paradigm shift in that “the student has now become the customer”. Finally, picking upon the same idea as Andy Hill and Carlos Ludlow-Palafox, he also clarified that the purpose of any research was to let other people use it and expand on it, not to make it unintelligible to everyone else.
Interesting international numbers meanwhile were revealed by Ali Amin of University Business Incubator (UBI) Index, during his panel, when he announced that according to UBI’s research the best incubators across the world were fairly evenly spread across Oceania (13%), Eurasia (37%), North America (23%), South America (22%) with only Africa left to catch up (5%).
One tech transfer organisation that has been doing much to foster this global ecosystem is Isis Innovation, as Tom Hockaday, managing director, pointed out during his discussion with Timothy Barnes of University College London.
Isis has established a network with offices in cities including Adelaide, Hong Kong, Kyoto, Mexico and Madrid which are all promoting Oxford University research and attracting investors. Concurrently, these offices also give Oxford’s spin-outs direct access to international markets they would not otherwise have been able to enter.
Barnes meanwhile said University College London had an annual turnover of $1.5bn, with a fifth of that being industry-enabled, including a total of 36 partnership agreements with Cisco. When it came to international collaboration, the university had a significant relationship with China, educating more Chinese students than any other institution outside the People’s Republic.
Finally, Janice Denoncourt of Nottingham Trent University spoke at length about intellectual property (IP) law and how it was affecting spin-out creation. Indeed, IP rights were often treated as an optional module at UK universities and looked down on, rather than seen as a necessary and important component of a wider, complex process.
The failure to recognise IP as valuable had also led to UK banks disregarding it when spin-outs sought debt financing, a loss to the companies and to the banks. Denoncourt, however, declared herself optimistic about the future, a view that was held by many – perhaps all – delegates at the summit.
George Gogolev of Russian Venture Company continued the summit on its second day with a view towards the Eurasian country which has only just begun establishing an ecosystem (see below).
Tomas Coates Ulrichsen of the Centre for Science, Technology and Innovation Policy later offered a comprehensive overview of how the UK’s ecosystem had evolved since its beginnings, from codifying its research publications to full-scale commercialisation.
Russian innovation creeps forward
The Russian ecosystem was non-existent a decade ago, and has really been formed only in the past five to seven years. Russian Venture Company was set up in 2006 by then president Dmitry Medvedev with the aim of fostering a venture capital ecosystem by replicating the functioning and successes of Silicon Valley.
The company now invests $100m as grants, and has an infrastructure fund that focuses on assets indirectly linked to the ecosystem, such as journals, magazines and printing houses. Elsewhere, the company invests in incubators, co-working spaces and biotech farms – these have spawned in two biotech spin-outs so far. The country as also targeted the nanotech sector and set up a $10bn fund, Rusnano, to bring nanotech research to a commercialised industrial scale.
Critically, Medvedev announced the Skolkovo initaitive in November 2009 – a new city just outside Moscow that offers tax exemptions to companies, encouraging both national and international corporations to open offices there.
The city will eventually contain five different clusters, each focused on specific sectors such as biotech and aerospace. In addition, Skolkovo Institute of Science and Technology, a private research university, is being established in collaboration with Massachusetts Institute of Technology.
Gogolev offers some criticism of the programme, as most efforts revolve around Moscow with only a handful of ecosystems across the country having access to venture capital funding. He also underlines that on average, it takes a company seven years to go through its first venture capital cycle, and another three before an exit, so the whole programme is still in its early stages and successes, or indeed failures, will emerge only in the next couple of years.
Crucially, universities in Russia are still sceptical and uninvolved with the ecosystem. Patents are considered a legal necessity to disclose discoveries, not as potential for commercialisation and financial returns to institutions. Those academics who want to change that reality face two significant obstacles – they are largely fighting on their own and they are fighting a long-standing status quo.
On the question of how current embargos on Russia are affecting the situation, Gogolev said foreign investment continued, although they were decreasing and largely kept quiet. Overall, he said the country had reached the point at which the UK had been two decades ago, and still had a long way to go.