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The financial stress faced by many UK universities is driving them to look for new sources of cash. Bad news for anyone hoping that spin-outs from technology and life science research will plug in the gap. Not only are they likely to be disappointed, they can also miss out on long-term opportunities.
Please don’t take my words. However, listen to Anne Lane, who leads UCL Business, the technology transfer business of UNITERS UNIVERSITY COLLEGE LONDON. UCL is located in the Golden Triangle, a research university that links London, Oxford and Cambridge, and is most successful in commercially profiting from the scientific and medical inventions that flow from its research.
Last year, UCL Business donated £6 million to the University Gift Aid, earning an additional £18 million from inventions such as the technology behind Loctavian, which has 95 active spin-out companies based on research in clinical trials and 24 advanced therapies currently in its current state. In other words, it’s not financial stupidity.
However, this remains modest compared to UCL’s £2.1 billion revenue last year, or within that range, it is a £538 million research grant. “Scholars want to get involved because it has a real impact on their work. If someone wanted (fully) funding in a spin-out, it would wait a long time,” says Lane.
Or listen to Lord Jim O’Neill, chairman of Northern Grit Stone, a £312 million partner investment fund at Leeds, Manchester and the University of Sheffield. The university needs to understand how risky venture investments are, which are hoping to have a guaranteed revenue stream… They cannot attract investors if they try to control fairness and manage all their intellectual property.”
The good news is that despite the economic challenges facing universities, it exists despite the fact that many people are behind the opportunity to commercialize research. It starts to seep into an ecosystem where several bets on technology can easily and consistently turn ideas into ventures.
The less-than-world expectations of a university, the more agile its intellectual property spin-out or license, the more you will get. “It’s better to take a little bit of everything than trying to play in venture capital,” said David Grimm, partner at AlbionVC, who works with UCL on two spin-out investment funds.
The university acknowledges this being encouraged by a 2023 review of spinouts co-led by Oxford University Vice President Eileen Tracy. A recent study by a Beauhurst research group found that university equity interests in spin-outs fell to a 10-year low of 16%. This opens up more equity to inventors and investors.
Rather than negotiating individually and slowly on any potential invention, lowering fairness and adopting a standard model offers two advantages. One is to promote larger scale, especially along with partner investment funds. The second is to give universities a concrete economic role and attract researchers who prefer to combine pure and applied research.
One size does not fit all within the entire scope of science and technology research institutions such as UCL. For software and artificial intelligence, business ideas must be developed by entrepreneurs to have real financial value. For life sciences, molecules and therapeutics coming out of university laboratories can have patentability and lasting value.
Therefore, UCLB takes a very open approach to software spin-outs, encouraging anyone with a business idea to develop it, and exempts them from the rights against 5% of their capital. With drugs, there is a tendency to hold greater interests or work with academics to license intellectual property to biotech companies.
The fact that UCL has a practiced technology transfer office is helpful. Last year, think tanks criticized many university offices for lacking funding, capabilities and expertise. The bigger your university operations, the more likely you are to work well with investors and utilize proof-of-concept funds for potential spinoffs.
Therefore, there are many reasons why universities take spinoffs seriously and allow partner funds such as Northern Grit Stone. Forget about trying to fill in the budget hole and focus on making your university a more enthusiastic and creative place. It will be rewarded in time.
john.gapper@ft.com
