Now might be the time to nourish an idea
12th May 2009
Matthew Rippon discusses the potential of University spin outs.
Economic slow-downs always see spikes in the establishment of new businesses.
Huge numbers of start-ups were created in the recessions of the early 1980s and 90s, for example.
After all, if you’ve been nourishing a business idea for a while, why entrust it to an employer who might be about to unveil a redundancy list featuring your name. Why not just have a go yourself?
In those troughs, support grew for those coming out of employment into the scary world of enterprise. But those coming from Academialand onto an employment wilderness were left to their own devices.
It’s not like that now, of course. Our five universities (and many of the region’s further education colleges) provide superb support for entrepreneurial academics and graduates alike.
For most universities, enterprise programmes play a number of roles. Probably the highest profile of these is the spinning out of businesses based on university-owned intellectual property.
It is a function that is perhaps most effective in the old universities. It plays on their strengths in research and where technology transfer officers, whose remit is to patrol the campus on the lookout for research that may be exploited commercially, are employed.
Academics are employed and post-graduate students granted funding on the basis that advances they make are to be owned by the institution. Occasionally, advances come to light that present significant commercial opportunities.
Often, an expensive period of product development follows, which is carried on by a company formed by the academics concerned, whose know-how is crucial to the success of the project.
The university will get a minority stake and in many cases, venture capital or business angel investments also feature as minority shareholders. This is the spin-out process in action.
Spin-out companies are high risk businesses. Will the technology prove reliable? Will it scale up? Is there a market for it at a price that will prove profitable?
Successful spin-outs produce massive returns. Arrow Therapeutics, spun out of NewcastleUniversity in 1998 was sold to AstraZeneca nine years later for $150 million.
The push to produce spin-out companies whilst retaining a degree of ownership for the university is intended to reproduce ‘the Cambridge model’, which turned that city’s science park into a world-leading location for high-tech business.
Each spin-out is a convoluted and tense process that requires the investment of a considerable amount of time and money.
Author: Matthew Rippon (info@bhplaw.co.uk)
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