Startup Life/Opinion/ Should the UK get rid of tech transfer offices? The UK needs a growth plan. Better commercialisation of IP could be it Credit: Unsplash Credit: Unsplash \Startup Life How to keep the cofounder spark alive By Jing Ouyang 22 February 2023 Startup Life/Opinion/ Should the UK get rid of tech transfer offices? The UK needs a growth plan. Better commercialisation of IP could be it By Tom Adeyoola Thursday 9 February 2023 By Tom Adeyoola Thursday 9 February 2023 As recent dismal growth forecasts highlight, the UK is in urgent need of a growth plan. In moments of crisis you look to your strengths to propel you forward. IP generation is one area where the UK punches above its weight. 84% of the nation’s university research is classed as “world-leading” or “internationally excellent” and 19 of the UK’s universities are represented in the global top 100. Improving the commercialisation of university research would be an obvious candidate to fix the country’s economic woes. But according to Beauhurst, university spinouts represent just 3% of the UK’s scaleups. We need a better tech transfer system. Why harnessing IP generation is key to UK growth Ultimately there are only three ways to boost economic growth: increase labour, increase productivity (i.e. make more with the same resources) or find and mine untapped resources. Brexit and declining health and birth rates have put paid to the first option, and since 2008 our UK productivity has only gone sideways… for 15 years, during a tech boom! So that leaves untapped resources. And the UK has an incredible resource in IP generation — we just need to better harness it. Universities recognise their own excellence in research and IP generation, but with constant pressure on budgets, the aim has become to capture all the value from potential commercialisation. Bloated tech transfer offices (TTOs) are incentivised to secure the best possible deals to maximise shareholdings and licence fees for the university. According to testimonies collated by VC investor Nathan Benaich with his spinouts database, this often leads to long drawn-out spinout processes lasting years and “egregious” equity settlements that disincentivise founders and future investors. “If getting rid of TTOs all together is a bit difficult, there are more politically palatable measures possible” Here’s the thing. Universities are primarily funded by the government, by us and by taxes. If university actions reduce the flow of spinouts and potential business success, they reduce the flow of future taxes, which is bad for all of us — including the universities. Hence, in the extreme scenario, if you were to optimise for tax income, you might choose to abolish TTOs, reducing university equity stakes to zero. Instead, you could encourage universities to facilitate more spinouts faster by focusing on showcasing IP and taking a more arms-length matchmaking role in bringing IP, entrepreneurial talent, companies and crucially money together. The political realities mean that it would be nigh on impossible to jump straight to such an extreme, especially given many Vice Chancellors today enjoy the contribution to their budgets of licence and IP fees. But is the perceived contribution actually illusory and the real attachment down to power and control? Even the mighty Oxford University generated just £25m in 2021 through its TTO, Oxford University Innovation, accounting for only 0.5% of its turnover. If getting rid of TTOs all together is a bit difficult, there are more politically palatable measures possible. The Labour Startup Review — which I co-authored — advocated for the monitoring of university spinouts with a University Dashboard to drive a sense of competition and best practice, and the provision of a broader standard range of equity options, including one with lower stakes. This, we believe, will encourage the shift in orientation to growth. Examples of best practice do exist It isn’t all bad news — there are examples in the UK of universities that are being smart about encouraging the commercialisation of research. I founded my fashion technology startup Metail in 2008 off the back of visiting professor Roberto Cipolla at my undergraduate alma mater Cambridge and seeing his computer vision research work with the renowned artist Antony Gormley. Roberto and his students owned their own software and research IP, which meant I could collaborate while retaining the ability to patent, while the student retained the ability to publish. Also by working with a student on a subject they were interested in and committed to, I was able to win a battle for talent against the likes of Google that I would never have won on cash alone. “Imperial has understood that the key ingredients to success are talent, effort, speed, resources and money” Imperial has also had its innovation hub Thinkspace in White City, London since 2016. Last year, the university launched an Institute of Deep Tech Entrepreneurship which offers non-dilutive funding each year to a cohort of 10-15 promising university teams. And they have taken a startup approach, with seed funding to support each programme over three years and constant evaluation against strategic criteria to determine progress. Those that do well will be further supported, those that don’t won’t. Imperial has understood that the key ingredients to success are talent, effort, speed, resources and money. Others understand this magic formula, like the Universities of Leeds, Manchester and Sheffield which launched university spinout-focused VC Northern Gritstone. We shouldn’t need convincing Our universities have long proven they have world-class talent, but we need to complete the recipe for success and it should be straightforward; it shouldn’t require much more convincing than that. But if you need a bit more convicing, here is a statistic. In 2014 MIT in the US had over 30k active spinouts employing 4.6m people and generating $1.9tn in revenues. If we get this right we will be well on our way to kick-starting a new growth era. Tom Adeyoola is a technology entrepreneur and is cofounder of Extend Ventures. He was also the inspiration behind the British government’s Seed Enterprise Investment Scheme (SEIS). 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