Balancing entrepreneurial and research missions demands deft handling of intellectual property, says Ian Walmsley
The threads of an academic career sometimes converge in unexpected ways to solve a research problem and create a commercial opportunity. My early career teaching an optical-engineering course led to several patents that were licensed to a laser instrumentation company. More recently, a long-term project with a graduate student, and later research collaborator, led to us co-founding a quantum computing company.
My experience is common: per capita, UK universities create spinout companies faster than any other nation, bar the United States. From work on nuclear energy in Manchester to satellites in Surrey, from net zero applications in Glasgow to commercialising research on immunity against infection in Cardiff, universities are developing advanced applied research and spawning businesses based on world-beating ideas.
Impact of expertise
Startups and spinouts are a great way to turn expertise into impact, but getting them right is difficult. Universities need a business model that can sustain innovation at scale without compromising their broader research activities, while academics—and their venture funders and partners—want the lowest barriers to setting up a company. I’ve seen this dichotomy from both sides. As someone responsible for university research and innovation activity, I want my institution to manage IP effectively and get a good return on its investment. I know that university innovation activity needs to be financially self-sufficient, otherwise it is yet another drain on the only major, adjustable source of income—tuition fees from overseas students.
Universities also have to enable high-risk research across a broad swath of areas. The best outcomes come from interlinked activities developing over time—you can’t just pick one topic and expect quick results. Without the support needed to generate and test ideas, universities won’t have any IP.
But wearing my hat as a company co-founder, I want a licensing and spinout model that frees up as much cash and equity as possible, enabling my company to invest in the technology, raise funds and hire talent.
Spinout companies need low-cost access to IP, and universities need a clear upside if things go well. That means cheap and simple licensing agreements, with safeguards to ensure the IP is actually used and a reasonable return for the university if the company proves successful.
To do this properly, a university must have an adequately resourced enterprise function that can support entrepreneurial ambition. Even then it will not be easy. It is challenging for universities to manage publicly funded research for long-term public benefit without compromising the various interests and loyalties of academics as researchers, inventors, founders and employees.
The IP that goes into spinouts often has co-inventors, for example, who have a right to benefit from their work even if they are not involved in the company. The university and its academics both have responsibilities to this group, particularly when they are graduate students or postdocs.
Managing IP also needs trust and verifiable frameworks. Universities’ side of the bargain involves investing in and supporting entrepreneurship. On their side, founders and venture funders must understand the merit of giving up some equity to universities in the interests of sustaining the R&D ecosystem.
The need to sustain this ecosystem should, for example, factor into the value of a spinout’s initial IP. This is what attracted investors in the first place, but it is easy to overlook once it is hidden in the foundations of a growing company. Universities need to make such IP visible and accessible, while also having a means to share in long-term company growth.
The good news is that there are already models that work. Several universities have a rapid licensing offer, with simple and easily negotiable terms and a return based on a stake in the company and delayed royalties.
Coupled with a large-scale fund that understands the long-term mutual benefit of a thriving ecosystem, these licensing models stimulate the formation of companies that can turn ideas into impact. This has worked in Oxford and Cambridge, and there’s no reason the UK cannot be a pioneer in this area.
But universities can’t do it alone. The private sector could assist by providing more funding. In particular, there’s a need for more
proof-of-concept funding, to enable technologies yet to leave the laboratory to show their commercial viability and so derisk private investment. There is a role for government here: public funding for proof-of-concept studies in universities, perhaps in partnership with companies, is a smart investment.
Russell Group’s seed fund
The Russell Group has set out a proposal for a deep-tech seed fund, backed by a one-off investment from government. This would support at least 350 new spinouts across the country, with a focus on disruptive technologies that could draw in private investors and transform local economies.
There’s also a need for space and support for incubating startups. This is an area where partnerships between businesses and universities can help.
Imperial College London has built thriving enterprise spaces with a commercial partner; many other universities have similar arrangements that build on strong collaborations. Higher education institutions are anchors for innovation communities and districts across the UK, involved in almost every exciting initiative, creating employment and prosperity.
We have many of the pieces to drive innovation further, and the ideas and energy from our universities to underpin this. To really unleash this potential, we need serious commitment from investors and coherent, sensible policies from government.
Ian Walmsley is the provost of Imperial College London, and chair and co-founder of ORCA Computing
A version of article also appeared in Research Fortnight and Research Europe