GUV:Fusion 2017

It has been an incredible year for the innovation ecosystem – in many ways it seems unbelievable that only a single year has passed since the last GUV:Fusion, Global University Venturing’s annual conference in London held alongside the GCV Symposium of our sister publication Global Corporate Venturing.

But that the world does not stop turning even when many of the technology transfer leaders are gathered in a hotel opposite St Paul’s Cathedral was arguably best illustrated by news the day before the main proceedings of GUV:Fusion that commercialisation firm IP Group had made a bid for its peer Touchstone Innovations – fuelling many a discussion among delegates. There is more on that story in our big deal report.

The changes were also illustrated by some of the speakers at the conference, beginning with Lesley Millar-Nicholson, director of the technology licensing office (TLO) at Massachusetts Institute of Technology (MIT), who gave the opening keynote speech. Millar-Nicholson took over the reins at TLO in July last year, replacing Lita Nelsen, who had led the office for 23 years.

In her keynote, Millar-Nicholson acknowledged the privileged reality in which MIT found itself, remarking just how much easier it was to secure funding for spinouts than it had been in her previous job with University of Illinois at Urbana-Champaign.

One in 10 of MIT’s alumni also offered services back to MIT, and of those a third offered capital – a vital factor for innovation and something that may be lacking in other cultures, Millar-Nicholson said.

MIT’s standing was further boosted by more than 45 maker spaces and 85 innovation initiatives as of April this year. Joking, Millar-Nicholson added: “Given the fact it was a month ago, it is now probably 90.”

Crucially, MIT was part of an ecosystem rather than a single point of focus – and just because it had been successful to date did not mean it had it all figured out. Indeed, MIT’s president L Rafael Reif wrote a guest comment for the Washington Post in 2015 – A better way to deliver innovation to the world – in which he drew attention to potential lost because research did not make it to market.

That article, Millar-Nicholson said, started a discussion on campus and eventually led to the creation of the Engine, a huge undertaking by the university that would result in a $1.5bn investment in the transformation of Kendall Square into more innovation space.

Millar-Nicholson was keen to point out that while the Engine was built by MIT and the institute was putting $25m into the Engine’s fund, it was not run by MIT, which would withdraw participation and abandon its board seats later this year.

She returned to the idea of how lucky MIT was. The TLO received some 800 disclosures each year without any need to chase researchers. Picking up on a keynote speech given by her predecessor Lita Nelsen a few years ago at GUV:Fusion, Millar-Nicholson also pointed out, however, that tech transfer was not a profitable business.

In 2012, for example, a total of 84% of tech transfer offices (TTOs) were in the red, and over the past 20 years 87% failed to break even. The difficulty in making a profit was due in part to the fact that TTOs returned money to a host of actors – from inventors to labs to units – making it nearly impossible to cover operational costs.

In a conclusion that encapsulated why GUV:Fusion was moved from a stand-alone event to a conference running in parallel with the gathering of corporate venturers, Millar-Nicholson said the ecosystem needed many more partnerships with corporate venture capital units.

Indeed, she concluded, corporate-sponsored research ended up going nowhere – 53% of inventions arising from such research between 2003 and 2012 was unlicensed.

But research that does make it out of the lab will need capital, and a panel following Millar-Nicholson’s speech took an in-depth look at funding university spinouts and startups.

Hosted by Douglas Hansen-Luke, executive chairman of Future Planet Capital, the panel included Jim Wilkinson, chief financial officer of university venturing fund Oxford Sciences Innovation (OSI), Nick Greenwood, pension fund manager of the Royal County of Berkshire Pension Fund, Patrick Chung, founding partner of investment vehicle Xfund, and Gregg Bayes-Brown, marketing and communications manager at tech transfer office Oxford University Innovation.

Wilkinson noted that OSI had an agreement with University of Oxford for the next 30 years, provided everything went according to plan, meaning the fund would focus exclusively on the institution’s spinouts. The fact that OSI was independent was crucial to its creation, giving it the ability to make decisions on deals and act more like a VC investor than a university department.

Bayes-Brown pointed out that OSI was just one of several models, even at Oxford itself, where other initiatives included Lab282, which supported early-stage life sciences research.

Elsewhere, Apollo Therapeutics brought together the TTOs of Imperial College London, University College London and Cambridge University as well as pharmaceutical firms AstraZeneca, GlaxoSmithKline and Johnson & Johnson, to set up a £40m ($57m) commercialisation fund. Other models included Epidarex, Bayes-Brown continued, which worked well for regional collaboration. Indeed, he added, a similar model may also work well for south Wales, where individual institutions may not have the pipeline required to support their own funds.

Chung disagreed somewhat with the remainder of the panel, arguing for a limited partner and general partner structure for funds. Such funds, he argued, had been around for a long time so they obviously worked. He added that he would struggle to think of any evergreen fund outside the university ecosystem that had been a top performer. Bayes-Brown countered that universities needed a different framework of support from other ecosystems.

The audience, with a majority based in the UK and Europe, remained split on the issue, with a slight majority in favour of an evergreen fund.

OSI, meanwhile, has chosen to raise money from its consortium of backers upfront, as Wilkinson said the aim was to commit the shareholders and to gain access to dealflow.

Greenwood added that for his fund, the aim was primarily to access the best innovation, whether that was in the UK or internationally. The pension fund, which has backed Future Planet Capital, conducted many co-investments, he said.

Once an ecosystem has access to enough funding, the question then becomes how the ecosystem can be managed and nurtured in the long term.

Hoping to answer that question was the next panel, hosted by Anthony Boccanfuso, president of UIDP who welcomed Derek Newton, assistant vice-president of innovation, partnerships and entrepreneurship at University of Toronto, Adam Stoten, chief operating officer at Oxford University Innovation and Sally O’Neil, director of industry contracts at Stanford University to the stage.

Stoten said that, to a certain extent, universities were still catching up with increasing student entrepreneurship. At Oxford, the reaction had so far included the creation of an incubator downstairs from Oxford University Innovation, a collaboration with the business school identifying opportunities around unused lab space.

Newton noted that Toronto now had nine programs supporting more than 200 student-based teams. The university was aiming to understand how the TTO could be relevant to that devel
opment and in what ways university intellectual property was involved and needed to be protected.

The bigger challenge for Toronto, however, appeared to be to retain talent in the city and region, rather than seeing entrepreneurs leave for Boston and Silicon Valley – the proximity to these two hubs could be a blessing but sometimes turned out to be a curse when founders left to obtain funding and did not return.

O’Neill said Stanford – much as Millar-Nicholson had remarked about MIT – was in an unusual environment and the university was aware of that privileged position.

Stanford’s ecosystem was strong, with initiatives such as the StartX fund, launched by students, boosting the university’s standing. On the other hand, O’Neill admitted, Stanford was facing its own unique set of problems, with VCs trying to lure students away with money to work on their startups.

Stoten noted there was a direct financial benefit for universities taking entrepreneurs seriously, whether students or staff. O’Neill echoed that sentiment, saying Stanford faculty were free to conduct 30 days of consulting each quarter. Her office, however, did not handle those consultancy agreements, which were often a significant source of income for other tech transfer offices.

She echoed Millar-Nicholson’s feelings that there needed to be a better relationship with corporates, noting that research contracting was more difficult than it should be. Agreements, she lamented, had become increasingly complex over time and faculty often had a hard time being patient and realising it was in their best interest for the university to protect their right to publish results.

Newton concluded the discussion with a more optimistic tone, explaining that many companies that had not traditionally sponsored research were now keen to support innovation, engage with students and build a network.

The morning’s proceedings concluded with a panel discussing best practices in tech transfer, both in the UK and internationally. Hosted by Thierry Heles, editor of GUV, the panel included Quentin Compton-Bishop, CEO of Warwick Ventures, Larry Loev, CEO of Ariel Scientific Innovations, Tony Raven, CEO of Cambridge Enterprise, and James Wilkie, CEO of Alta Innovations.

The panel tackled some of the big questions, including how to go about establishing a tech transfer office. Loev explained he had learned how to do that by at another commercialisation office, that of Tel Aviv University.

Panellists agreed that the most important mission of a young TTO was to get faculty members to see how commercialisation could bring value to them and serve as a research funding vehicle. Wilkie echoed that sentiment, saying it was critical to talk continuously to and stay in touch with academics, including beyond the initial setup of the TTO.

Compton-Bishop pointed out that the most challenging aspect was recruiting and retaining people with both commercial expertise and an understanding of science, thus able to work with people from academia.

Although the panel was initially slated to discuss the consequences of Brexit, it emerged early that the question was irrelevant as TTO staff do not deal directly with research funding. Instead, the discussion moved to orphan intellectual property. The panel largely agreed with Loev’s statement that it was “not good to be stuck with it – try to minimise it”. He added that Israel’s unique geopolitical position also drove TTOs in the country to innovate.

Reacting to a question from the audience on why TTOs were still relevant, Wilkie countered that “someone has to do the leg work”.

Raven pointed out that, contrary to the institutions of his fellow panellists, academics at Cambridge were allowed to reach out to anyone to commercialise their research. He concluded that “they come to us because they need help to understand the language of business” and that Cambridge Enterprise’s success was based primarily on word of mouth among faculty.

Following the lunch break, Frank Rimalovski, executive director of the New York University (NYU) Entrepreneurial Institute and managing director of the NYU Innovation Venture Fund, gave a keynote speech. Although not on the original schedule, Rimalovski stepped in after Russ Cummings, chief executive of Touchstone Innovations, was otherwise occupied following IP Group’s takeover proposal.

The NYU Innovation Venture Fund, which Rimalovski joined in 2010, was originally set up as an evergreen philanthropic seed fund with NYU as sole limited partner. The fund invests between $100,000 to $200,000 directly as part of syndicates, with a general focus on early-stage companies.

Rimalovski noted that in the US commercialisation was not only important, it was legally mandated through the Bayh-Dole Act.

The funding “valley of death”, Rimalovski said, was often thought of as a lack of funding, but that was not the whole truth. He said it was also about customer discovery, prototype development, business model and team formation, legal counsel, mentors and advisers, collaborative spaces and, finally, capital.

That meant a university had to do more than provide funding – recognising also that “not everyone is going to be an entrepreneur” but that learning about this environment would still be beneficial.

Rimalovski summed up his team’s mission by explaining they wanted to make entrepreneurship a campus-wide reality, boost multi-disciplinary experience, bring more innovations to market, compete for top students and faculty, attract funding and generate return on investment, and, most of all, create a generation of entrepreneurs to inspire and support NYU for years to come.

Creating a generation of entrepreneurs also raises the question about what the future of education will look like. Aiming to provide some answers to that challenge was a panel hosted by James Mawson, editor-in-chief of Global University Venturing, who introduced Nicos Nicolaou, CEO of Unicaf, UK House of Lords member Baron Wei of Shoreditch, and Rob Jordan, investment manager at CDC, the UK’s development finance institution.

The panel addressed a variety of issues, including continued education, where Nicolaou pointed out that affordability was much less of an problem. Another challenge the panel discussed was education in Africa, where there are few universities to cope with capacity. That meant, said Nicolaou, that students were forced to go online rather than attend a physical institution.

Jordan noted that digital education was an important factor on the continent, giving the example of one university setting up a Facebook page and gaining more than 100,000 likes within a very short time. Some 90% of those connections came from Africa, despite the fact that the page had not been targeting those users specifically.

Lord Wei, meanwhile, considered a future in which universities took over many aspects of modern life, enabling citizens to continue learning and remain within the education ecosystem their entire life. He cited student entrepreneurs as an early example of this, where students graduated from a university but remained nearby, possibly even within an incubator run by the institution, to launch their venture.

Artificial intelligence, Lord Wei noted, would be crucial in supporting that reality – the more the system knew what a student knew or did not know, the more materials could be adapted to ensure they gained relevant knowledge.

But how does a university build a successful incubator to reta
in those student entrepreneurs? Ali Amin, co-founder and CEO of UBI Global, and Simon Bond, innovation director of SetSquared, took on that question during their discussion.

Amin summed up UBI’s work, explaining how the organisation emerged from a master’s thesis that established a proprietary framework for ranking incubators and accelerators worldwide. UBI was currently collecting data for its latest benchmarking study, with responses welcomed until the end of June.

Amin noted that from the previous study, which ranked SetSquared as the world’s number-one global incubator, successful initiatives showed three distinct traits – they attracted high-potential startups, in other words those that were sustainable and had a high impact solving global issues, they ensured resources were available for operations and used the money to network with other players, including TTOs, and finally they were supportive of the entrepreneurial environment.

To be evaluated in such a way helped SetSquared learn some important things about itself. Bond noted that it was important SetSquared provided value for the ecosystem and for its client startups. The incubator also needed to offer an open innovation program.

Bond joked that it had all come together for SetSquared, saying: “When you join SetSquared, it is kind of like joining the mafia. You can walk in the door but you can never leave. A lot of alumni hang around.”

Looking to the future, Bond said there was only one way to go from being number one – up. He noted that SetSquared would continue to increase its presence in cities, move into additional sectors and look into funding. He said he was particularly keen on advanced engineering, digital innovation, health and wellbeing, and sustainable technologies – hinting that SetSquared may open hubs focusing on these sectors.

Once companies emerge from an incubator, they will need support scaling – a problem that EU governments and corporations are keen to help with. How exactly they can do that was debated when William Stevens, chief executive of E-unlimited, welcomed to the GUV:Fusion stage Michael Brandkamp, managing director of High-Tech Gründerfonds (HTGF), Shiva Dustdar, head of innovation finance advisory at the European Investment Bank (EIB), Julia Prats, head of entrepreneurship at IESE Business School, and Livio Scalvini, director of Intesa San Paolo.

Prats listed several reasons to be optimistic, including a study that showed corporates already collaborate with tech transfer offices and accelerators. She added that Spain also had a program in which corporations could approach the government to ask for a scientist to sit temporarily on the board as an adviser.

Scalvini added that in Italy, Itatech had been a successful initiative. Itatech was set up in January this year with the support of the European Investment Fund to back technology transfer in the country.

Brandkamp, whose HTGF has been able to attract corporates and use that capital to boost university spinouts, was also optimistic, noting that corporates were increasingly keen to invest in the early stages, a crucial factor in helping startups grow quickly and efficiently.

Finally, it was left to Victor Christou, chief executive of university venturing fund Cambridge Innovation Capital (CIC), to conclude GUV:Fusion 2017 with a keynote speech.

Christou echoed much of the general optimism that had prevailed throughout the day at the innovation ecosystem’s continuing successes. CIC, he said, was backed by a corporate itself, semiconductor company Arm, as well as sovereign wealth fund Oman Investment Fund, other actors such as IP Group, and Cambridge University, which remained the largest investor.

CIC had the right to co-invest alongside Cambridge Enterprise at the inception and seed stages, but even more so fitted into an ecosystem of vast potential – the Cambridge cluster was home to more than 4,300 businesses, including 12 unicorns. Importantly however, in a sample of more than 1,200 science and technology businesses, it had emerged that fewer than 10% made it to scale-up stage, showing that there was still much work to do.

Christou noted that there were tax incentives for investors at the early stage, but such initiatives were lacking when it came to capital of £5m ($6.3m) or more. It was here that CIC hoped to make a difference, focusing on the £5m to £20m funding rounds.

To be efficient, CIC behaved mostly like a traditional VC firm. CIC’s focus lay largely in long-term problems such as deep learning, artificial intelligence, wireless and wired devices, materials, genomics, epigenetics, next-generation biologics, and so on.

Showing just how ambitious CIC was about making an impact, Christou concluded by saying the fund was interested in building really big businesses – not simple unicorns, but companies worth at least $10bn or preferably multiples of that amount.

The message fitted into an overall theme – delegates at GUV:Fusion were keen to push onwards and upwards. And while some noted in discussions off-stage that Brexit had them worried about staffing issues, most were not worried about an impact on their work.

With such a fantastic year for the sector to look back on, nobody could blame them for being optimistic and eager to continue making a lasting impact on the world.