A billion reasons to smile

UK-based Cambridge University’s success at seeing its students’ and faculty’s spin-outs gather more than £1bn ($1.5bn) in follow-on funding is a landmark to be applauded. Cambridge, therefore, joins other luminaries, such as US-based Stanford, in such a success (see analysis, page 13).

But, as Carol Daniel drily points out in a guest comment (see page 12 of the May 2013 issue) written in a personal capacity rather than in his role in the enterprise office at City University, London, if Cambridge and its peers are so good, do they need so much public funding?

It is partly a rhetorical question, as governments and other funders of universities and research institutions are increasingly looking for metrics of “impact” on the local economy beyond simply people receiving a good education and writing academic papers.

Money is increasingly going to the “winners” able to compete on a global stage. And, here, the UK and US universities dominate, at least in terms of their impact on the local ecosystem, according to research on behalf of Russia-based Skoltech (see news, page 9).

There is no question that the two biggest sources of innovation – as defined by effectively being the first dollar into an entrepreneurial idea and company – comes from state-backed universities and research centres and corporations through their research and development (R&D) and
venturing units.

Analysis by financial services provider Silicon Valley Bank for a webinar co-presented with our sister title, Global Corporate Venturing, and hosted by law firm DLA Piper, found the US invested more than $400bn each year in such forms of innovation capital (see regional analysis, page 15).

The majority of the money goes on internal R&D at such corporations and research centres. The sponsors of such R&D, however, are looking for more impact and results, which is driving them towards supporting nascent academic entrepreneurs (NAEs) as a way of stimulating the next high-growth start-ups and businesses of the future that can create clusters in new business segments.

Research by Roman Lubynsky, part of MIT’s venture mentoring service, another in the billion club, indicates that many of the starting approaches to encouraging such NAEs could be hindering their stated goals. His work identifies how important the students are in taking technologies and turning them into new ventures.

Lubynsky rightly warns of the numerous pitfalls confronting these NAEs, including potential tensions with their academic mentors and how different it is to take research and create a viable company around it. The alternative of taking established technologies and recombining them into a
new venture with a specific target customer in mind is very different in terms of the time and resources needed.

Universities underestimate the years or even decades an idea could spend in research before reaching potential commercialisation, and governments and other agencies should fund this accordingly. Venture capitalists and angels are more often successful in taking the recombinants to a path of fast growth than they are at turning research-based start-ups into the equivalents.

This puts more pressure on states, which, in turn, want to make sure their regions maximise benefits and the returns are not reaped by peers elsewhere – a difficult task in a globalised economy.

A high-profile and well-funded attempt to do exactly this is under way by Mike Lynch, who has raised $1bn for his venture capital firm Invoke Capital. Lynch is one of the few to have turned his research at Cambridge University not just into a successful company, Autonomy, but into one worth more than $10bn at the time of its sale to computer company Hewlett-Packard. He now wants to help others do the same and by himself could quickly help his alma mater enter the 2 billion club.