Alta Innovations: the origins of success

Alta Innovations, the tech transfer office (TTO) of Birmingham University, is one of the younger actors on the spinout stage – founded in 2008, the organisation has already come a long way.

It owes much of its success to the vision of chief executive James Wilkie, who joined Birmingham University in 2007 from industry, where he started out as a research scientist before becoming a corporate venturer.

Wilkie says moving from that career to tech transfer was an obvious choice. “It was quite natural to come across the other side of the table and start to be the individual who is representing the assets of a university to corporates and businesses, and to be looking at how you can gain value from intellectual property.”

Wilkie puts Birmingham University, with an annual turnover of roughly £577m ($815m), into a “cluster of five” below Oxford University, Cambridge University, Imperial College, University College London and Manchester University.

Birmingham University has some 1,100 active research academics, about half of Oxford’s number, and taking that into consideration, the institution “punches above its weight in the Russell Group”, according to Wilkie, who says: “We are fifth for records of invention this year and sixth for the number of new patent families.”

Birmingham University’s success was not always a given. In 2007, the TTO functioned with few staff and struggled with the fact that spinouts typically took between eight and 15 years to produce any return on investment.

“There was a much less structured approach to intellectual property,” Wilkie explains, a situation that required significant changes – so radical, in fact, that he shut the old TTO down and launched Alta Innovations in its place. It now has about 30 full-time members of staff.

He continues: “One of the things we put in place is a proper pipeline, which we report to the university’s executive every six months.” That pipeline contains the full width of research, from things that Alta is contemplating patenting to the research that has been licensed and put into spinouts.

Wilkie also recognised that it was not just the university’s executive that needed a better insight into how the TTO works. “One of the key things that has been an absolute passion of mine has been to make the intellectual property development process transparent to the academics.

“If it is transparent, they can get it, they can understand where they are in the process, they can understand who is doing what, why we need to involve a patent lawyer, why they are having to talk to some investor or why their idea cannot go any further until they find an external commercial manager to come and get some sweat equity to put it into shape.”

That transparency obviously demands an established methodology, which Alta Innovations has put into place, from informal help to a formal process.

“I have teams of people that can help with trying to find investors, trying to shape management and thinking,” Wilkie explains, “but then at the point at which someone wants to actually set up a company in which the university will end up with a shareholding, we have a kind of Dragon’s Den where you have to have the investor, the putative CEO, and the founding inventor, who all go up and do an internal pitch to convince us that it is the right way to take this opportunity.”

The transparency is paying off: Alta Innovations recently surveyed everyone with whom it has interacted to date and, with a 20% response rate, discovered that an impressive 96% of academic users would recommend the service to a colleague.

“I really was proud of the team at that moment,” Wilkie says. “The key thing here is to make sure that you have the academy on your side. It does not matter whether the TTO functions as its own department or whether it is like ours, it is held in a separate wholly-owned legal entity.”

Alta Innovations functions as a wholly-owned agent of the university, a different approach from peers such as those at Oxford’s Isis Innovation, which is assigned IP from the university to trade on the value of that asset. While Isis Innovation can receive royalties and generate share value in spinouts, the setup of Alta Innovations retains all IP in the name of Birmingham University.

That means Alta Innovations is unable to make a profit from licensing and spinout activities, despite bringing in decent sums – £17m last year. Instead, that cash goes directly to the university departments concerned.

Of course, Alta still needs to make money itself to fund its operations. To that end, it operates a research park and incubation facilities – which we will cover further in next week’s feature article.

Alta also operates academic consultancy services, taking a 15% cut, though that money does not actually cover costs and is merely a device to safeguard the university’s legal status as an education charity.

Wilkie explains: “If an individual academic wants to be a private consultant, they have to pay something to the university for their use of the charitable assets, like office, email and their university titles – because quite often the title professor is given by a university and not owned by an individual.”

Alta is also paid by the university to be its agent, income that is based on results. “We have key performance indicators we have to meet – number of patents, profitability of the other operations,” says Wilkie. “We operate pretty much cash-neutral for the university. Most years I actually give them a big donation in the form of gift aid. I cannot retain profit within the company, it goes back to the university.

“We do employ staff on terms and conditions that are not university staff. They are bonused, but internally within Alta, and those bonuses relate to our key performance indicators, but they are not directly related to any income streams that flow to inventors.”

Wilkie is quick to point out the importance of that arrangement. “It means when we have conversations with the academy, I can say to them I am actually merely an extension of the educational charity. We are here to help them develop their IP and commercialise it – we do not personally gain from the activity.

“That is our philosophy – we are transparent and we work alongside the academy. And it works really well for us.”

The collaboration with academy has been a fruitful one, and Wilkie is proud of that success. “We had far fewer spinouts when I got here in 2007. We had been typically setting up between two and three a year, and closing some down. Currently, we have 37 spinouts. They have a current valuation of about £172m ($248m) and since August 2015 they have raised £11m from third parties.”

One of Alta’s spinouts is Irresistible Materials, created in 2010, developing technology using ul
traviolet light to advance semiconductor manufacturing beyond current roadblocks. Global University Venturing reported the spinout securing £235,000 in 2014.

The success has led to Birmingham University agreeing to providing Alta Innovations with its first internal seed fund of £5m, as Wilkie reveals. The fund is in addition to a £250,000 annual commitment from the university for proof-of-concept research, an amount that is typically spread between 15 to 20 projects.

The seed fund will invest in conjunction with consortia and marks the first time that Birmingham “has a had a slightly more than early-stage interest”. It is modelled on two vehicles at other universities, Oxford Spinout Equity Management and Edinburgh University’s Old College Capital, which GUV featured in its own profile a few months ago.

The £5m fund has a lifespan of five years, and should it produce decent returns in that timeframe, Alta will reinvest those. Wilkie points out, however, that his “principals understand that the usual timeframe for a return in this kind of sector is eight to 15 years”.

He adds: “What this is really about is that it is helping us retain value in the early stages, in what we sometimes call the definition phase – the stage where you need to attract reasonable series A money.”

Birmingham University further benefits from approximately £125m in annual research funding, and the various research councils and medical charities across the UK provide between £4m and £5m in translational funding each year.

Birmingham was also instrumental in the founding of Mercia Fund I, a “university challenge fund” set up in association with Warwick University. Wilkie is confident that the fund, which still exists, will be one of the few evergreen challenge funds. To find out more about Mercia, listen to GUV’s interview with Mark Payton, managing director of Mercia Fund Management.

Wilkie, who has also collaborated closely with Fusion IP, IP Group and Imperial Innovations, points to another fund that intrigues him – Oxford Sciences Innovation (OSI), a £320m behemoth created under the leadership of Tom Hockaday, who gave his final interview as head of Isis Innovation to GUV earlier this year.

Wilkie is cautious about the potential success of patient capital in the UK, however. “The challenge is pipeline. They may have to look outside the UK. If you look at the number of investable ideas coming out of a UK university, even a really good one, it is not that many.

“OSI is obviously very focused on Oxford spinouts and region, so I am really interested to see how that goes. It is very good and I think the UK is extremely well served for patient capital. I am interested to see if OSI will work with other patient capital funds in the UK or abroad. I suppose they could invest in startups set up by alumni in other countries.”

Wilkie returns to an earlier comment about why he switched from corporate venturing to university tech transfer. “The more enlightened TTOs over the past five years have shifted from an emphasis on commercial success to being a part of the university’s reputation management and building.

“I do not care whether the outcomes are policy or economic, get an exit and realise some hard cash, or patient outcomes for improvement of quality of life or survival rates – those are all good outcomes for us.”

Finally, Wilkie says he is glad the university’s executive shares that view, but acknowledges that the understanding is also due to Alta’s success to date. “At the moment I am operating the TTO without ever costing them money. If I was in a loss-making situation, there would have to be a deeper understanding.”

Alta Innovations has big plans ahead to make sure it never ends up in that situation, which GUV looks at in the second part of this feature, which you can now read here.