New research commissioned by UK VC firm Octopus Ventures has put a spotlight on which of the country’s higher education institutions are doing the most to support spin outs. The report compiles a ranking of universities, foregrounding those with a record of producing what partner Simon King dubs “quality spin outs”.
The research combines and weights five data points — looking at university spinouts’ relative total funding as a means of quantifying exit success, for example. The idea for the Entrepreneurial Impact Ranking, as it’s been called, is to identify not just those higher education institutions with a track record of encouraging academics to set up a business off the back of a piece of novel work but those best at identifying the most promising commercialization opportunities — ultimately leading to spinout success (such as an exit where the company was sold for more than it raised).
Hence the report looking at data over almost a ten year period (2009-2018) to track spin-outs as they progress from an idea in the lab through prototyping to getting a product to market.
The ranking looks at five factors in all: Total funding per university; total spinouts created per university; total disclosures per university; total patents per university; and total sales from spinouts per university.
Topping the ranking is Queen’s University Belfast which the report notes has had a number of notable successes via its commercialization arm, Qubis, name checking the likes of Kainos (digital services), Andor Technology (scientific imaging) and Fusion Antibodies (therapeutics & diagnostics), all of whom have been listed on the London Stock Exchange.
The index ranks the top 100 UK universities on this entrepreneurial impact benchmark — but the rest of the top ten are as follows:
2) University of Cambridge
3) Cardiff University
4) Queen Mary University of London
5) University of Leeds
6) University of Dundee
7) University of Nottingham
8) King’s College London
9) University of Oxford
10) Imperial College London
Octopus Ventures says the ranking will help it to get a better handle on which universities to spend more time with as it searches for its next deep tech investment.
It also wants to increase visibility into how the UK is doing when it comes to commercializing academic research to feed further growth of the ecosystem by sharing best practice, per King.
“We are looking at a number of data points which are all self-reported by the universities themselves to the Higher Education Statistics Agency. And then we combine those in the way that we think brings out at a higher level which universities are doing a good job of spinning out companies,” he says.
“It means that you take into consideration which university is producing quality spin-outs. So it’s not just spray and pray and get lots of stuff out there. But actually which universities are creating spin-outs that then go on to return value back to them.”
“We’ve invested in a couple of spin outs — SLAMcore and Surrey Nanosystems — and we have a few focus areas, future of money, future of health and deep tech. And on the deep tech side, university spin outs are absolutely one of the sources of companies that we’re looking for. So a larger number of higher quality spin outs will make a difference to what we invest in and what we look at,” he adds.
“When you look at how other countries in the world view the UK education comes top or right up there among what we export and what we’re known for more people look to us for. So I think we’ve got a fantastic pedigree in terms of the research and teaching that goes on. But I think we fall short of where we could be in terms of commercializing that research and turning it into something that people can benefit from, that creates jobs. So a focus of this to say actually who within the UK is doing it well and what can we learn from those universities?”
Boiling down what it is the universities that rank highly in the index are doing well, King suggests it’s a combination of factors — such as providing early funding themselves (as with Cambridge University’s Cambridge Enterprise arm and Oxford University having set up Oxford Sciences Innovation); and/or institutions having partnerships in place with regional development funds or IP groups that allow access to startups.
“Another is just the level of attention and kind of focus they put on it,” he says. “There are lots of things that universities do and clearly the education teaching is the main part of the work. There’s also many ways of translating technology out into the wider ecosystem. Both by educating and training researchers and students who then go out and take those skills out into the market. Or directly working in a consultancy fashion. So professors working with companies and licensing technology. And then also by spinning companies out.
“So I think another key criteria/characteristic is universities that smooth the transition or allow companies to spin out easily. So they have standardized policies. They recognize that small companies in particular move at high pace and so they need to be able to allow those companies to work at high pace and not get sucked into more of the university bureaucracy, which tends to act a bit like sludge.”
Support for spinouts to acquire the right blended skill-set is another key factor — with the report highlighting instances of partnerships between higher education institutions with complementary skill-sets.
“It’s quite nice to see in the ranking — you’ve got examples like the Royal College of Arts who pair up with Imperial College London in the Helix Centre combining those different skill-sets into one place to then create teams and companies which have all those skill-sets together. Because it’s really hard to create a company if you’ve got just academics in there. You just don’t have the right mix of skills,” says King.
“Typically what we see for businesses to be successful they have to have the right people and that’s a mix of different skill-sets. So not just technical understanding and academics in there but also people who’re able to create beautiful and usable products, and also people who understand how to talk to customers and work out whether they want something; how much they want something; how much to charge something. So you need all of those skill-sets in one place.”
“You can see Dundee and Leeds in the top ten,” he adds. “And you might not necessarily think if you just asked someone on the street to name top ten universities in terms of commercializing the research that they do they may not come up there. But they have fantastic technology transfer offices, they have really forward thinking policies. These are universities starting to recognize in academic progression and career progression it’s not just about the research that you publish. Translation forms a part of how you should be assessing an academic in terms of their career. So it’s really nice to see some of that coming through.”
Octopus Ventures invests in early stage companies at a seed and Series A stage — which, as noted above, does include some spin-outs. So at what point does King consider a spin-out ready to invest in? (The report talks in terms of “investor ready” spinouts.)
“We’ve really taken a perspective in the report as an investor who looks at early stage companies… so that doesn’t necessarily mean that companies need to be already generating revenues. But typically we’re looking for companies where there’s a team in place, there is some IP protection and technology has been built into a minimum viable product or a prototype. So there’s a bit of demonstration that the technology’s here and it works. And also there’s been a bit of engagement with the market to validate that actually there are problems out there that we have a solution for,” he tells TechCrunch.
“When it’s first created it’s not ready to go out there into the market. So there’s a process that typically happens within universities, or maybe just outside, of bringing that technology up through your technology readiness levels. And then starting to engage with customers and the market to work out actually where is it applicable. What is the problem that the technology’s looking to solve or help or improve on? And then there are the various bits and pieces that need to come together. The company needs to be created itself, you need to have the right people in that organization.”
For researchers wondering when to think about making a disclosure or writing a patent, instead of focusing only on the usual academic imperative of publishing, King says in his own case — when he worked in academia developing plastic solar cells — it was “whenever we developed something that we thought was really highly novel; hadn’t seen it before”.
“We were at the forefront of this research and we knew what other institutions were doing and what was being published and so if we saw something that was kind of a step change in what had been done before then we would seriously consider do we disclose this, do we think about patenting. Rather than moving straight to publish,” he says. “A lot of that came down to the commercial nous of the professors that I was working with — so they were thinking along multiple avenues at the same time. So not just purely about researching, and ‘publish or perish’, but also is this something that we think will make a difference in the world and do we want to take it out there in one shape or other and do something about it.”
Discussing the challenges of commercializing deep tech research, King says a key consideration is knowing where to apply the technology — given this sort of research can support many possible applications.
Oftentimes you start with a technology which is a solution and in many cases it’s a platform technology which could be applied in many different places,” he says. “So one key challenge is to narrow down a focus and understand where it’s going to be most valued early on. Who really wants this technology? Who really has the problem that the technology is going to provide a solution for. And that involves going out into industry and the market and talking to customers and understanding their problems and challenges — and really, ultimately, the acid test here is will somebody pay for it?
“Because if they’ll pay for it they’ve clearly got a problem that they’re willing to put money behind to solve. But if you’ve got multiple different verticals where a technology could be applied how do you select between them? So that’s a real challenge. But universities are institutions. There are a lot of people who know how to tackle that type of problem. But that’s certainly one.”
For deep tech, too, he says getting the right team in place is crucial — which mean identifying and securing a mix of talent. “You need a mix of different people in different positions. And different people at different periods in the life cycle of a business. You’re going to struggle to have a successful business with just academics in it. There’s product design skills and the commercial skill-set as well. And so that is a challenge that again various people around various institutions around this ecosystem can help with.”
“That’s something that we, as a relatively active investor in the companies that we invest in, try to help our companies with as well — shaping the senior teams, looking for gaps, using our network and I guess the perspective we have across many different companies to understand what is the right skill-set and what does good look like for a person who’s coming into that position,” he adds.
The report touches on the notion of a ‘valley of death’ for spin outs — meaning the point at which these nascent businesses have to navigate the transition from having developed a relatively advanced technology to turning it into a product that people are going to buy.
And having a university switched on to commercialization and providing active support and access to relevant expertise clearly helps with bridging the gap. But King reckons the UK ecosystem is also generally in a better place than it was a decade ago to support spinouts — having opened up, with a lot more public information now out there to help demystify key processes such as fundraising.
He also points to greater engagement with young startups by a range of UK deep tech investors.
“While we don’t necessary invest in companies that are in universities — we’re the next stage beyond — we’re still very happy to engage early on help and shape and tell companies what they’ll need to look like when they come and raise money from us,” he says. “And we’re just one of an increasing number of deep tech investors in the UK. There’s been a bit of a deep tech winter — certainly over the noughties — and we’re emerging from that. I think it’s been driven by AI and machine learning and advances there. But we’re seeing an increasing number of investors at all stages, actually, focused on deep tech companies.”
“If you’re looking for a product manager for a spin out company in the US you’ve got a much deeper, richer ecosystem — just because of the longer history you’ve had in terms of startups and venture capital funding and successes in the US which means you’ve got a bigger pool to be able to draw from,” he adds, discussing differences in the structure of research commercialization in the UK vs US. “I think we are just a bit earlier in that journey. And so that pool is a little bit shallower. We’re on the way to building it but it’s very hard to compare the two.
“The heads of the tech transfer offices at Stanford and MIT came across to the UK a couple of years back and had a look at what was being done here and trying to compare it with what was being done in the US. [In their report] they said they thought it was being done really well in the UK but it was really hard to compare because in the US you have a much deeper history and deeper ecosystem in terms of just the startup community in general and spin outs feed into that startup community.”
Returning to the UK’s deep tech scene, King says there are several areas with exciting developments that the fund is keeping its eye on.
“Synthetic biology is one. So it’s kind of getting biology and life to do useful non-life work — I think that’s the simplest way of putting it,” he says. “Quantum computing is another area where actually the UK is really advanced, we’ve got some fantastic academics and so there’s quite a few spin outs that we’re speaking to building quantum computers or on the path to building quantum computers. And I think that’s going to be really exciting and game-changing when they take off.
“We’re also looking at human-computer interfaces. So how do people interact with technology, so that might be augmented reality, virtual reality, voice interfaces but also display technology — flexible screens and these types of things too… And probably finally robotics and drones. That’s another area where we can use a lot of the AI and machine learning expertise that we have in the UK and combine that now with the robotics expertise we have in order to make the next generation of intelligent robots. So that’s pretty exciting.”