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"Fewer uni spin-outs will mean greater success"

| Thursday June 26, 2008



More money should be focused on fewer university spin-out companies in order to ensure greater success, according to a report by technology and innovation consultants Targeting Innovation.
The report into spin-out activity in Scotland also suggests that many companies are spun-out too soon and do not benefit from early involvement of high calibre commercial managers.
The findings are backed by figures which show that of around 200 spin-outs from Scottish universities since 1967 almost a third failed while 55% have less than 10 employees. Only 16 of these firms employ more than 50 people.
And despite an increase in the number of spin outs from Scotland’s universities in the last 10 years, fewer are thriving, with top performers such as Axis Shield and Wolfson having been established 10 or 20 years ago.
The report recommends:

Refocusing resources – more money should be concentrated on fewer spin-outs in order to ensure success,
Don’t spin-out too soon – too many firms are spun out before the technology is ready,
Install commercial management sooner – it is important to employ a high calibre team at an early stage, including a commercial MD with detailed market knowledge,
More funding – more funds are required at start-up to help attract private investors.

 

George Boag, chief executive of Targeting Innovation, said: “It has long been recognised that technology from Scotland’s universities represents a great opportunity, but this study shows that efforts so far to exploit it have had limited success.
“Many of the more successful companies have taken at least 10 years to realise their potential. This is considerably longer than the traditional venture capital exit horizon, which is typically nearer five years.
“Universities often develop novel research which isn’t aimed at any specific market. Because there is a lot of risk at this stage, the private sector is wary of investing until it is clearer how the technology can be exploited and which market it is aimed at. Therefore there is a gap to the market which universities are not well-equipped to address. The real challenge is to find ways to successfully bridge this gap.”
The report recognises that choosing which technologies and ideas to spin out is difficult, but suggests closer relationships with venture capital and angel investors could assist with identifying the most promising technologies.
George added: “A choice needs to be made between spreading resources thinly to give as many spin outs as possible a chance, or progressively focussing on a select few.
”Effort and funding might be better directed to ensuring that fewer spin outs emerged, and were nearer to market when they did, and that they employed stronger commercial management sooner.”
In compiling the report, Targeting Innovation gathered information on spin-outs from all Scottish universities and interviewed those involved in commercialisation at universities, the spin-out firms themselves, and private equity backers.
George added: “Targeting Innovation’s constructive aim in commissioning this study was to offer some insight into the challenges facing Scottish university spin-out companies and influence policy and practice to ensure greater successes in future.”

www.targetinginnovation.com

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