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16 August, 2006 - 11:39 By Tony Quested

Risk funders and entrepreneurs must receive earlier access to top brains

“We’re losing some of our best brains across the Atlantic and slipping behind in key areas of science – and the long-term consequences for our economy could be serious.”

Most readers would assume that was a Brit talking – tortured by memories of the brain drain of the ’80s and ’90s when brilliant UK scientists and technologists were heading to America in droves and fearing a reprise. It was, in fact, a leading American scientist talking to me just a fortnight ago about the loss of their own top brains in stem cell science – notably Roger Pedersen – to Britain and in particular, Cambridge.

Those in the UK who, quite accurately, bemoan the superior commercialisation of research in the US compared to Britain’s performance in technology transfer should have their view tempered by one sobering fact. Leading American corporations have shelled out billions of dollars in the last two years to fill the cracks in their own product portfolios by buying entire East of England Life Sciences and high technology companies, often gobbling up the technology and spitting out the executives. If you can’t grow it, buy it!

There is an urgent campaign underway by regional investment chiefs to persuade these American giants that simply swallowing the science only gives them a handful from the cookie jar – but if they act smart they could corner most of the cookies. To do that, they commit long term to the region and stay close to the future pipelines of science & technology as they roll out from seven world-leading universities and internationally renowned res-earch institutions across the East of England.

Surely the model of developing ongoing partnerships would be more cost effective than having to acquire every single UK business that spins out of a university or produces a fresh piece of innovation that takes their fancy.

There has been a flood of recent reports arguing whether there is or is not an equity gap hindering the development of young technology businesses and how Britain can secure more gain from its brainpower.

The consensus is that most universities have raised their game in terms of interface with industry and are generally more open to commercialising research but that far more needs to be done to close the gap on the US exemplar.

More public money than ever is currently being pumped into UK R & D but it is still nowhere near enough.

Numbers of spin-offs and levels of licensing revenues from the leading universities are both increasing but the feeling is that only the surface is being scratched.

Arguments continue over certain elements of IPR policy at some universities, including Cambridge, as a balance is sought to keep researchers and dons keen while stimulating alliances with the external funders and other parties essential to take the relevant technology to market. And when companies are spun-off from university research another balancing act is being triggered: Brilliant scientists and technologists rarely make successful business men and women, although there are a few notable exceptions.

If a technology is particularly exciting from a venture capital funder’s standpoint they will be eyeing a relatively swift and lucrative exit – and that means an IPO or trade sale.

To make a company City friendly, the VCs will want an executive team experienced in market validation, chasing down revenues and both identifying and sustaining the right investors.

The inventors are therefore sidelined but the executive board needs to continue to keep the innovators stimulated for the sake of developing future generations of the core product. A report commissioned by the British Venture Capital Association from The Library House in Cambridge faithfully records the vast improvement in academia-industry interface but urges all relevant parties to acknowledge that great challenges must be faced to ensure more resources are generated – and, crucially, that they are used far more effectively.

As the BVCA report points out, perhaps a useful opening gambit would be to start talking quality of research rather than quantity of spin-outs.

One university in the region interviewed for this supplement openly stated that it didn’t really do spin-outs. Yet many of its leading brains have individually become entrepreneurs and even formed their own companies and the university is at the cutting edge of collaborations with companies and governments around the world that will undoubtedly have spin-off benefits for the UK economy.

The Lambert Review found too many low-quality university spin outs and also too many instances of spin-out ventures being forged that prematurely packaged promising ideas into a commercial entity that had little or no hope of attracting sufficient VC funding to take it to market. This opinion is mirrored in VC funding for university spin-outs, which is modest, and the fact that the record number of IPOs in any one year by university spin-outs was 12 in 2004.

The ideal surely has to be matching the serious funders and serial entrepreneurs with the most brilliant innovators far earlier than is now the case: To achieve this will take a tremendous show of faith on the part off the universities and will require going much farther than supporting their internal technology transfer offices.

Assuming that the VC and angel funders are the best source of executive talent to optimise commercialisation of technology then these funders have to be part of the internal fabric of universities with pretty much immediate access to the most entrepreneurial and inventive dons and research heads. Such access would also counter another major hindrance to swift and effective commercialisation of university brainpower – nailing down IPR ownership much quicker.

The BVCA study reports that 89 per cent of university spin-outs surveyed commented that securing access to IP rights and negotiating contracts with the relevant university was too protracted. Some windows of opportunity don’t stay open for long in a competitive marketplace and an IPR wrangle can be fatal. But we should not dwell too long on negativity.

The endemic challenges represent a wonderful opportunity for UK plc to solve through collaboration. And if an incentive for finding a solution is sought, recent high level delegations from India and Hong Kong that held dialogue with Business Weekly are happy to provide it. Among many other countries, they have identified knowledge as the surefire route to economic growth.

The Indian government is using Cambridge as a model to turn India into a “knowledge superpower by 2020.”

So we know we have brainpower and innovative ideas that are the envy of the world. Does it matter if the region remains a ‘virtual’ marketplace; that the ideas are generated here and developed elsewhere; that manufacturing or physical premises will be overseas; that our top science and technology based companies will inevitably be acquired in a relentless dollar deluge?

The answer has to be ‘no’ as long as the payback is right for the original IPR. Being royalty rich with minimum overhead is hardly a curse.

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