Nigel Wilson

Nigel Wilson

Group Chief Executive

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The Telegraph

Universities must embrace the value of commercial spin-outs

The conditions have never been better for Universities to work with financial institutions in developing a fusion of the academic and the entrepreneurial. Nigel Wilson, featured in The Telegraph, discusses how Universities should follow the successes shown in the US and China.

Over thirty years ago I was privileged to complete a doctorate at the Massachusetts Institute of Technology (MIT) in Boston. It was in so many ways an eye-opening experience for a young man starting out from County Durham.

MIT was created to support the application of research in business and life – academically distinguished but with a founding ethos that emphasised applied science and research. The consequence today is an extraordinary fusion of the academic and the entrepreneurial – MIT has created several hundred new firms in the last twenty years. The same is true of Harvard, Stanford, Caltech and many other US universities.  From computing and engineering, to medicine and life sciences, artificial intelligence and industrial processes, academic work leads to patents and commercial applications, attracting billions of capital investment. The Chinese are already following this model, at pace and at scale.

The UK has a huge share of the world’s top one hundred universities, and is also following, but we need more pace and greater ambition. Oxford, Cambridge and Imperial College have modestly successful vehicles for corporate spin-outs, and there is no shortage of innovative thinking at other universities including Edinburgh, Glasgow, Queens Belfast, Newcastle, Manchester, Leeds and others all the way to Cardiff, Swansea and Exeter.

Ambition requires three things.

First, more patient capital which not only invests in early-stage university spin-out companies, but also stays with them and supports them as they scale up. This is not standard venture capital or private equity funding seeking a relatively short-term return, but money invested with an investment horizon of a decade or more. We do not want to simply create brilliantly innovative companies whose fate after just a few years is to be bought for small change by US or Asian tech giants: DeepMind, bought by Google, is the obvious example, but there are many also in life sciences. We need our millions of UK pension savers to benefit from owning these businesses, not US entrepreneurs.

Following the Treasury’s outstanding work on the Patient Capital Review, the British Business Bank can start assembling billions of pounds of long-term money from government and institutions like Legal & General to back high-tech start-ups including from universities. We need to take a long, hard look at how the US does this, through academic institutions and for example through the DARPA defence innovation programme.  Then we can copy the best of the best.

Second, we need to configure our university spin-out agencies to take maximum advantage of new research with commercial applications. OSI in Oxford, CIC in Cambridge do this well, with hundreds of millions of pounds of investment. Other universities struggle to reach scale, and there is a strong case for collaboration between, for example university spin-outs in Scotland and the North, along the M62 corridor or in the South West.  At present, there is a long tail of smaller spin-out funds but the number of companies emerging is not large enough e.g. Edinburgh delivered 13 spin-outs from 2011 to 2015, Newcastle 2, more could be achieved collaboratively.

Third, we need to normalise the process whereby academic work is commercialised – creating a career path for university-based innovators which enables them and their institution to benefit from the commercial success of the intellectual property they develop. This should be perfectly possible for a not-for-profit institution which, in the case of a university, provides teaching as well as research.  The Wellcome Trust’s commercial arm, Syncona, is an outstanding example, as is Sheffield University’s Advanced Manufacturing Research Centre, a collaboration led by Vice Chancellor Sir Keith Burnett.

A more commercial approach complements rather than devalues “pure” academic work with less obvious business applications. David Willetts’ recent thought provoking book “A University Education” rightly makes the point that funding for universities is not just a pump priming exercise for new business ventures – but if universities can become more profitable via applied research then the cost of going to university could come down.

The time is right to do this. The UK has record rates of company formation, animal spirits and entrepreneurial zeal are rising, with many new companies based around ideas or intellectual property. The government is supportive with the ambition to grow research and development in the UK from the current 1.7% of GDP to 2.5%, that is a £15b increase, and through UKRI has created a framework to do this.

The conditions have never been better for our great academic institutions to work with financial institutions developing inclusive capitalism that helps to create a modern, knowledge-based economy with rising real wages and increased profitability. Let’s make it happen.

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