University entrepreneurs should wait up to a decade before spinning off companies - far longer than is the common practice now, venture capitalists have said.
Fledgling companies should be kept under "incubation" at universities for up to ten years, rather than breaking ties when they are barely a year or two old, if they are to attract top-quality management and investment from venture capitalists, they warned.
Jo Taylor, chairman of the British Venture Capital Association's technology committee and director of private equity firm 3i, said: "University spin-offs need to make sure they are providing an unmet customer need.
"Too often companies are spun off too early for that need to be proved.
"There is a natural temptation for those in university technology transfer offices to show their roles are productive with as many spin-offs as possible.
"The Government, too, looks at universities that have spun off the most companies and sees them as a measure of success with which to compare the rest. We are saying that that is not necessarily so.
"We should delay spinning off early and concentrate on quality. In venture capitalists' eyes, it can take five to ten years before a company has proved to be successful."
Mr Taylor was speaking at the launch of a study on how to create successful university spin-offs by the BVCA and market research firm Library House.
The four-month project interviewed staff at 25 university technology transfer offices, 65 spin-off directors, 42 venture capitalists and several multinational corporations.
Mr Taylor said the findings showed that government money for spin-offs needed to be deployed more selectively. Currently, £240 million a year is allocated through the Higher Education Innovation Fund.
But the BVCA will be writing to Gordon Brown, the Chancellor, to urge that some of the funds be set aside for headhunting the best managers for spin-offs and technology transfer offices.
Mr Taylor said: "The Higher Education Innovation Fund could be more appropriately used to maximise its effect on young companies. More finance is needed to attract quality managers with a proven track record of success."
But Chris Jeffery, director of the executive MBA at City University's Cass Business School, said there was a limited pool of suitable managers for university technology transfer offices.
He said: "Most commercial people would find a university setting a challenge because of the number of rules and regulations.
"It is therefore hard to find people who combine sufficient commercial knowledge with higher education expertise for roles in technology transfer offices," he added.
Running tally
The BVCA/Library House review found the following:
- The number of companies spun off by the 36 UK universities that receive the most research income peaked in 2001 at 89. In 2003, the figure fell to 30, partly because of a tax change that affected university staff
- Twelve university spin-offs went public in 2004 * Most technology spin-offs are connected to life science.