If you think your academic work is ripe for the commercial world, think long and hard before you make the leap. Harriet Swain offers advice to would-be entrepreneurs.
Ever thought of putting all that thinking you've been doing as an academic to practical use? Ever thought it would be nice to be rich? Ever thought about setting up a university spin-off company?
Well, don't, says Philip Ternouth, an innovation consultant. "The circumstances that make a company successful are far rarer than most academics believe them to be. I have set up very successful companies and I have set up companies that haven't been successful, and they have looked just as promising."
He does, however, qualify the warning. His advice is: "Don't, unless you have certain things in place." First, there must be a compelling business case for why someone will have no alternative but to buy your product.
Second, you need to ensure that what the technology is designed to achieve cannot be done better in other ways. Your good idea for a product developed through your technology may invite competition to develop that product using other technologies. Third, you must be the right kind of person.
"It's about salesmanship - seeing opportunities where others see problems."
Finally, you must be sure that you want to deal with all the headaches of management. Academics often make good entrepreneurs because they have enthusiasm, Ternouth says. But enthusiasm isn't enough. Academics also need to find someone they can trust to manage their venture. "It may be themselves, but they need to be aware that this is a full-time job, and it needs a special kind of thinking process."
Ederyn Williams is director of Warwick Ventures, which patents, licenses and creates spin-off companies from research at Warwick University. He says that while the most important thing for a successful spin-off is to have a genuinely world-beating technology, academics must realise that they will also have to become involved in the business side of the venture, even if this is not their strength. Most academics are unwilling to immerse themselves in business, understandably perhaps, because they are often not very good at it, he says. "What is the point of taking world-class academics and turning them into mediocre businessmen?"
Isis Innovation, a wholly owned Oxford University subsidiary, has spun off more than 40 companies. Tim Cook, its managing director, says managing a spin-off will either mean doing more work or stopping doing the academic work you probably enjoy. He advises bearing in mind a few essential principles: creating a company demands hard work, some of which will be dull, and it requires new skills. There is also an element of luck.
It also requires money. Getting funding is an essential first step, but it is not always easy. Williams says that although the quality of the technology involved is key, the next highest priority is a business plan that takes into account who might invest in the proposed company. If no one wants to put up the money, there won't be a company.
David Charles, who holds the David Goldman chair of business innovation at the University of Newcastle upon Tyne Business School, suggests that academics should first explore the possibility of selling expertise as consultants. This may, in the long term, lead to a product-based business and, in the short term, generate cash to help develop the product. Ternouth agrees that setting up a consultancy first is an ideal way to get used to dealing with customers while also doing research on potential customers.
Another consideration is what will happen to any money the business generates. Cook says: "The great thing about spin-offs is that they bring a new source of money and allow something to happen that wouldn't otherwise.
Everybody can get something that they wouldn't have had before."
But he warns academics against being too greedy. In general, he believes that the academic innovator should receive about the same amount as the university because a project won't happen if either withdraws their input.
"I have had deals fail because academics won't let anyone get any equity," he says. "Because academics are worried about being taken advantage of, they sometimes have unreal expectations. There is no point having a brilliant deal that no one will invest in." He says his first advice for anyone thinking of starting a company is to talk to someone who has done it.
Mark Fenwick, business support manager for Nesta's Creative Pioneer Programme, which supports graduate entrepreneurship in the creative industries, stresses the need for teamwork. He says this can cause more problems for those in the creative industries, where the emphasis tends to be on authorship of an idea, than for scientists used to collaboration.
"The evidence is that entrepreneurial teams tend to be more successful than individuals," he says. "Therefore spin-offs need to encourage teams, but this must be developed sensitively."
The one relationship that academics cannot neglect is the one with the university, Charles says. "In the first few years of a company, you need all the support you can get," he adds. By keeping up with colleagues, it may be possible to contract work to the department, and it will be necessary to negotiate time off to deal with management of the company. He says academic entrepreneurs should also be clear about intellectual property in relation to the university. Licensing agreements that are too broad could infringe on the research activities of colleagues.
All of this will take time, and academics looking to make a quick buck may be disappointed. "You might become a millionaire in 18 months," Williams says, "but it is much more likely that it will be a five to ten-year process."
- Scott Shane, Academic Entrepreneurship: University Spinoffs and Wealth Creation , Edward Elgar (2004) www.isis.innovation.com downloadable leaflet on starting a spin-off company
- D. Hague and K. Oakley, Spin-offs and Start-ups in UK Universities, Universities UK (2000)