Spin-offs 'doomed to fail'

August 20, 2004

Universities may be creating more spin-off companies - but most are doomed to fail, according to research published this week.

The study, by researchers at Nottingham University Business School, shows that, although universities are responding to the Government's drive to exploit research for the benefit of the economy, they are unaware of how to make a business profitable.

It says that while many university companies have been launched, few have reached the stage of being sold or floated on the stock market. Venture capitalists typically expect between 10 and 15 per cent of the companies they invest in to create wealth, but the percentage of successful university spin-off companies is much lower.

Mike Wright, who led the research, said: "Universities are tending to focus on creating business rather than creating wealth."

The research, which was funded by the Economic and Social Research Council, concludes that universities are destroying their chances of success by failing to provide sufficient seed funding for spin-off companies. It criticises institutions for not employing enough staff to support knowledge transfer.

Professor Wright's team recommends the introduction of sabbaticals for staff who want to set up spin-off companies.

The research, which backs many of the criticisms in the Lambert review of business-university collaboration last December, prompted a defensive reaction from institutions this week.

Ederyn Williams, director of Warwick Ventures, the technology-transfer arm of Warwick University, said: "While it is fair to say that the success rate could be increased, to define success as stock-market flotation of university spin-offs with venture capital investment is unrealistic."

Philip Graham, executive director of the Association of University Research and Industry Links, said: "As a sector we are making excellent progress."

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