The double life of academic entrepreneurs

December 5, 1997

Given their intellectual resources, universities ought to be bursting with lucrative commercial ventures. But in the main, they are not.

The few academics who have become successful entrepreneurs say they have to struggle against envy and prejudice. In some cases, they resort to a double life to pursue their commercial plans.

Martin Clarke is professor of human geographical modelling at Leeds University and chief executive of GMAP, which was recently sold to a US firm for an undisclosed multi-million pound sum (THES, November 28). Both Professor Clarke and his co-founder, Alan Wilson, who stand to make close to Pounds 1 million from the sale, say their success was achieved in spite of a climate of envy and resentment from fellow academics.

"I've learned some bitter lessons over the past 10 years or so thanks to the British anti-success culture," Professor Clarke says. "The amount of money involved in the sale of our company created a lot of tensions, a lot of envy. But success is something we ought to be applauding, not dismissing."

He says that universities do not know how to handle valuable intellectual property or how to benefit the inventor and the institution by making the most of an idea. "It is a myth that universities nurture start-up companies successfully," Professor Clarke says.

A good idea and a university connection do not guarantee a warm commercial reception.

Nick Radcliffe is a director of Quadstone, a thriving computing venture -its turnover is Pounds 3.5 million -Jthat operates in the finance, telecommunications and retail sectors. The company was spun off from Edinburgh University, but a person would be hard pressed to spot the link. The professor of computing never uses his professorial title in business because, he says, there is so much prejudice against academics.

"There is a real attitude problem. With most customers I consciously play down our link with the university," Professor Radcliffe explains. For the most part, he says, businesses regard universities as a cheap source of consultants but out of touch with reality. There is some truth in this, Professor Radcliffe adds, because academics often fail to play by the customers' rules.

When Quadstone was trying to break into the lucrative banking market, the company hired a former banker to offer advice on apparent trivialities on which a deal can sometimes hinge: like always wearing a blue suit when dealing with a bank. "It is just part of their expectation. If you cannot match that, you start at a disadvantage and there is no sense in that," Professor Radcliffe says.

Another common pitfall of academics seeking commercial backing is their inability to escape the "propeller-head" tendency. "At all costs, avoid the technology sell," Professor Radcliffe warns. "Technically, your product may be out of this world, but unless you have a business focus, forget it."

Quadstone invested a great deal of time talking to about 200 potential customers to find out where they had IT-related difficulties. Armed with this information, the company could be sure it had solutions to real-world problems.

Jeff Skinner, chairman of the University Companies Association, says that selling market research, particularly a radical idea, can be hampered by the "not invented here" syndrome. "Potential customers can be negative towards innovation because it shows up weaknesses in their own organisations," he says.

To get around that problem, a prototype is needed, Mr Skinner says. "Then you can really capture their imagination."

Mr Skinner, who works at University College London Ventures, recalls a biomedical detector that was devised after 20 years of research. It was so advanced that no one believed it would work. After UCL formed a company and built a prototype, customers flocked in.

The trouble is that making a prototype can be costly, and intellectual property rights are often forfeited in raising capital.

Professor Clarke says universities are conservative, bureaucratic, zero-risk environments, not dynamic commercial hothouses. And yet, as the majority shareholder in a commercial academic venture, a university will typically exert a great deal of control over the venture. Although lacking business nous, it may appoint board members and control equity.

The secret to making it work is to flag up potential conflicts with the university partner from the outset and devise strategies to avoid them, says Gwyn Humphreys, a founder of Bradford Particle Design Ltd, a pharmaceuticals concern that has secured Pounds 5 million worth of licensing after two years of trading.

Bradford University is a minority shareholder in BPD, and is represented on the firm's board. Dr Humphreys stresses that the relationship is a fruitful one, which he believes has contributed to the venture's growth. The university campus is just 300 yards from the company - "close enough, but without getting in the way of our distinct identity as a company", he says.

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