Uncle Sam's out in front, but we're hot on his heels

February 4, 2005

UK technology transfer is a late starter that shows every sign of being a great success, says Ederyn Williams.

Of course, the Americans are more enterprising than the British, so if we do something differently from them, we must be wrong.

From this myth comes another one - that British universities are creating too many spin-off companies and should instead be licensing new technologies to existing companies. That is what their US counterparts do, so it must be right.

It is undeniably true that universities across the Atlantic earn lots of royalties on their licensed technologies - more than $1 billion (£530 million) a year, according to the latest survey. To compare ourselves with the US, we must allow for the fact that its research budget is about six times larger than ours. Correcting for that, UK universities still come in at only 39 per cent of the US level, clearly a substantial shortfall.

But wait a minute. Research shows that it takes a long time to build up royalty income. By this, I mean decades.

The University of California reports that more than half its royalties are from inventions that date back to the 1970s, while less than a tenth come from innovations in the past decade. This is hardly surprising when you realise that the most significant income is from medical treatments, for which testing and approval take ten years.

Careful examination of the statistics shows our real failure: the average UK university technology-transfer office is only eight years old. In the US, the average is 15 years old. So we started late, but we are catching up.

If we correct for the size of research budget and the age of the technology-transfer office, we see that the UK in fact signs more licences and generates more royalties than the US, with earnings doubling in the past year.

Our universities are quite good at licensing after all. But the generally sensible Lambert review, which is guiding theOffice of Science and Technology's next round of funding, has declared "too little licensing and too many unsustainable spin-offs".

Suppressing the number of spin-offs by redirecting some technologies towards licensing is not only unnecessary, but most technology-transfer managers would say that it is often not even possible. It is rather like asking the British athletics coach to produce more medal-winning shot-putters by reallocating some marathon runners.

Technologies have a natural home in most cases, and twisting them away will only lead to fewer successes. But it is still valid to ask: "What is the proper number of spin-off companies?"

I was surprised to find that the average university academic, despite having great intellect, access to world-beating technology and encouragement from people such as me, is four times less likely to create a company than the average member of the population. It seems that a tenured teaching and research position is a big disincentive to getting involved in a commercial enterprise.

The Lambert review argued that only a few spin-offs get venture capital or float on the stock market, meaning that too many are being created.

The facts are true, but I disagree with the conclusion. More than 99 per cent of all companies never get venture capital or float on the stock market. Are they all worthless? I think not.

This huge rump includes many successful companies that form the backbone of regional economies, generate lots of employment and are, by their sheer numbers, probably a greater asset than the select few.

And as the early cohorts of university spin-off companies mature, we are seeing ever more of them succeed.

Last year, more than a quarter of university spin-offs raised venture capital, a success rate 60 times that of ordinary companies. Ten floated on the stock market, again a staggeringly high rate of achievement. These figures suggest that far from creating too many spin-off companies, UK universities may be creating too few, as bottlenecks and restrictions squeeze out all but the highest of high-fliers.

University technology transfer, through licensing and spin-offs, is showing every sign of being a great success. Our only failure is that we did not engage in serious activity until the late 1990s. But with various types of government encouragement, we are making up lost ground fast. More of the same progress over the next ten years, and our successes will be very visible by any measure.

And a final message for the OST - your financial input over the past five years has been a great success. Don't spoil it by taking a radical new direction.

Ederyn Williams is director of Warwick Ventures, the technology-transfer arm of Warwick University.

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