Universities stall takeoff of spin-offs

April 14, 2006

Spin-off companies are not as successful as they could be because universities take too large a proportion of shares for themselves, a conference heard last week.

Researchers are given shareholdings of as little as 5 to 10 per cent in fledgling companies based on their ideas even though any commercial success will likely be a result of their hard work, according to a leading financial lawyer who addressed the Association for University Research and Industry Links (Auril) conference.

Sean Nicholson, a corporate finance lawyer at the firm Dickinson Dees, said: "My fear is that spin-off companies in which the institution is a majority shareholder will not develop as quickly as they could and might never achieve their full potential."

He suggested that each university could adopt a standard formula for equity distribution in its spin-offs and that the funding council, Auril and the University Companies Association (Unico) could develop guidelines to help universities set the formula.

Universities could also work with the National Health Service, which is starting to sell the rights to technologies developed in hospitals, Mr Nicholson said. Auril or Unico could work with NHS technology-transfer officers or a new body could be set up to work between the two sectors.

At the conference, a management consultant said that the funding council should set better targets to ensure that university links with business benefited the economy.

Phil Burgess, a consultant at PBAS, a consulting firm for public-sector organisations, said too many universities focused on how many businesses they collaborated with rather than on whether the collaborations had a positive impact on the firms.

He said: "I think they (thefunding council) have a responsibility to tell the universities what they are expected to achieve with the money invested but leave it to the universities to decide the process by which they do it."

Mr Burgess added that university staff working on knowledge-transfer schemes should have experience of business and spend a period networking with industry.

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