..while lack of private cash stops them setting up

Venture capitalists are still wary of investing in university spin-off companies, according to research published by Nottingham University Business School this week, writes Caroline Davis.

The research, based on responses from venture-capital firms, shows that investors are favouring high-tech companies over university spin-offs, which they view as too high risk.

Mike Wright, report co-author, professor of financial studies and director of the Centre for Management Buy-out Research, said both universities and venture-capital firms had unrealistic expectations.

"There has been a lot of dancing around handbags. They need to understand where the other comes from. Universities need to develop strategies so that they can key into the things venture capitalists are looking for, for example transparency of process and identifying decision-makers.

"Venture capitalists have got to learn to get close to univer-sities and spend more time helping them to work up proposals."

Access to finance from venture-capital firms was listed as the main factor impeding the creation of spin-offs in a Bank of England report last year.

Availability of proof of concept funding at all stages was also high on the list.

The Nottingham research found that, in 2002, eight firms invested in spin-offs from more than three universities and three firms invested in more than one company from a single university.

Overall, 15 per cent of investment portfolios were devoted to spin-off companies and few venture-capital firms had staff who were well-versed in science and technology.