12 Nov 2008
The way that UK university research is turned into profitable spin-outs is changing, with several specialist investment companies now operating as funding sources. Rob Rule explains the benefits for both parties.
Rob Rule is managing director of Techtran Group Ltd, the investment and commercialization partner for the University of Leeds, UK. Techtran is a subsidiary of IP Group PLC, which also has partnerships with nine other universities across the UK, and is the country's leading company for the commercialization of university intellectual property (IP).
How does Techtran operate?
Techtran is part of IP Group, which creates value for its shareholders and partners through the commercialization of IP originating from research institutions. Techtran manages IP Group's partnership with Leeds University. It originally developed the relationship with the university in 2003 and was subsequently acquired by IP Group in 2005. We get to know the academic opportunities at Leeds as soon as they arise, and we can quickly develop an investment case from the ground up.
We have people working hand in hand with the university, identifying new technologies and assessing ideas as they arise. This ensures that there is a stronger and more natural bridge into the venture capital (VC) community. IP Group has actual capital to invest in university spin-outs, and there are other companies and groups around the UK engaged in similar work. This is in effect a new business sector, one that stems directly from the UK's traditional strengths in research and development. Companies like ours are indicative of a real change in the way that this activity is now conducted in the UK.
Do any contentious issues arise?
One particular prerequisite for creation of a successful spin-out company is that the IP generated by academics that will form the company's foundation has been well protected, and not published. This can be a challenge, since publication is the lifeblood of academics, but it is an absolute necessity that any IP to be exploited has not been revealed elsewhere.
As commercial partners, we need to recognize the requirement of academics to publish their work. We need to decide quickly on our potential interest and whether we will proceed or not, so that the academics are clear on whether they can publish it or not. Once the IP is adequately protected and in the public domain in the form of patents, then they're free to publish again. We owe it to our academic partners to run a reasonably efficient process so as not to interfere with their need to publish, just as they owe it to us to ensure that the IP is protected and does not jeopardize the creation of a spin-out company (if that is the intention).
Are there similar models abroad?
I am not aware of any other country in which this model has grown so rapidly. Clearly the US has had a strong track record of VC investment in new technologies, some of which has taken the form of university spin-out companies, so the process for identifying and creating spin-outs has been in place there for a long time. But I am not aware of anywhere that has followed a similar model to ours, raising finance for the specific purpose of being a specialist investor in university IP.
What are the current hot topics?
Venture capital is currently very much issue-driven rather than technology-driven. Cleantech and photovoltaics are very attractive, along with anything related to energy efficiency, renewable energy and waste management. We can not afford to ignore these hot topics. We will not necessarily be able to fulfil the investment requirements for the full life of a company, so in the longer term many companies we create will be looking for external finance.
Do you fund photonics companies?
Techtran is currently funding Athena3D Ltd at the incubation level at Leeds. Athena3D is developing techniques for the creation of photo-realistic, three-dimensional digital images of objects using a patented optical scanning technology. The technology is capable of rapidly producing high-resolution 3D representations of objects with a co-registered colour image. Currently the company is focusing on radical improvements to the quality of metrology of moulded components.
What makes a good manager?
All of our investment managers in Techtran are PhD scientists or have second degrees in science. It's crucial that academics feel that the people that they are describing the technology to can really understand the basics and speak the same language. Then obviously our other job is to speak the language of investment when we are making an investment case. We need to create a clear and compelling value proposition based on the new technology and our links with industry help us to understand their requirements and what it will take to commercialize the technology.
How do the universities view all of these developments?
I think that our university partners would echo our belief that it has been a very significant development for the sector. In essence, it helps to grow trust between the two sides, and with trust comes the ability to do deals more quickly. If researchers feel that we are in this as long-term partners, then people become less suspicious. As this new sector develops and starts to deliver real commercial success stories and genuine value to all of the partners involved, then everyone will recognize just what can be achieved.
• This article originally appeared in the November 2008 issue of Optics & Laser Europe magazine.
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