Market tricky for R&D 'spin outs' - but it's definitely there

Most research and development (R&D) work in Europe isn't commercially exploited, even though 'spin out' companies from R&D operations in the US have contributed tens of billion of dollars and over a quarter of a million jobs to that economy.

However, now is a tricky time to spin out ideas and technologies into separate companies, according to a white paper published this week by venture capitalists 3i and The Economist Intelligence Unit (EIU).

The research puts university spin-out activity in the UK behind that of the US east and west coasts but quite far ahead of that in the rest of the world. Israel, Germany and the Nordic countries come in next.

Laurence Garrett, local director at 3i's Cambridge office, said: "We're in second place, which isn't a bad place to be."

He pointed out much of the R&D work in the US is indirectly because of massive expenditure on defence and that studies by the joint arm of Cambridge and MIT, both long known for their scientific excellence and spin out ventures, shows the quality of R&D in the UK is in many ways higher than that of US institutions.

However, quality isn't everything. "The challenge for universities is to decide which things are best spun out and then to build the network [of managers, entrepreneurs, VCs and others] that supports them," said Dr Andy Richards, a Cambridge entrepreneur and business angel known for his work with numerous companies in the UK biotechnology sector.

"I look at Cambridge Plc rather than UK Plc and very much think 'We're doing OK, thank you very much'," he added.

Yet encouraging spin out companies isn't the right option for every educational establishment, or even every company, where many researchers are afraid to stick their necks out or lack business nous.

First, there must be a decision on whether a technology is better spun out or licensed. Then there must be a team to take it forward. And of course there needs to be funding, which isn't particularly forthcoming these days.

Tom Hockaday is executive director at Isis Innovation, Oxford University's vehicle for spinning out R&D efforts, and has seen increasing numbers of spin outs from the university over each of the last five years. "We are still seeing the supply side going full steam ahead, still seeing as many good new ideas coming through," he said. "We were relatively unaffected by the whole dot-comedy but the conditions do have to be right."

However, despite the expertise and the will for researchers to cast off their lab coats and go in a new direction - as they usually have to - there is another stumbling block, namely intellectual property rights (IPR). There has to be clarity as to who owns the IPR to a technology, whether it comes out of a university or a corporate R&D facility.

Dr Chris Abell, a chemical biology reader at the University of Cambridge, said: "Universities have not been very efficient in capturing intellectual property in the past."

It looks like that situation is changing but the spin out route is far from right for every idea.