Cynical business types might suggest that the phrase “university entrepreneurship” is dangerously close to being something of an oxymoron.
However, it is all too easy to dismiss or underestimate the efforts of those in “ivory towers” to transform ideas into something of substance that can provide the foundations for a viable new business.
While commercialisation, often appearing to be a Sisyphean task at the best of times, can’t be the prime focus of universities, commercially exploiting university-generated intellectual property is regarded as a key activity, requiring technology transfer offices to balance a university’s need for knowledge dissemination with the protective impulses of the commercial world and the demands of the commercialisation process.
Balancing the demands of creating a successful teaching and research institution with generating licence deals and spin-outs is a skill many Scottish and UK universities continue to develop.
While there is no perfect way to secure a regular supply of lucrative licence deals or generate high-growth new companies focused on the dynamic energy, renewables
or oil and gas sectors, recognising the types of activities that give universities, as well as those directly involved in commercialisation projects, the best chance of success is critical.
One of the most underdeveloped parts of commercialisation plans can be the market research element. Turning ideas and research into something more tangible means knowing as much as possible about the market or markets that might be entered. Indeed, it requires more than knowing, it requires understanding – moving beyond mere facts to analysis and comprehension.
Grant Wheeler, who manages the University of Edinburgh’s Research and Innovation’s Company Formation and Incubation team, confirms that given how risk-averse investors currently are, business plans need to be properly stress-tested: “Wild promises of upside no longer work,” he says. “Unsubstantiated forecasts of exponential growth based on spurious data trends are now seen as a warning sign rather than an indicator of great potential.” With Wheeler’s team supporting the formation of 143 companies (including 24 actual spin-outs as well as the renewables-focused NGenTec) over the last five years, he is well aware of the challenges of commercialisation: “In short, investors have become better
able to make sound investment decisions even at a very early stage,” he says.
“As a result, early-stage technology companies have to be similarly well-informed and they have to build their teams accordingly.” No amount of late-night Googling, accessing historical quasi-relevant market research reports or relying on the sort of ham-fisted assumptions that bedevil too many start-up business plans, is a substitute for proper research. This means talking to as many relevant global contacts as possible.
As Professor Stephen Logan, senior viceprincipal at The University of Aberdeen, which produced the oil and gas focused spin-out Brinker Technology, confirms: “There are clearly challenges in translating research results into real world applications. For example, typically there will be a considerable development gap between research output from a university lab and what ends up being installed offshore. We find that early engagement with
industrial partners is a key part of successful commercialisation.”
What is the market being targeted? Who operates in it? What are its dynamics (buying cycles, nature supply chain, etc)? While those involved in commercialising can worry too much about size (impossible to estimate especially in emerging markets), they can never worry too much about accessing it and operating within it.
Beyond decisions on what IP should be utilised and how it should be protected, information on competitor technology and IP, and the commercial exploitation structure to be pursued, the market questions continue. What is being sold? Who will be the customer (remember buyers are different again)? Why should people buy from the new entity and how does the product or service distinguish itself in terms of performance, ease of use, integration with existing systems? Understanding a “value proposition” and its bedfellow “window of opportunity” may sound like clichés, but the positioning of a new company is crucial for fundraising and sustainability.
In emerging and rapidly-evolving markets such as energy and renewables, the market research and positioning exercise is even more critical given the obvious challenge of aligning research with what emerging markets actually want. With few certainties (apart from change) and little visibility of future potential, knowing if there is a window of opportunity and recognising if (or when) it is really presenting itself is a thankless task.
A company surviving long enough to take advantage of new opportunities requires
access to funds in a country where access to funds is limited. And with new technologies inevitable taking more time and money to get to market than expected, the inexactness involved in developing such a business will mean sleepless nights for those managing a spin-out. “Finding ways to address the developmental funding gap is a continuing challenge” says Prof Logan, who highlights the value of the university’s involvement in the SFC Horizon renewable power and subsea programmes, as well as strategic partnerships with organisations such as the Aberdeen Renewable Energy Group, the National Subsea Research Institute, and the Energy Technology Partnership. “However, funding from industry, for example through ITF and from public sources such as the Scottish Enterprise Proof of Concept programme have enabled several projects to be progressed.
Combining a structured commercialisation process with determined and motivated academics who can work with equally-determined and motivated businesspeople, is likely to be pre-requisite for success. Making the transition from university research to viable business is ultimately much more of a people process than simply a legal one.
Without the right mix of people (which will change over time) even the best university IP will struggle to emerge as a valuable commercial proposition. “Building a credible board,” concludes Edinburgh’s Wheeler, “with people willing to get their hands dirty, and more critically understand, the questions investors will ask is absolutely critical. Their input at an early stage will provide the solid foundations needed… They can challenge the assumptions and spot the fantasies. And they can integrate new technology companies into existing supply chains to generate early income and reliable evidence of long-term demand.”
Darran Gardner was Commercialisation Champion on a 2011 Scottish Enterprise-funded Proof of Concept project at the University of Aberdeen.