This article first appeared in The Daily Telegraph.
It is now more than 60 years since James Watson and Francis Crick made their breakthrough.
The story goes that the University of Cambridge researchers chose a popular student destination – The Eagle pub – to announce their discovery of the double helix, which explained how DNA replicates and how hereditary information is coded on it.
It was to be one of the most significant scientific discoveries of the 20th Century and would see them awarded a Nobel Prize for their work. It also paved the way for the rapid advances in molecular biology that continue to this day and created an industry that, even by conservative standards, is worth billions globally.
UK universities remain world-renowned, ground-breaking research institutions, producing the third greatest number of PhDs and academic papers globally. Over many decades, work by brilliant minds has resulted in the UK coming second only to the US for Nobel prizes.
For all the disproportionate breakthroughs, however, the UK struggles when it comes to taking new research to market, with many promising ‘home-made’ innovations slipping through its fingers and providing the foundation of businesses that flourish elsewhere.
Britain is by no means alone in this regard. Indeed, there is significant room for improvement for most countries and their respective universities.
An opportunity lost
It is difficult to quantify the value we have missed by not commercialising academic research, but it may be trillions of pounds worth of unrealised opportunities, many of which have lost in the ether between our universities and investment communities.
The US is a notable exception to this rule, and has been phenomenally successful at unlocking commercial value from its universities.
Research from the Massachusetts Institute of Technology, for instance, has been the genesis for some 26,000 companies with a collective value of $2 trillion, creating 3.3 million jobs in the process. Equally impressive is Stanford University, whose research has formed the basis of 70,000 companies with a combined turnover of $2.7 trillion.
Taken together, the historical contribution of the companies spun out of these universities is equivalent to an economy with a size in-between Germany and Japan.
How can the UK – and indeed other countries – improve? This was the starting point for a recent research project from Octopus Ventures, which set out to better understand the challenges spinouts face in moving from lab to the real world. The intention was to identify correlations and spotlight the institutions that punch above their weight.
Building successful spinouts is tough
The short truth, despite much received wisdom to the contrary, is that building companies from academic research is hard. This is primarily because the traditional challenges facing start-ups – namely the battle for talent and funding – are amplified for spinouts.
The skills and experience required to get research-intensive businesses off the ground are difficult to come by, and it’s often more challenging to recruit into early stage enterprises, particularly when alternative career paths offer less risk.
Exacerbating this dynamic is the ‘publish or perish’ culture within academia, where achievement is often measured by the number of publications and citations a researcher delivers. This limits the opportunities – and indeed incentives – to better understand the commercial value such research may possess.
The good news is that many of the ingredients for success are already here – we just need to get them working together more effectively.
An interesting partnership we identified was the Helix Centre, a digital health innovation lab that was launched as a joint venture by Imperial and the Royal College of Art. Interdisciplinary teams of product developers, software engineers, clinicians and scientists come together to develop and trial new products. The team we spoke with credited collaboration with helping them attract and retain talent they needed to compete.
Funding presents an entirely different type of bottleneck for university spinout. The level of investment and infrastructure needed to develop prototypes dwarves what’s required by more conventional start-ups. The scale of the challenge is such that it has come to be known by academics as crossing the ‘Valley of Death’. The skewed timings for market entry and exit creates added risk, complexity and expense to get world-class scientific research off the ground.
Our research also found that the universities working closely with funds to bridge this gap, outperform their peers. Through their internal funds, the likes of Queen’s University Belfast, Imperial, Oxford and Cambridge are able to provide money for proof of concept and prototyping at vital early stages to get discoveries and teams off the ground commercially.
At the same time, patient capital in the form of listed funds, whose investment cycles are far longer than traditional venture capital, enables them to engage at earlier stages than a typical investor. The experience of Oxford Nanopore is telling, which has now achieved unicorn status after receiving proof-of-concept funding from IP Group.
Again, greater collaboration between these investors will help. The pooled resources of venture and patient capital represent a formidable combination and bring together technically excellent, very early stage investors and scale-up experts more familiar with the financial and commercial landscape.
In the latest Industrial Strategy, the UK government set out the importance of having a network of world-class universities, one capable of producing the new technologies that would allow the economy to flourish post Brexit. If we are to realise the commercial potential of UK academia, then we need to address the pervasive bottlenecks that limit progress and ensure the teams nurturing the next wave of innovation are set up for success.
Simon King is a Partner at Octopus Ventures
For journalists in their professional capacity only. Personal opinions may change and should not be seen as advice or a recommendation. We do not offer investment or tax advice. Issued by Octopus Investments. Octopus Ventures is part of Octopus Investments Limited, which is authorised and regulated by the Financial Conduct Authority. Registered office: 33 Holborn, London, EC1N 2HT. Registered in England and Wales No. 03942880. Issued: December 2019.