In a spin

The journal Times Higher Education has published an interesting piece on university spin-out companies. According to research done by an organisation called Spinouts UK, over the past 10 years UK universities were able to form well over 1,000 companies, mainly in order to commercialise the institutions’ intellectual property. The top performer in the list is the University of Edinburgh, with 244 companies, followed by the University of Cambridge with 139. On the other hand many universities did not produce any spin-outs at all, and a more typical number for those that did would be in the region of 5-10. My own university, RGU in Aberdeen, was able to spin out 12.

But what should we make of this? How important is it for universities to establish companies in order to develop their IP, and how successful is this likely to be? The answer is just a little ambivalent. For a start, in my experience universities often over-estimate the benefits of spin-outs. Companies are formed as part of a commercialisation drive, but most end up doing little or no business while still running up costs and complex corporate governance. Where universities want to commercialise intellectual property, the route of licensing the IP is normally the better option. But in any case, universities should not register and commercialise IP unless they are willing to defend it. In the early stages this can be an expensive business, so some funds need to be available.

On the other hand, injecting some commercial discipline into the exercise is good, and companies can serve a useful purpose – indeed not only in commercialising IP. But it is important that proper thought goes into these decisions, with an awareness of the implications. At the end of it all, the number of companies formed is not a useful performance indicator. Income generated is, but that must be measured over a longer timeframe. Universities also need to have a good sense of what risks are worth taking (and some risks are inevitable, and need not be a deterrent), and how to arrange for good management and governance of the entities formed.

I am a strong believer in commercialisation as a university strategic aim in appropriate settings. Spin-outs can be an important component of such strategies. But setting up dozens of companies on the back of vague business plans is not a particularly good way to go, and institutions should not see this particular league table as one where they must try to hit the top numbers.

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6 Comments on “In a spin”


  1. […] “The journal Times Higher Education has published an interesting piece on university spin-out companies. According to research done by an organisation called Spinouts UK, over the past 10 years UK universities were able to form well over 1,000 companies, mainly in order to commercialise the institutions’ intellectual property …” (more) […]

  2. Evert Bopp Says:

    In my experience a huge amount of IP is wasted and ends up “gathering dust”. There seem to be a number of reasons for this; some of the research simply hasn’t got a valid enough commercial application, but in quite a few cases commercialising the IP is just too complicated and wrought with bureaucracy.
    I’ve seen companies being set up with equity split between the 3rd level institute, the researchers and sometimes an outside investor (in Irelands case quite often Enterprise Ireland).
    Once real commercialisation is explored and the need to pull outside expertise in, getting market validation, further investment and what not things get messy very quick. NDA’s have to be signed, everyone and their uncle wants to be involved in the most minute decisions and egos come into play.
    But what’s a real stickler is that the academic culture more often than not doesn’t mesh with the commercial world.
    This leads to potentially lucrative commercial partnerships & licensing opportunities not coming to fruition.

    What I would suggest is the establishment of a “sheme” whereby commercial entities get easy access to IP developed out of third level research. Work out a standard agreement giving them 6 months to come up with some sort of commercial application and if this doesn’t happen either “take the IP back” or renegotiate an extension. Off course all this has to be protected by solid NDA’s but that a standarised mechanism can be put in place for that.
    The crux is that 3rd level institutes need to cooperate with the commercial world to apply the developed IP in a meaningfull and succesfull manner. Easy and quick access and the two main requirements.

  3. jfryar Says:

    I think one of the issues with spin-off companies is that they tend to involve and rely too much on universities and government agencies. Let’s be honest, university and government staff know very little about running businesses.

    What we do in Ireland and the UK is suck up public cash through various grants and innovation funds for the creation of these spin-offs, and watch as most fail within 5 years because, as Evert says above, they weren’t commercially great ideas to begin with.

    Bring on the venture capitalists and let’s prostitute our wares directly without the pimp of government bureaucrats and university staff who’ve never run a successful business themselves.

  4. Evert Bopp Says:

    Coincidentally enough I came across a blogpost today announcing a new venture addressing this problem: http://chaosmanagement.ie/chaos/news/innovation-island

  5. Mary B Says:

    You might combine this and the previous posting and set up an Aberdeen regeneration company… @jfrayr, much of my experience suggests businesses don’t know how to run businesses, let alone universities!


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