Call to focus cash on fewer university spin-outs to boost chances of success

Published on Sunday 22 June 2008 20:41

PUBLIC and private sector funding should be targeted on a much smaller number of university spin-out companies to give them a better chance of success.

The call for a more focused approach to financing comes in a report published today, which analyses the history of innovative firms that have grown out of ideas generated by academics.

It finds that despite an increase in the number of spin-outs from Scotland's universities in the past ten years, fewer are thriving. Top performers such as Axis Shield, which makes medical testing kits and Wolfson, which designs microchips, were established ten or 20 years ago, the study says.

But of around 200 spin-outs from Scottish universities since 1967, almost a third failed while 55 per cent have less than ten employees. Only 16 of these firms employ more than 50 people.

The report – by a technology and innovation consultancy company – was compiled by gathering information from Scottish universities, the people involved in commercialisation, the spin-out firms themselves and private equity backers.

As well as calling for better targeting of money, the report also says that a commercial managing director with market knowledge should be appointed to spin-out companies at an early stage. George Boag, chief executive of Targeting Innovation, which carried out the research, said: "A choice needs to be made between spreading resources thinly to give as many spin-outs as possible a chance, or progressively focusing on a select few.

"Effort and funding might be better directed to ensuring that fewer spin-outs emerged and were nearer to market when they did and that they employed stronger commercial management sooner."

He added: "It has long been recognised that technology from Scotland's universities represents a great opportunity, but this study shows that efforts so far to exploit it have had limited success.

"Many of the more successful companies have taken at least ten years to realise their potential. This is considerably longer than the traditional venture capital exit horizon, which is typically nearer five years."

Universities Scotland, which represents higher education institutions, said the number of spin-outs surviving more than three years had increased by 12 per cent between 2004-5 and 2005-6.

A spokeswoman for Universities Scotland said: "Most spin-outs are extremely successful and comprise some of Scotland's most innovative companies."

A Scottish Government spokesman said: "University spin-out companies are of great value to Scotland and there have been a number of success stories in recent years.

"Improvement of knowledge transfer, including the development of spin-outs, is a key national indicator for the Scottish Government's goal of sustainable economic growth."