University IP policy: To TLO or Not to TLO*?

Professor Mark Spearing Pro Vice-Chancellor January 2012

TLO = Technology Licensing Office

My personal interest and experience •  The majority of my career has been spent at three institutions:

–  University of Cambridge (7 years)

–  MIT (10 years)

–  University of Southampton (7 years)

•  All three are very effective at working with industry, creating spin outs and transferring technology

•  All three have very different models for achieving their success

•  Why?

Acknowledgements

•  Input from:

–  Prof. Phil Nelson, Pro Vice-Chancellor, Research and Enterprise

–  Mr. Don Spalinger, Director Research and Innovation Services

–  Dr. Tony Raven, Former Director Research and Innovation Services, now Chief Executive of Cambridge Enterprise

Spin Outs at Southampton “UK universities are generating companies of a quality substantially higher than would be expected from their worldwide research ranking. Perhaps the most striking example of this is Southampton University which comes third in this analysis despite being ranked over 100 places lower than both Washington and Wisconsin in the Shanghai Jiao Tong Ranking system.” Doug Richards, Library House, 2007

Impact – Spin Outs and Spin Ins

•  11 spin-outs over 5 yrs worth £200m

•  4 AiM listings for post 2000 spin outs

•  Other spin-outs are now divisions of Cisco, Alcatel, Schlumberger etc.

•  Over £160m of Venture Capital raised since 2000

•  25 local entrepreneurs supported; £6m raised

Impact – Spin Outs and Spin Ins

•  Pioneered leveraging IP assets for investment funding (now copied by 9 Universities)

•  Pioneered using AiM market for spin out funding (now copied by 14 Universities)

•  52 companies located on the University of Southampton Science Park including BSkyB, Cisco and Merck

•  2 fully occupied incubators on the Science Park

Some of Southampton’s industrial partners

WJ GROUNDWATER LIMITED

The Models

•  MIT has a very aggressive policy of Intellectual Property protection (>140 patents/yr), a very strong TLO (income of >$100M/year), quite inflexible in its dealings with companies

•  Cambridge has one of the strictest IP policies in the UK, but is (much) more relaxed than MIT (and other US Universities)

•  University of Southampton only protects IP if there is a clear licensing or spin out opportunity (<30 patents/yr), very flexible in its dealings with companies, in terms of IP and financial arrangements.

Considerations

•  Long times scales for IP to pay back, frequently 20+ years

•  Big wins are big, but rare and clumpy

•  Potential for distortion of objectives: impact is not just about $$££¥¥…….

– Good business-university relations may matter more

•  Need for smoothing funding, contingency coverage

–  provided by endowment for MIT (& Cambridge)

•  Even in USA majority of TLOs lose money

Creation of a Spin Out Phase 1 •  Awareness training on IP and exploitation in Schools

•  Academic has idea and approaches Research & Enterprise Services

•  Idea screened, IP filed, application for Proof of Concept funding (~£15k, 14 day decision cycle)

•  Concept refined, tested and business case prepared

•  Experienced sector CEO identified (advertise/headhunt/networks)

•  Presentation to University investment fund investment committees

•  Investment of ~£250-750k agreed @ £750k pre money valuation

Creation of a Spin Out Phase 2 •  Build team, product, gain early customer tractions

•  Around 18 months: “A” Round with external investors. ~ £1-2m @ £3-5m pre-money valuation.

•  Around 2-3 years: “B” Round with external investors or listing. £5-10m @ £25-50m pre

•  Exit through IPO or trade sale.

•  University will seek to exit its investment over 5 years and reinvest in research and next generation of spin out companies.

•  Key factors: Quality of management; early demonstration of customer traction.

12

Excellence in Research and Education

+ Enterprise Culture

= Economic and Societal Impact

Discussion?

Combining academic excellence with an innovative and entrepreneurial approach to research