Steve Brierley did not have to negotiate intellectual property rights when he quit his academic position at Cambridge University to create a start-up. But he was still glad he founded his tech company there – and could take advantage of the institution’s broader benefits.
A former senior research fellow in computational mathematics, he launched Riverlane in 2016 to help correct the high level of errors made by quantum computers. Today, with 100 staff spread between Cambridge, Boston and San Francisco, he is in a good position to assess and compare the value of university links to entrepreneurs.
His experience points to why a significant number of European start-up hubs are based in – or are connected to – academic centres across the continent. “The challenges are to do with scaling, engineering and implementation: how to turn ideas into technology,” says Brierley. “I realised I would never solve this problem in academia; we needed expertise including chip designers and engineers. Being at the heart of a field where Cambridge is really one of the leading research organisations means you are exposed to so many of the top ideas.”
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He credits his decision to move into business partly to advice from veterans of Cambridge’s technology ecosystem – including the entrepreneur and venture capitalist Hermann Hauser – as well as to the university’s broader support for spinouts.
Brierley found he was able to hire staff, offer internships to postdoctoral students and receive funding from the university without excessive pressures on delivering a rapid return on investment.
“I asked the pro-vice chancellor of innovation when he wanted his money back, and he said: ‘The university is 800 years old. Take your time!’” he jokes.
Riverlane is an example of what Andrew Williamson, an investor in the business and managing partner of Cambridge Innovation Capital, calls “deep tech” or knowledge-intensive businesses. These particularly benefit from co-location with strong academic centres.
“There’s a growing recognition, when you think about UK plc, that growth will come from the industries of the 21st century: AI, quantum computing, advanced therapeutics,” he observes.
“Those start-up hubs, typically, will have one or more anchor academic institutions generating the intellectual property,” Williamson notes. “It’s rare that you see an ecosystem evolve in the middle of nowhere.”
Even when tech companies such as Google are involved in quasi-academic research and publishing research papers, he points to the power of the universities of Stanford and Berkeley in the San Francisco Bay as the “anchors”.
“You need the right mix of skills and capabilities on the management team of a start-up,” suggests Williamson. “Stem universities to provide strong technical capability paired with people who understand commercialisation: product development, sales and marketing, operations, supply chains, finance and regulatory matters. Our best start ups have that diverse mix.”
Williamson, along with Irene Tracey, vice-chancellor of Oxford University, published a UK government-commissioned review of university spinouts last November, which called for additional funding, business training for academics and the development of more standardised commercial terms.
Universities are the hubs where the most exciting and complex technologies come from. They churn out students with know-how
— Ananay Aguilar - Head of TenU
But the review also found that many positive conditions were already in place. Of 620 business founders surveyed, two-thirds said they would not have spun-out without the existence of IP created at universities – citing support including for filing and managing patents and access to facilities and equipment.
Ananay Aguilar, head of TenU, a network of 10 leading US and European university technology transfer teams, says: “Universities are the hubs where the most exciting and complex technologies come from. They churn out students with know-how. More recently, they have intentionally become builders of ecosystems, offering land and service providers. Then, investors come along.”
Comparisons with the US sometimes suggest that the commercial terms for university spinouts are less attractive in the UK. However, Aguilar suggests the differences are often misinterpreted. While the two systems may take different approaches to the share of equity, to the conditions for dilution, or to the terms of royalty payments, “you end up broadly at the same point”.
And although academic centres including Cambridge remain among the strongest places for university-linked spinouts, others have been growing in recent years. These include networks forged between different institutions, such as SETsquared – an alliance between the universities of Bristol, Bath, Cardiff, Exeter, Southampton and Surrey.
Andrew Wray, director of research impact and development at Bristol University, sees growing interest from investors. “Traditionally, you couldn’t get the venture capitalists out of London but, in the last five years, there has been a big move of investors at all stages looking around the UK,” he says.
You have to manage expectations – everyone goes in thinking they will become the next unicorn
— Andreas Johansson
He points to successful start-ups nurtured at his university, including InductoSense, which detects corrosion in pipes, and Fathom, which a professor developed to model for floods and was recently acquired by reinsurer SwissRe. The university did not have an equity stake in Fathom, but he stresses the wider benefits to the community through the contribution of its founder, the creation of local employment, and the broader contribution it has made to society.
Access to growth funding remains a hurdle, though. Bristol has begun to invest directly in some of its start-ups. But Wray says the biggest challenge the UK is tapping large-scale support once they become successful. “Why do we not have more investors like in the US, and why can’t we keep more companies in the UK?” he asks.
Elsewhere across Europe, Williamson sees strong “deep tech” hubs linked to universities in cities including in Paris, Berlin and Munich. There are also centres linked more typically to “soft tech” businesses without direct technology transfer, such as at the Stockholm School of Economics.
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Its SSE Business Lab, like the hub at Bristol, typically does not facilitate technology transfer, both because of its expertise in business rather than science, and because Sweden has a system of “professors’ privilege” which grants patent rights to academic developers rather than to the institution they belong to.
Andreas Johansson, its director, says the Lab’s contribution is typically through training and coaching of prospective founders among its students, although it has also started to invest directly alongside external partners through a venture fund. He points to successes including a role in nurturing Klarna, the successful payments and shopping platform.
“You have to manage expectations – everyone goes in thinking they will become the next unicorn,” he says, reflecting on the growth in interest among students for start-ups. “But there are few things in life that can teach you as much as entrepreneurship. Even if they fail, as long as people come out with an entrepreneurial toolbox, we see that as a win.” – Copyright The Financial Times Limited 2024
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