Posted on Jun 11, 2012 by | 0 Comments
By Dug Campbell
This Thursday sees the launch of thePraxisUnico Spinouts UK Annual Report 2012 in Southampton. The project, run by our friends at Young Company Finance, provides a fascinating insight into the trends in the formation of all spinout and startup companies created out of higher education establishments since 2000. It will be of particular interest in my city as The University of Edinburgh has traditionally performed exceptionally well in the tables.
As with any survey, the numbers will of course always be open to interpretation. However, what is indisputable is that the institution based up the road in the Old Town has not been content to merely rest on its laurels in recent years. It has recognised that a supportive ecosystem is crucial to encourage the fledgling ambitions of those researchers and students who sense an opportunity to commercialise knowledge in the wider business world.
But why are certain institutions, such as Edinburgh, so far ahead of so many others in this respect? Clearly it’s a fantastic achievement. But it is also indisputable that across the UK, there are many cases of outstanding brains carrying out world-class research which is failing to be commercialised for a wide range of reasons.
Now, I don’t for one second claim that a panacea exists which can instantaneously remove all friction between bench and business. However, I do think that a change of sorts is coming. For example, accepted wisdom may be that the total amount of money available for startups is finite. However, as the evidence behind theBBAA’s recent campaign to increase the number of business angels in the UK shows, there is untapped potential. Further money could be released to be invested in the most deserving companies at this stage of development if the right proposals can be put in front of the right people. Early-stage funding is not a zero-sum game.
I can’t help but think that as society continues to move towards the instantaneous exchange of information and connections, this customisation of interactions between companies and funders should speed up the process. For example, just look at the indexation provided by a service such as AngelList which lets startups connect directly with business angels.
How this will impact upon those of us who live outside the huddle of entrepreneurs, knowledgeable investors, highly-qualified labour and (lest we forget) advisors that inhabit Silicon Valley? John McNicol of Kelvin Capital has previously blogged about the cultural chasm between the Valley and Scotland. I have no doubt that cluster theory has its place but perhaps now is the time for certain location-based hurdles to fall.
I am convinced that we are now entering (another) new era in business which couldn’t have been foreseen fifteen years ago. If you have time, check out a fascinating post by renowned entrepreneur and educator Steve Blank on how the Facebook IPO has damaged Silicon Valley. In essence, he argues that the effect of the IPO is that the Valley will no longer be the place where investors who have traditionally taken big risks on science and technology will be able to do so. They are now faced with social media businesses which compete for their attention with the potential of much quicker returns. Deciding whether to invest in a cancer drug involving a ten-year wait or a social media business with the potential of significant returns over two years appears to be straightforward. In any event, the VC model is clearly in trouble, a point that we’ll return to in coming weeks.
In passing, it’s worth noting Blank’s view that whilst there may be a valuation bubble at present, social media is not going away. Remember: one of the reasons for the dot-com bust was quite obvious - there were no customers. This is very different to Facebook which makes around $4 per user.
So I’ll be very interested to see the results of the Report on Thursday. However, I suspect that those research institutions that find themselves lower down the tables will have a real opportunity to increasingly make their mark over the next few years. Faced with the continual erosion by society of any barriers to communication and information exchange in general, the opportunities to publicise your research within a niche, and ultimately to build traction and to gain investment to grow, have never been higher.
Over to you.