UK university innovation’s changing landscape
The innovation ecosystems surrounding the UK’s universities have rapidly grown since they began to emerge around the turn of the millennium, and continue to evolve at pace.
By Ben Oakley, Technology Transfer Manager, Oxford University Innovation
In the early days of university innovation, the process of converting research from UK universities into real world technologies and companies — technology transfer — was the entire story of innovation coming out of institutions.
Since then, universities have tried and tested a large number of models, approaches and initiatives. Some of these failed. Some of these have helped it boom. Today, technology transfer itself has grown massive. However, the sector of university innovation is more developed than ever before, with technology transfer just a part of the overall story that continues to evolve within an ever-changing landscape.
Oxford is no different. Oxford University Innovation (OUI), the University’s research commercialisation office, has recently seen exceptional growth in output, where the number of Oxford spinouts generated more than doubled from 10 companies in 2015 to 21 in 2016. Yet, even as OUI approaches its 30th birthday this year, it continues to evolve. Our international innovation consultancy division, Oxentia, has spun out to better position it with its international user base. We’ve expanded our activities to support the whole University, not just science and technology. And we’re constantly working on ways to solve age old problems with technology transfer, such as the LAB282 partnership, which is looking to accelerate early-stage projects towards the market with proof-of-concept cash and industry validation.
This evolution is taking place across the UK. Below are some of the ways that the university innovation sector continues to innovate itself.
While not the case universally, many university innovation offices have traditionally been kept at arm’s length from their main university campuses. However, this is changing, with a number of universities strengthening their ties with their innovation offices and, in some cases, bringing their technology transfer operations back into the fold.
Imperial Innovations, the technology transfer office (TTO) for Imperial College London, recently rebranded itself as Touchstone Innovations to reflect its desire to focus its investment activity on the wider net of the UK’s Golden Triangle. Meanwhile, Imperial Innovations itself lives on as a technology transfer subsidiary of Touchstone, maintaining the original name to keep a strong working relationship with its parent university.
The University of Warwick announced that its subsidiary technology transfer company, Warwick Ventures, would become a department of the University operating within its wider Knowledge Group, comprising the Library and Research & Impact Services. In Oxford, Isis Innovation became OUI in 2016 to strengthen its association with the University.
This realignment is born out of an expectation for TTOs to help deliver impact for universities. In addition, knowledge exchange is becoming an increasingly valuable activity for universities more generally. The income of UK Higher Education (HE) providers from business and community interactions has grown to £4.2bn in the year 2015/2016 — a notable chunk of UK universities’ overall income. In relation to this, many universities are realising that they can tap into the expertise, experience and knowledge base present within their TTO.
Crowdfunding has surged in popularity in recent years, driven in part by the ability of fledgling projects and start-ups being able to reach their potential customer base through the internet.
With availability of funding a constant headache for universities, it is no surprise to see crowdfunding in the sector develop. For university innovation offices, reward, equity and loan-based crowdfunding have offered new ways to generate capital for a variety of highly creative projects. Crowdfunding has also helped communicate the benefits of university research to the wider community, and supported social enterprises which have sprung from those ideas.
In 2016, through its crowdfunding platform OxReach, OUI successfully raised over £60,000 to support development of a smartphone game to provide vital emergency care training to African healthcare workers. Last year also saw Chirp, a spinout company from University College London, secure £750,000 in equity crowdfunding to support development of a sonic data transfer app that can pass information between devices.
Many universities now have a dedicated web-based platform for crowdfunding activities. Typically, these platforms are delivered and maintained by a third party. For example, the Plymouth University, the University of Surrey and Nottingham Trent University have platforms run by Crowdfunder and promote a variety of different projects.
As these platforms become more sophisticated and commonplace, combined with an increasing pool of success stories, it is likely that we will see universities continue gravitating towards crowdfunding as a source of early-stage funding.
There has been a surge of bespoke funds targeting university spinouts in recent years, and this looks set to continue. Numerous university venture funds (UVF) have been set up to invest specifically in technologies arising from UK university research. With these funds, investors are taking a long-term view, accepting 10 years or more on a return on investment for potentially greater gains.
UVFs are not a new concept, with the initial versions appearing in the United States. One example is Arch Venture Capital, which started out life in 1986 as the venturing arm of Chicago University’s TTO. However, the idea went cold in the US, with traditional venture capital filling the space. In the meantime, the UK has emerged as a leader in UVFs, with the US only recently putting together large UVFs of their own.
The single largest UVF to focus on a single institution globally is Oxford Sciences Innovation (OSI). Formed in 2015 with £350m, OSI expanded to £580m last year. It focuses on investments in early stage investment rounds for spinout companies of the University of Oxford. Elsewhere, University College London recently formed the UCL Technology fund with support from Touchstone Innovations, which added a university venturing office to its TTO back in 2006. Over in Cambridge, the university’s follow-on fund Cambridge Innovation Capital is gearing up to hold an IPO after raising £125m over two rounds.
Outside of the South East, the £32m UMIP Premier Fund managed by MTI Partners has been set up to focus on research output arising from the University of Manchester. Epidarex, a specialised life sciences venture capital group, runs a £47.5m fund that sources opportunities arising from Kings’ College, Edinburgh, Glasgow and Aberdeen.
A critical element underpinning UVFs is a continuous and secure pipeline of investible opportunities, and access to these innovative portfolios has drawn attention from the financial sector to university technology transfer. We expect more activity in the UK university venture funding space, as new players look to take advantage of other instances where volumes of investable opportunities reach a critical mass.
With a large chunk of European funding for research disappearing in the event of Brexit, the UK’s upcoming exit from the European Union is a cause for concern for the HE sector. UK universities’ future access to research funding arising from European Union Research Framework Programmes and their ability to continue to be able to attract and retain the top research talent are questions that will need answers.
These uncertainties have fed into the UK university innovation sector, which is concerned in particular about the quality and abundance of future commercialisation and knowledge exchange opportunities moving forward.
However, despite the issues surrounding Brexit, there are still many reasons to be optimistic about the future of UK university innovation. In autumn 2016, the government pledged an additional £120m to incentivise university collaboration in technology transfer and to engage business on the most promising technologies. On a wider scale, we have seen the government commit to a £2bn Industrial Strategy Challenge Fund designed to enhance UK research and industrial capability.
Perhaps moves like this will help to ensure technology transfer continues to grow at our research institutions in one form or another. However, the full impact of the anti-immigration agenda of government on university innovation — which thrives on diversity and internationalism — remains to be seen.
One example of the potential of collaborative partnerships is SETsquared, the incubator for Bath, Bristol, Exeter, Southampton and Surrey and ranked number one university business incubator in the world. A testament to the power of inter-university collaboration, the partnership has incubated over 1,000 startups and helped them raise more than £1bn of investment since it started in 2002.
Proof of concept (POC) funding aims to fuel the development of a piece of research into an industry ready technology through grant funding. A number of universities now manage their own POC funds, which are often supported in part by their Higher Education Innovation Funding allocation. Innovate UK and a number of Research Councils (such as the European Research Council) also offer POC funds.
The most recent evolution in the POC space has been the involvement of corporations, which have historically been risk averse to grant funding owing to the uncertainty around the financial return on investment. Emerging in the biomedical space, one example is Apollo Therapeutics, a £40m fund formed by three large pharma companies (AstraZeneca, J&J, and GSK) and three leading Universities (Cambridge, UCL and Imperial College). Another is the £13m drug discovery partnership between Oxford, OSI, and Evotec known as LAB282, launched to help bridge the gap between university research and industry.
Unlike most established POC funds, these new funds are structured to provide a return on investment, offering equity in any project that manages to cross into a product or business that can be commercialised. The distinction between early stage proof-of-concept funding and seed funding appears to be less clear-cut than it once was.
Similar POC funds may enter the fold in the next few years, perhaps with a focus in other sectors and targeting a collection of smaller research-intensive universities.
The introduction of the assessment of impact in the Research Excellence Framework (REF) exercise for UK universities in 2014 yielded valuable insights into institutions’ wider social and economic activities and achievements.
With the next REF exercise due to take place in 2021, we can expect to see a renewed focus on impact and the activities of TTOs and university innovation offices in encouraging the adoption of research output for socio-economic benefit. An independent review of university research funding by Lord Nicholas Stern recommended that the interpretation of impact be broadened in future REF exercises.
We expect even more involvement from TTOs in supporting the impact agenda, and TTOs and university innovation offices certainly have their part to play in making the most of the research output we see.
We have seen massive growth in UK university innovation in recent years and, since the turn of the millennium, we have had no qualms about referring to it as a sector in its own right.
The emergence of UVFs and corporation-backed POC funds along with commitments from the government to extend support for university innovation demonstrate in actions the traction the sector has gained in the wider economy. The popularity of crowdfunding within the HE sector also demonstrates the potential appeal university innovation can have with the public.
With the university impact agenda building momentum and potential major changes in the UK HE sector on the horizon, it is no surprise that we have also seen attention focus on the ways university innovation and technology transfer can support research institutions more broadly.
As the UK university innovation landscape continues to change, it will be fascinating to see university TTOs and innovation offices evolve, adapt and continue to innovate themselves in the coming years.