Season 4 Recap: Building blocks in place for university venturing to take off in 2025

Speaker A: Hello, dear listener. With Christmas just around the corner, it is the end of another season and that means it is time to look back on some of the highlights from the past few months. This episode is also a little bit special, as today marks the end of my hosting duties for this podcast. More on that at the end, but without further ado, I'm Thierry Hylas, and for the final time, let's take a look beyond the breakthrough. And it certainly feels weird to quote myself to begin with, but let's start with my own look at uh, university venture funds in Asia, where Japan turned out to be boasting a flurry of activity unrivalled in the rest of the continent. The country also has more than 3,000 spin outs, so there's clearly deal flow for all these funds. Here's a clip from that episode. What I really found was that Asia is probably doing the worst out of all the regions that I've looked at so far. So that was us, Europe, Australia, New Zealand. But within Asia, Japan is really a shining light. So about a third of all the funds that are found among the Asian universities were in Japan. There were 13 Japanese universities on the list and 11 of those had a fund. So even within Japan, there seems to be quite a lot of activities at, uh, these research intensive universities.

Speaker B: And which are their biggest funds?

Speaker A: Um, in Japan, the biggest one overall, I believe is the University of Tokyo Edge Capital Partners, which has about $594 million under management across a few funds. But then with Tokyo, it's interesting that they also have another one called University of Tokyo Innovation platform, which has $420 million under management. So between them they have close on a billion dollars under management, which is obviously quite close to Oxford Science Enterprises, which as far as I'm aware, is the biggest one in the world, which has, uh, just over 1.1 billion. In the US. It was Kentucky that got a special look this season as the university there has struck up a unique partnership with industry called the Estate Whisky alliance, which will work on certifying estate whisky, the definition of that being all production processes, including the milling, cooking, fermentation, distillation, barreling, aging and bottling, all occurring on the estate, which is actually quite rare these days. The alliance is a membership organisation open to anyone in or adjacent to the supply chain, including other, uh, academic institutions. Here's Alexa Norell telling us more.

Speaker B: We invite farmers, we invite distilleries. Anyone in the supply chain really, or adjacent. I know, I've spoke to logistics groups recently about how they can get Connected, um, with the network and then also, most importantly, academic partners we welcome. So we've spoken to other universities that have strong distillation or fermentation programs about how they can get involved, especially with the research side of things. And it seems that as we've been doing outreach, we find more and more universities that have these fermentation programs that we didn't originally know about. So I'm really excited to get those groups involved. And that's mostly been inside the US this far, but we've met with a few outside and I'm excited to see what those programs look like outside of the US too, and how they can bring different perspectives to the program.

Speaker A: One of those surprising institutions Alexa says was the South Puget Sound Community College. So this isn't just massive research institutions running craft and distilling programs. Members in the alliance pay a fee which is used to cover the costs of the certification program, but also to solicit research. Here's Land and borders telling us about that.

Speaker C: We're firm believers in a, uh, use inspired research model. I'm from product development and spent 20 years there before I came here to the University of Kentucky. So we'll let the problems guide the research, I guess, and we'll try to find ways for discovery to make an impact on solving those problems as well. But so far it really seems that what we're hearing more is the opportunities are around agricultural advancements and certainly as it relates to grains and cereal crops, but also the disposition of waste. As we mentioned, we have a shortage of white oak species here in the United States which are used quite extensively in whiskey production and aging. So how can we solve that, uh, crisis? What can we do to be creative in how we're using that resource the best we can? The other thing that's worth interesting is there's a lot of interest in reintroducing heritage grains into mash bills. So varietals that grew here many years ago that are no longer used today and reintroducing those and the influence that they might make on flavor or aroma of products. It's quite interesting.

Speaker A: Back in the UK I was honored to work once more with my friends at UH10U on bringing you a series of panels from their most recent innovation summit. Michelle Barbour from the University of Bristol had the following to share on where the UK is headed following the spin out review, the usage guides and the recently announced proof of concept funding.

Speaker D: In my own founder journey, I was very fortunate to have investors who were very collaborative, very close, had very open Challenging conversations, but open and honest conversations. And that, uh, wasn't the experience of some people that founded around the same time as me. And I really valued that. I think if you can achieve that at an institutional and a sector level, that culture is much more likely to flow into the individual spinouts and allow people to have those really productive relationships. So I think it's of central importance, I think, to illustrate an example of something that is new and it's not just Bristol, it's a Set Square partnership. But we announced in September our plans with Quantext to form a new £300 million investment vehicle, Sports Spin Out, Smile 6 Universities. The whole process, all the hard work that's led up to this and the announcement and then of course all the much more hard work that going forward. But that couldn't be achieved if we didn't have that really collaborative, open relationship. That's the old way of doing things as sort of, you know, investors and founders and universities almost sort of sometimes can feel in opposition or at least in sort of not always aligned. We have to move on from that. That's a sort of tangible example where we are. But we're doing really good collaborative stuff with smaller individual angels as well. It's all to the benefit. It's the benefit of the investment, it's the benefit of the founder and ultimately the impact of the research that led to it.

Speaker A: And, um, Michelle added, funnily enough, I

Speaker D: think all of the press coverage and all of the controversy and all of the ill will and I don't want to say culture wars exactly, but all of discussion around equity shares. I know a lot of people in our various sectors sort of sat back and thought, oh goodness, we're under attack. In a weird way, I really welcomed that because it meant that suddenly everybody from academics and researchers to the person next to you on the bus wanted to have an opinion on spin outs, wanted to know what one was and what it was for and what it was trying to do and have a view. So coming back to that, why is the sort of university and academic culture changed? My role in part is to inspire and help to upskill academics to consider entrepreneurship in their personal journey. The fact that this was so much in the press and the public discourse meant a lot more researchers wanted to hear the stories that I was trying to tell, which are the stories of some of our fantastic founders and some of our fantastic collaborations that have come out of the spin out and licencing indeed, all of the amazing stories that I know that we have and all of Our institutions have them. Suddenly there was a much more willing, engaged audience because they wanted to be able to be part of this debate and this discussion and they wanted therefore to be informed. Once informed, a lot of people have really liked what they've seen and it's inspired them to consider where it fits in their own career journeys. And you change a culture one person at a time. In some senses. A few high profile, massive successes do help because suddenly there's a human face to this difficult but rewarding journey that is spinning out a company and having some that do really good things in interesting ways does help to sort of populate those stories as well.

Speaker A: I have to admit I found it surprising and refreshing to hear Andrew Williamson, the managing partner of Cambridge Innovation Capital, who was one of the co authors of the Spin out review, talk about settling the equity debate.

Speaker E: I was just blown away by as we started to call around the country and do the zooms and do the roundtables as to how much great stuff was going on. I think I'm guilty of being a bit golden triangle centric. Talk about Edinburgh a bit later. Just amazing the amount of activities that's going on there. And your predecessor has taken me through the sort of journey of the last five years. Sheffield was another, another standout example. And I think every TTO is sort of on a journey of uh, sort of increasing their level of activity increasing, therefore getting more market terms in different universities are at different places on the journey. And that was part of what this review was about, was to sort of try and standardize that and accelerate adoption of best practice. But there was just so much good stuff out there that was unfortunately being drowned out a bit by this unfortunate debate, rather myopic focus on the equity splits, which is obviously only one part of the deal, as everyone on our uh, advisory board said. But it's one that had sort of taken on an outsized proportion of attention. So we needed to put that to bed so that we could return the conversation to being a much more productive conversation because we are all on the same team, we are all trying to do more, better, faster spin outs and take the front pages of the FT much more to where we are now. And Tim's beautiful introduction where you sort of listed, you know, the best universities in the world and the most active spin out scene and the most capital and get the story back to you being able to say what you're doing as opposed to being defensive about, well, maybe There's a few 50% equity splits, but there's an outlier I don't have to say that anymore. So it's been a very positive journey.

Speaker A: The University of Southampton's Diana Galpin meanwhile, has been using the USIT guide published by Tenure's guidance for spin up negotiations as the basis for harmonizing spin out deals in the UK in collaboration with a group of partners and conversations with dozens of other universities.

Speaker F: We were very lucky to get one of the earlier awards from Research England CCF for an impact IP program. The collective Set Squared universities we were looking at to standardise and harmonise what we do. It's one part of the program. The other elements were definitely building relations with investors and we have a commercialisation Fellows and Entrepreneur in Residence programme. The piece that we're quite excited about at the moment is as part of harmonising what we do and how we do a deal, we've started to create a resource that we're aiming to share with our researchers, use for the technology transfer offices. And we're sort of piloting the development of what we're now starting to call as the Deal Readiness Toolkit. It will include templates and checklists and process improvement, trying to harmonize what we do to make sure that we can get deals going out sooner as well as guidance about the whys, building on some of this information and some of the guides from the UCIT guide, but taking it to the next level of being a practical, really easy to use resource. And we've started to uh, do co creation with a few investors and law firms who represent both founders and the founding companies and investors. And everyone that we've talked to, including I think more than 40 universities, are really keen to engage. It's only the start of the resource. We're sort of hitting the ground running with, starting to release some of the resources that we'll be doing some testing with the community on, but very much looking to engage because we think that the deal Readiness Toolkit could be a really practical resource to make that uh, a really big difference. Because if the investor community are happy to use it, if law firms are happy to use it to start with, and it covers commercialization deals, not just spin outs, then we can absolutely start to get on with the business of developing the technology and getting the spin out started sooner. So we're quite excited about it.

Speaker A: I mentioned proof of concept funding there earlier and let's come back to that for a moment. The UK government recently announced it would allocate 40 million pounds, that's about 50 million US dollars over five years to proof of concept funding. That's uh, not much per institution, though even at 500,000 per project, that would still potentially be 80 spinouts that could be formed, which also isn't nothing. I actually did some more work on this and there's an article on globalventuring.com university if you are interested in this subject. But here's the international perspective from KU Leuven's Paul Van Doen, illustrating just how small Westminster's commitment is, but what such POC funding could mean for the UK outside of the immediate impact of cash.

Speaker G: Specifically, when it comes to proof of concepts funding, we can't complain in our area, in the sense that the Flemish government, our government already since I think, 17 or 18 years, has installed a proof of concept fund of 45 million per year to be distributed amongst the five Flemish universities. It's a closed envelope and it's distributed according to output productivity. So the institutions that deliver the most commercial output, so to speak, peak the most impact at the biggest chun of one. Each university that gets the money has to install a panel composed according to certain equilibria people from industry and people from the university. And it's that panel that actually will decide which projects will get the money and which projects will, apart from the fact that we deem a lot of individual projects really getting the chance, which otherwise they definitely do not have, had two other advantages that I've seen through this program. The first one is that when this program was installed in the years thereafter, this was actually the first time that researchers saw that you could get projects funded with the specific aim of commercialization. Before that it were research projects with a chapter where you have to justify how you going to apply. Now it was the other way around. The main aim was how are you going to apply it? And by the way, it has to be excellent research. And as a consequence of that, in our office, we got a whole new audience, a whole new segment of researchers that we did not see before, but that suddenly started to think, well, hey, this might be something to me. And the second advantage that we've seen is that these panels that allocate the proof of concept funding, they change every three years. It's not always the same composition. And I've seen that the level of affinity and the level of understanding from both the academic members and the industry members has grown by working together and deciding together on which projects are to be finest and which ones hard. So also through that mechanism, we've seen now, 15 years later, that there's a whole cohort of academics who have a better understanding of, um. This is how my colleague from Indus Bio, this is what they want, this is what they think is important, etc.

Speaker A: When I talk about the UK, I think it's worth noting somewhat of an oddity that international listeners among you might not fully appreciate, and that is that the UK is actually four nations with their own government and budgets. Some things may work very well in one nation, but be a lot harder in another because the government's priorities might be somewhere else or the money just isn't there. Andrea Taylor, the CEO at the University of Edinburgh's tech transfer arm Edinburgh Innovations, had this to say about higher education innovation funding, which is much less generous in Scotland than it is in England.

Speaker H: The funding landscape in Scotland and the devolved nations actually is very different. That often is not taken into account and I think it is an important part of the conversation. So something like Research England, whilst the budget has increased steadily from 2018 by about 35% in sort of equivalence to Scottish Funding Council, which is where our knowledge exchange funding comes from, has increased in the same period by about 3%. So it's very different in terms of that landscape. But saying that we do have some other levers that we access. So for example, our local economic development agency, Scottish Enterprise, has a great scheme called the High Growth Spin Out Program, and we've certainly made great use of that. It has three levels of awards, so it will give £75,000 award for over about 12 months for the earliest age of sort of opportunity creation to start to explore your company idea, raising to about £200,000 for around sort of six to 12 months, really looking beyond the sort of experimental to sort of the market you're going to enter, uh, what's the competitive landscape? And doing a bit more of that, which is also important before you become a company, and then moving on to £400,000 offered as a, uh, convertible loan note as you start the company as working capital. So that's very encouraging. We this year accessed about 900,000 of that for six programmes. But in total for, say, 22, 23, that funding is still only about 2 million in total funding, 33 programmes, and that's to COVID 19 higher education institutes in Scotland. So it's welcome. But a drop in the ocean and then the gap remains that whilst that's fine for some of the smaller companies, if you're a large life science company, some of the examples I've just given, they've needed, uh, in the order of about a million to 5 million pre seed. So 70,000 doesn't really get you off the plate. So I think the sectoral piece is quite important. Different sectors need different trajectories of funding. And then finally as well, it's worth mentioning that the VC landscape in Scotland and probably the north of England is quite different. So Even to engage VCs of some scale with the science getting that crucial input and insight to academics early on, we have to work a little bit harder to sort of really engage those networks. Because on the ground VCs locally in Scotland is very different compared to the south. So there's a different lens of challenges that's important we don't forget about when we're talking about proof of concept, that it isn't a sort of one size generic issue across the, the landscape.

Speaker A: And this season I also talked to Piers Coyle, a partner uh, at uh, the Deeptech Seed Fund, who has been working with Innovate UK to improve its pre accelerator program, iCure. What exactly wasn't working so well? Let's hear from Pearce.

Speaker I: So the central idea is in your Icure program, you've gone out and spoken to 100. At the end of the Icure program, the ventures would all stand up at the demo day and say, hey, we've got five really engaged. But they didn't really qualify it in. Like what does engaged mean? Are uh, they going to spend money with you now or were they just being nice to you? The data wasn't solid enough for an investor to say, okay, this is really clear, this is really solid evidence of demand. I'm going to write a check. And we found we needed to do a load of work to get from that glib statement of yes, we've got 10 people interested to a point where we knew to what extent are they really interested? What is the level of commitment being offered? So we created this concept of a scorecard, which is a very simple matrix where you essentially plot the 10 interested people onto two axes. One is vertical, um, which is about the stage right now being gram scale, next being kilogram scale, next being perhaps having a full product being shipping in volume. So three vertical axis and then there's a horizontal axis which is about what is the level of commitment? Will they do a free trial? Will they pay for a trial? Is it invest in kind in a trial? Is this actually they want to invest? And by plotting the 10 on that little matrix there is absolutely no escaping it. It's completely objective, there's no bullshitting it. And that's really the key thing. There's a whole bunch of tools out there that Try to score things based on a whole bunch. Um, usually too many different characteristics. There's a commercial readiness tool, there's the kth of a tool, but they're all subjective. So we went back to Innovate UK and said, guys, look, you have to understand you've got a great program, spending a lot of money on it. It's the best program. Your Candid adventures are doing 95, 98% of the work that is required. But there's a tiny little bit at the end which, if they just did it, would get much better value from your program and would allow investors to engage earlier.

Speaker A: Pearce's and, um, Innovate UK's model sort of assumes that the right founders are in place. But who exactly is the right founder? It turns out that's a rather difficult question. And, um, universities that push their faculty to launch spin outs might be setting them up for failure. At least that's the result of research by Maria Roche, uh, at the Harvard Business School.

Speaker J: So the three different outcomes we're looking at, one is just raising a significant amount of funding here we're looking at different types of levels, just in general, a continuous measure or above a certain threshold. We took a, uh, threshold of 50 million. We also did, uh, of 10 million based on conversations with venture capitalists and private equity folks because we really wanted to know what is the threshold that is important for you in terms of when you think the startup is actually worth it or is good thinking of especially growth perspectives? And here they were saying, yes, we do look at, if we put money in, it has to be over several million, otherwise it's not really worth our time. So that's kind of why we were looking at that cutoff in terms of funding. We also look at the outcome of getting acquired because based on a lot of conversations and where the research is going, is that being acquired could actually be an exit strategy. So that could actually be the goal when you start a company, especially those coming out of academia, that they want to be acquired in the long run. So that's why we're using that as a performance measure. The third one we looked at is if the company had an ipo, which is a very extreme outcome obviously, but we did want to include it because it is, when we think about entrepreneurship, often the big grand goal where founders are going towards. I'll, uh, go back a little bit in terms of when we're saying specialized knowledge in the way we measure it. So what we're doing is we're looking at the patents that underlie A startup, the original patents. And we have a way of tracing that. So that's really nice that we have those. And then we look at how much these patents rely on science and we look at how much the science that these patents cite is the science of the inventor. And that's why we're saying very specialized knowledge. Because we're assuming that if it's the science of the inventor, this is kind of knowledge that not many have. And the assumption is usually, and I'm a scholar in strategy, so we always think about competitive advantage and sustaining that competitive advantage. And the idea in this stream of work is that if you have specialized knowledge or resources that no one else has, that this should enable you to build a sustainable competitive advantage over the long run. So our notion going in was, oh my gosh, this should be amazing, right? These startups have knowledge that no one else in the world has. And potentially even the only person who knows how to do this, no one can copy this. So this should be valued very highly. Turns out what we're finding is that in terms of funding, it's not so good. In terms of being acquired, also not so good. In terms of ipo, we don't really find anything in terms of positive or negative. And that's why I say, because it's a very extreme outcome.

Speaker C: Come.

Speaker J: That could be why we're not seeing much. Since you've read this paper, added another feature because as I was saying, the inventor seems to matter. So what we added was thinking of if the inventor is also the founder. So you have specialized knowledge, which is kind of the technology, and then you have the inventor who could be inventor founder, which is the person. So it's different ways of embodying the knowledge. Now when we look at the inventor, founder, same thing again. In terms of funding, it has a negative impact on receiving significant funding. In terms of being acquired here, we don't see anything. So it's like, okay, weird. In terms of ipo, it's pretty negative. So there's differences in terms of where the knowledge is embodied. Now, if you really want to make it much more complicated, you interact these two.

Speaker A: Let's do it.

Speaker G: Yeah.

Speaker J: And this is where it's really exciting. And I'll tell you why. It's super exciting in a moment. But we're finding that if you have the venture founder and specialized knowledge, very negative for funding, for acquisitions, nothing. So for acquisitions, it's all driven, uh, by the technology, for the funding, it's driven kind of by both. Right. And when you look at IPO it turns positive. So if you have the founder inventor and the specialized technology coming together, there's one time where it can actually be positive for ipo. And I'm saying this is interesting and important to know because based on what you want your exit to be. So that's why I was saying at the beginning, it's really important to understand what your exit strategy is going in with your startup that may tell you what you need to build your startup around. Do you need to build it around specialized knowledge? Do you need to have the founder inventor or not? Because it does seem to be positive. If you have both for ipo, but for acquisitions and for funding, it's negative. That's why we did want to bring in that piece, because these are things you can easily decide to do or change and adjust, right? It's not like it changes much about the start. It's not going to be so extremely difficult to do. So that's why we really wanted to dig deeper into really teasing apart technology in person.

Speaker A: So in a nutshell, if you want spinouts that succeed have an exit strategy from the get go, there's a lot more in my interview with Maria Roche. So go and listen if you haven't yet, it'll be worth your time. The same of course, goes for all of the other interviews this season. And if this is your first time listening, there's an archive of more than 130 episodes stuffed full of valuable insights from some of the world's top tech transfer practitioners. If you're a long time fan M let me take this opportunity to thank you for coming along on this journey with me. It has genuinely been one of the most rewarding things I have ever done in my life. Speaking to so many experts in the field around the world and hearing from so many of you how it's brought value to your own jobs. This podcast will return with a new host in 2025. As for myself, I will be leaving but this is not the last you'll have heard from me. So if you haven't yet connected with me on LinkedIn, please go ahead and do that now. There is a link in the show notes, you can just click on that. I would love to share what comes next. I promise it will be very exciting indeed. Thank you so so much for listening. I've been Tiji Hylis creator and up until now host of the beyond the Breakthrough podcast which is produced by Global University Venturing, a Morsonia Limited publication. Mark Chatterley is our sound engineer. Thank you Mark for making me and every guest sound so good over the past five years. If you want to find out more about Global University venturing, our home on the Internet is globaladventuring.com university. If you celebrate it, I wish you a Merry Christmas. And with that, thank you and goodbye.