Spin-outs, Reinvestment and Universities
Spin-outs, Reinvestment and Universities
I have just read this excellent article from Robert Gelb in today’s Scotsman:
In it he quotes:
“The other week, I heard a story about a leading university in Scotland’s response to a statement about equity. Wanting 20–40 per cent of a spinout company without any cash investment, they were told that Stanford often asked for 5–10 per cent at the most”.
If this is the case, I really do not understand it. The ideas and research is done within the heads of those who invent and discover new knowledge. The university is an enabler. It pays the bills and keeps the lights on. Without inventors, we have buildings and offices which will never produce anything. The ghosts of our research past will also diminish, and where the great work of the past will lead to nothing but the perception of a good reputation. New research teams will grow and flourish, while those stuck in the past will whither.
Research must thus be continually nourished, and shown that it has relevance and impact. If we do not support and incentivise those who create ideas and take them forward, and for the forthcoming CEO and CTO, we will never advance a culture of entrepreneurial spirit in Scotland or the UK. It makes me proud of the support we have received from Edinburgh Napier University for our spin-outs. In 2018, Zonefox was acquired by Fortinet and Symphonic by Ping ID. Cyacomb is flying, too, just now and perhaps could be acquired in the next few years.
And, so, how has the university benefited? Well, it received a significant sum back from its shareholding in the spin-outs without having to risk any money at all. For this, I am glad to say, that much of this has been invested back into research — and where — with other new investments and industry funding — we have more than 10 new Cybersecurity PhD studentships starting in October and where they have invested extensively in new academic staff in Cybersecurity (with two more posts to be advertised in the next few weeks). The funds from back from spin-outs and also involved significant investment from the university — and where success follows success. This has led to a continual upward spiral in our research. More jobs, more research income, more IP, more patents, more spin-outs, and so it continues.
And, what about those involved in the creation and the enablement of the IP? Well, they have benefited financially, and it will make their retirement — if they ever retire — a whole lot more comfortable. And, generally, they deserve it. They have bought into the vision and carried it forward. Those who rejected our ideas and didn’t think there was a future in what we wanted to achieve, possibly are still doing what they have always done. The same goes for asking for too much of a share in the spin-out for the company — they are trying to take a large share of nothing. In fact, 100% of nothing, is nothing. A spin-out needs to breathe and grow — it needs talent.
And, so, every time we have a spin-out, we get a little smarter, and generally try to understand how best to take our ideas to market. One thing, we know, is that the rewards should go to the inventors and the spin-out team. If the university receives a share, it can sit back and hope that 5–10% of a billion-dollar company is a lot more than 40% of a company that is worth nothing, and never went anywhere.
And, so my university has done well to reinvest its rewards. But, it has benefited in a greater way … its esteem has greatly climbed. For example, in REF 2021, we submitted two research impact case studies based on our spin-outs, and each was graded as “World-leading” (four stars). We also received two other World-leading impact case studies. This has transformed our research esteem, and now we see the benefits of increased research funds. But, what you don’t see is that the university enabled — rather than disabled — the whole spin-out process.
Conclusion
A single great spin-out can lead to an ever-increasing impact — but it needs great people to support the company, and not for the university to sit back on its share holding. And, so, here’s one of our next great spin-outs: