Written evidence submitted by UK Business
Incubation (TIC 16)
The purpose of this memorandum is to submit the views
of UK Business Incubation (UKBI) for consideration by the Science
and Technology Committee in its examination of the Fraunhofer
as a model for Technology Innovation Centres (TICs) in this country,
and its validity in improving commercialisation of research in
the UK.
The "Fraunhofer model" refers to "an
application oriented research organization which is geared to
the needs of its customers , who are from industry and the service
and public sectors". We understand that there are 59 Fraunhofer
Institutes in Germany, whose revenue comes two thirds from industry
and publicly financed research projects and one third from public
sector funding. The majority of their staff are qualified scientists
and engineers.
We are confident that other submissions will give
details to the Committee of existing research centres in UK, many
of them attached to universities, and of the benefits which could
be derived by having public sector funds available to extend the
number and scope of application orientated research organizations,
whether they are part of universities or independent. We wish
to restrict our submission to emphasizing that should this enquiry
conclude that TICs and the Fraunhofer model are worth adopting,
it should be recognized that there is already in existence a network
of business incubators which are available to assist high technology
spin out activity, and the development of a TIC should be done
in cooperation with the business incubators in its area. The structure
for helping to commercialise at least some (see below) of the
research coming from TICs is already in existence, and it is important
that TICs make use of this rather than duplicating it.
It is relevant that in the German Fraunhofer model
the majority of the staff are qualified scientists and engineers,
which suggests that in a Fraunhofer greater emphasis is given
to its role of applied research than to the problems of spinning
out and building a sustainable start-up, which are the skills
of business incubation. This is probably not of relevance in the
majority of the cases of the exploitation of applied research
since these result in licenses which are taken out by large companies
who have the structure and skills to make use of the licenses.
In the case of M.I.T. in Boston we understand that more than 70%
of the exploitation of their research is in the form of licenses:
in the case of a particular UK university we questioned the equivalent
figure is around 50%. It is probably only a minority of applied
research ideas which end up as being the subject of spin out,
but it is in these cases that the work of a business incubator
is invaluable and is complementary to the work of the TIC.
UKBI represents some 300 business incubation environments
in UK. Not all of these are appropriate for working with a TIC,
as UKBI is concerned with regeneration (viz job creation through
the creation and growth of sustainable small companies in economically
deprived area) as well as innovation and growth, viz encouraging
start-ups derived from research which will grow to become major
creators of wealth and of jobs. But many of our members are well
qualified to work with TICs as they develop, and are willing and
ready to do so. It is important that the TICs make appropriate
use of this expertise.
APPENDIX
UKBI
UK Business Incubation (UKBI) was set up 12 years
ago as a not-for-profit company, limited by guarantee. It was
sponsored by the Treasury and its initial financial backing came
from both the DTI and the private sector. It has been self supporting
for the last nine years. UKBI's purpose was and is to promote
the creation of wealth and sustainable jobs through encouraging
start-ups and the growth of small companies, including the commercialization
of university research and the regeneration of economically deprived
areas. It is a national organization, and its board is drawn from
business incubators in all parts of the UK. UKBI has worked with
all of the RDAs in recent years, as well as the World Bank, the
EC and a number of overseas governments. It has a strong international
brand, and acts as host for an annual "Global Business Incubation
Day" which in 2008 included a reception at 11 Downing Street.
BUSINESS INCUBATION
Business Incubation is a powerful socio-economic
development tool that acts as a "catalyst" and a "gateway"
for growth, entrepreneurship, and innovation activities as well
as industry clustering. It comprises the processes which collectively
help start-ups to survive and grow. These include the provision
of flexible property leases, availability of shared administration
and support services, mentoring, formal and informal peer group
interaction, access to university research, access to proof of
concept funding, investment readiness counseling, management selection
and access to growth funding. Where these processes are made available
in a physical location (viz an incubator) the client companies
are encouraged to "graduate" from the incubator after
say three years, so enabling new companies to be accepted.
With the help of businesses incubation, innovators
and entrepreneurs are better prepared to turn their business ideas
into successful new ventures that have an above average chance
of success and survival. Research undertaken initially in the
US and confirmed in the UK (and globally) has shown that business
incubators/business incubation environments reduce the risk of
business failures, and business incubation practitioners generally
report that more than 85% of all firms that have "graduated"
from their incubators are still in business. This compares with
a "standard" survival rate for start-ups of around 50%.
The business incubation industry has experienced
rapid growth over the last 30 years, but the first business incubator
started more than 50 years ago in New York. By 1980, there were
12 to 15 incubators operating in the United States and since then
the global industry has grown to include more than 9,000 incubators
worldwide. In the UK, in 1998 (when UKBI was founded by the Treasury
and DTI) there were estimated to be around 25, and there are now
more than 300 business incubators/incubation environments throughout
the UK in urban, suburban and rural situations.
The 300 business
incubation environments in UK work directly with around 12,000
clients, including "virtual" clients who make use of
and benefit from the incubation processes on offer but are not
physically located in an incubator. By way of comparison, in the
US incubation assists more than 27,000 start-up companies annually
and provides full-time employment for more than 100,000 people
generating annual revenue of more than US$17 billion. Research
shows that every US$ of public funds devoted to business incubation
generates a 30x return on that investment in tax revenues each
and every subsequent year.
See http://www.nesta.org.uk/library/documents/Business-incubators.pdf).Independent
research by Nesta.
Graham Ross Russell
Chairman
UK Business Incubation
30 November 2010
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