Science and TechnologyWritten evidence submitted by Plymouth University

Q1. What are the difficulties in funding the commercialisation of research, and how can they be overcome?

1. Funding for the commercialisation of research per se is a complex issue and due to the restrictions on how public funding can be used in the EU, limits the options available for the UK government to intervene directly. This is a commercial issue and one where the provision of funding is linked explicitly to commercial risk factors. The “Valley of Death” is predominantly an SME factor when seeking to bridge the gap between R&D and financing the creation and marketing of a product. This is particularly the case with early-phase start-up businesses.

2. Considering the HEI perspective, the SME sector is not the natural market-place for the commercialisation of their research, as it is often too fundamental in nature, and even where there is evidence of traction in the market-place, most success comes from working with larger corporate bodies. HEIs fully understand the Government’s necessity to pump-prime the SME sector (due to their predominance in the UK environment) and have, over the past few years, grown a support structure for SMEs via the HEFCE funded, Higher Education Innovation Fund (HEIF). Fundamentally, this has created an SME support and “engagement” mechanism in England, but has not necessarily created a healthy and vibrant escalator for the commercial exploitation of research from this source.

3. However, there is much evidence to show creativity in the HEI sector, through the prevalence of strategic IP commercialisation partners such as IP Group, Angle and Frontier IP Group. This mechanism allows HEIs to work alongside proven commercial expertise in the sector and enables them to access structured rounds of venture capital through a proven managed process. At Plymouth, we now have a balanced portfolio of commercialisation projects through working with our partnership with Frontier IP Group PLC, which enables us to address a diverse range of development projects with larger Corporates and SMEs. These are commercial arrangements, but arrangements which allow us to use HEIF effectively to support demand-driven, early stage, proof-of-principle support as a stepping-stone to creating viable business cases for structured venture support.

4. In conclusion, HEIs should not be seen as the sole engine for SME support and engagement. We cannot force the creation of spin-out companies and more often than not, it is not viable to work with the SME sector. Of course, there will always be a natural spin-off from HEIs, whether this is in the form of licensed or assigned intellectual property, or a strong commercial case for the creation of a spin-out vehicle where the HEI has a proven platform technology.

5. The continuing support of Government to enable HEIs to provide clean “proof-of-principle” support for early stage ideas is essential, as there are many risks and uncertainties in taking that journey from concept to market, a journey which is often uneven and indirect with many obstacles and possible entry and exit points. However this support should not be dedicated to the creation of SMEs only, as in the US, licensing of technology is a far more rewarding path for HEIs and is a proven model for generating external funding for supporting spin-out activities.

6. From an HE perspective, we would like to see the Government providing much more strategic support for the creation of a vibrant “strategic IP commercialisation partnership” market and to work with the HEI sector in strengthening those links between academia and industry. Perhaps the introduction of national schemes such as “senior internships” or “industry-academia secondments” where the exchange of senior personnel can create productive and strategic relationships. A good example of strengthening those links is through Plymouth’s Growth Acceleration and Investment Network (GAIN) reinforces the role of the University as a catalyst for economic growth, connecting people, ideas and money to drive creation, growth and acceleration of successful knowledge based businesses. This platform enables the University to connect the expertise of its researchers with businesses, supply chains and investors.

Q2. Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

7. Generally, given the state of the global economy, it is increasingly difficult to get any real traction in the marketplace at present as investors are particularly risk-averse. Historically, there have always been significant difficulties in seeking to commercialise research in the bio-tech and pharmaceutical sectors given the gestation time necessary and the size of the investment required to see through extensive trials and testing—generally, this still remains the case.

8. More locally, Plymouth has made significant investment in its infrastructure within the marine sector; research strength recognised at an international level. This is a sector where regulation and access and substantial capital cost, risk and the exploratory nature of R&D, limits the ability of SMEs to engage and is only overcome by working through larger corporate engagement to access their SME supply-chain.

9. The common difficulty across all sectors has been the recognition that business wants to engage directly with the academic research expertise within HEIs, but this often proves difficult as there is an increasing challenge for the teaching and research loading on HEIs. Basically, researchers are finding it increasingly difficult to find the time to have face-to-face exposure with the commercial sector. The current Research Excellence Framework exercise offers a brave first-step in addressing the need for researchers to embrace the commercial world through Impact case-studies, but until HEIs have the capacity to allow their researchers to spend more time with industry, this will remain a key issue. Another difficulty is around cultural issues whereby both academia and the private sector operate under very different ethical codes of practice and restrictions imposed by businesses on the publication of results could potentially inhibit an academics ability to publish in scientific journals.

10. Possible solutions include the provision of dedicated funding from Government to buy-out key researchers’ time to allow them to work in industry on particular demand-led research themes (Industrial fellowships). Indirectly the greater integration of commercial and academic approaches will also enhance the “overall student experience” by contextualising conventional theoretical learning with commercial application. Encouraging and supporting more “cross-disciplinary research” to develop real, exciting and innovative solutions which appeal to a wider commercial audience. Through Plymouth’s “Interactive Systems Studio”, for example, graduate developers through a sponsored internship programme using technology more commonly associated with video games, can “bring to life” projects based upon the visions of individuals and the business community.

Q3. What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

11. In Plymouth there are no examples of UK-based research having to be transferred outside of the UK for commercialisation.

12. One possible suggestion of why this may have occurred could simply be due to the current economic climate, whereby SMEs lack funding and large corporates are reluctant to invest in exploitable opportunities when the technology is early stage and/or in an uncertain phase of development.

Q4. What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

13. The dedicated SME support instruments developed by Government in 2003 have provided a viable support structure for the engagement of the research base, particularly through the Grant for Research and Development package and the Knowledge Transfer Partnerships initiative. These were both built around proven performance of such support through the previous Smart, SMART, SPUR and TCS schemes. Both of these SME support instruments have been subject to external audit by PACEC previously and show that it takes between five and seven years for a commercial return to the UK government in the form of corporation taxes and the yield of taxation on UK company sales.

14. Both of these measures have been extremely successful in engaging with the UK’s research base through the HE sector. The need for innovation has not diminished in fact, given the current economic landscape initiatives such as these are vital. Plymouth has nationally been recognised in stimulating and supporting business lead innovation through knowledge transfer and has a UK leading reputation for KTPs. Through initiatives such as GAIN, its Innovation Centres and Enterprise Solutions gateway, businesses can access an entire range of expertise, services and facilities.

Q5. What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

15. This is unclear, but clearly the Government has reviewed the economic landscape and has refreshed the range of “pump-priming” and structural, fiscal instruments at its disposal. It is important to recognise that rather than create new initiatives, the Government’s approach to build upon or refresh existing successes is the right way forward.

16. As discussed above, the “Valley of Death” (a phrase coined in the early 1990s) is seen very much as an early-stage growth issue for the SME sector. The Government’s strategies are seen to offer a balanced package of “investment ready” initiatives for the SME sector, but will be very much limited by scale and volume of support that can be made available. As has been seen in the past, these are probably the right tools, but they are restricted by available Government funding and require applicants to invest significant resources in entering strict competition to access them. This is just a basic economic fact.

17. What is the incentive for the venture finance sector to invest in these high-risk projects? Fundamentally, this is a commercial decision.

Q6. Should the UK seek to encourage more private equity investment (including VC and Angel Investment) into science and engineering sectors and if so, how can this be achieved?

18. The Government’s commitment to public sector funding in respect of commercialisation of research will continue to remain of paramount importance, as there is increasingly a need to generate “uncommitted” funds for re-investment into teaching and research. At Plymouth, as set out in its Commercialisation Strategy, there is a real drive to diversify its funding base as a way to meet current financial challenges within the HEI sector.

19. In both cases, whether investment is channelled through Government or through private equity investment, this needs to be “money with management”. HEIs have a significant role to play in this process through knowledge exchange or industrial outreach programmes, in order to share and promote the benefits of working collaboratively to reduce the risk and cost of R&D/Innovation.

20. Investment in the Science and Engineering Technology (SET) sector has been proven to provide a long-term sustainable economic model globally. However, it is often difficult for the private investor to understand the complexities, opportunities and risks associated with it. Visualising the opportunities is beyond many investors without significant investment in technological and scientific due diligence, which is all too often derailed by large upfront fees.

21. Therefore, the Government, through the Technology Strategy Board, should consider providing support for translation of these investment opportunities via strategic IP commercialisation partnerships (such as those currently engaging in the HE sector—discussed in Q1 above).

22. As is currently the norm with these commercial partners, the UK Government could consider taking a royalty or revenue share of any future commercial successes supported through these mechanisms, to re-invest in more of the SME “pump-priming” initiatives as discussed in Q4 above.

Q7. What other types of investment or support should the Government develop?

23. The current Government should continue to provide structural support through mechanisms such as the Regional Growth Funds to provide the infrastructure for business to thrive. Plymouth in partnership with a regional newspaper was the only University successful in being awarded a £1M grant investment fund of this type, financed by the Department for Business Innovation & Skills.

24. GAIN, another example, is a new model for economic development, putting Plymouth University at the heart of a virtual and physical ecosystem that draws together individuals and businesses to support investment and innovation. Its offering incorporates an expansive physical infrastructure including on-campus pre-incubation space and services, Innovation Centres and a new £18 million Marine facility.

25. More generally in the case of the HE sector, mentoring of academics and HEIs by mature and established corporations and relevant government departments may help increase the number of commercialisation initiatives, providing prospective investors with the confidence that the emergent management teams are equipped and skilled to translate research into viable commercial ventures. This may also lead to offering better incentives (reward/recognition) for both the academics and the professional staff involved in the commercialisation process.

26. HEIs and established large corporations may de-risk the translation of research outputs into viable and sustainable commercial activities more efficiently by adopting an Open Innovation approach, rather than a reliance on the creation of spin-outs as the default exploitation mechanism.

27. Alongside this and the other support discussed above, there is an acute need for education of the investor sector that allows them to understand and access SET opportunities.

28. To a certain degree the HE sector has addressed this within its own Technology Transfer function through the PRAXIS UNICO model. The commercial education and support accessed via this is recognised nationally and by commercial practitioners. This is all about maintaining and improving the professionalism of the Technology Transfer community with the intention of ensuring the HE sector deliver results expected by businesses in ways complimentary to each individual institution’s mission statement.

29. It is suggested that this model should be used as the Forum for dialogue with the investment sector, particularly focussing on SET investments. UK Government should be seen to promote this best practice and to provide subsidies for the investment sector to undertake the range of courses and fora that this currently offers.

January 2012

Prepared 11th March 2013