Science and TechnologyWritten evidence submitted by the Isis Innovation Ltd

Introduction

Isis Innovation Ltd is the technology transfer company of the University of Oxford. Isis was established by Oxford University in 1988 as its wholly owned technology transfer company. It is a growing and profitable business, contributing impressively to sustainable economic growth in the UK.

Isis is responsible for these activities:

Technology Transfer for Oxford

Isis helps Oxford University researchers to commercialise intellectual property arising from their research: patenting; copyright; licensing; spin-out companies; research reagents and patient reported outcome measures. Isis manages over 1,600 patents/applications, has established 65 spin-out companies since 2000 raising a total of £330 million, has concluded 650 technology licensing deals, and 900 academic consulting agreements.

Isis Angels Network

IAN introduces private investors and seed/venture capitalists interested in investing in spin-out companies to investment opportunities. IAN was established in 1999.

Oxford University Challenge Seed Fund

Isis manages the Oxford UCSF to provide financial investment for accelerating the transfer of Oxford technologies to market. The £4 million fund was established in 1999, has made 155 awards totalling £6 million.

Oxford Invention Fund

Isis launched the Oxford Invention Fund in 2010 with the University’s Development Office as part of Oxford Thinking, a united Campaign for the collegiate University. The OIF has attracted over £1 million to date.

Isis Software Incubator

Isis launched this programme in 2010 to support Oxford University staff and students develop software business ventures by offering technical and commercial advice. Three new software companies have been formed in the first full year of operation.

Oxford University Consulting

Isis manages OUC which helps Oxford University researchers to identify and manage consulting opportunities and helps clients access experts from Oxford’s world-class, interdisciplinary research base.

Oxford Innovation Society

Isis runs the Oxford Innovation Society, a leading forum for open innovation, bringing together industry, investors and the business professions with researchers and inventors from the University. Established in 1990, the OIS has held 66 events and involved over 180 member organisations.

Isis Enterprise

Isis provides consulting expertise and advice in technology transfer and innovation management to clients across the public and private sectors around the world. Isis Enterprise has worked with clients in 53 countries.

International Presence

Isis opened its Hong Kong office in 2009. The office provides a platform for Isis Enterprise consulting services in the region, supporting technology providers and technology seekers; and also enables Isis to market Oxford technology opportunities in the region and attract investment partners into Oxford spin-outs. Isis now has staff in Oxford, Madrid, Hong Kong, and Kyoto.

We are pleased to provide the following submission in response to your seven questions.

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

1. There is an enormous difference between research outputs and successful new products and services. It takes a long time and substantial investment of energy and resource to create the latter from the former; it involves bringing together people with different objectives, capabilities, and motivations working together over a long period of time.

These difficulties can be overcome:

2. By government:

(i)Addressing market failures in a clear and consistent manner; avoiding tinkering with its schemes; avoiding the pr needs of politicians rebranding, redesigning and reinventing schemes; think beyond the electoral cycle. It is a long term process for which we need long term stable schemes.

(ii)Continuing to support the Higher Education Innovation Fund which supports the development of capacity within universities to deliver a successful research commercialisation programme. Support should be focussed on activities with clear results, evidenced by intelligent metrics.

(iii)Reinstating a specific stream of funding for Proof-of-Concept/Seed Fund support within universities. The 1999 University Challenge Seed Fund scheme was fantastic; this stream of funding has got lost within HEIF, where the tendency is to use HEIF money to hire people; there needs to be a protected allocation for Proof-of-Concept/Seed Fund support.

(iv)Continuing with the EIS and SEIS schemes; simplifying and promoting the EMI scheme. These steps are vital to encouraging and incentivising good people to risk money and time in early stage ventures.

(v)There is no need for government to prop up further the UK dysfunctional early-stage venture capital community (see BVCA data). They lobby well and deliver poorly. There is already sufficient government support through VCT, ECF, CGT. What is needed is investment executives with real experience of growing sustainable businesses.

(vi)Improving the immigration system to allow talented researchers to remain in the UK for longer.

(vii)Supporting business incubators which provide facilities for new and early stage businesses. These can be on a modest scale such as the successful Isis Software Incubator.

3. By businesses thinking about and talking to the market, customers and potential customers earlier; from the outset of their business planning.

4. By shareholders, including investors, taking a longer term view on the returns on their investments; developing the concept of “patient” capital, shareholders willing to grow sustainable businesses, recognising this takes a long time, and sustainable businesses that will maintain a UK base.

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?

5. In Healthcare there is an urgent need for the NHS to present itself as a willing customer of innovative products from UK technology companies. The NHS needs to become a first port of call. At present UK healthcare technology companies actively avoid engaging with the NHS because it is such a poor customer (slow decision making, late adoption), turning instead to overseas markets.

6. In the national security and defence sectors there is an urgent need to improve the connectivity between the research base, early stage business and the customer, which is of course Government.

7. Difficulties exist in the healthcare sector and particularly in the drug discovery/development sector where lengthy regulatory processes drives the industry outside if the UK set within an environment of an extremely strong medical research base in this country. The European ban on embryonic stem cell patents is another step that is likely to hamper the progress of the healthcare sector.

8. Overall, UK companies need to become open minded to open innovation in order to benefit from new technologies and thrive in the knowledge based economy. The demand-side, pull-side needs to “get out there” and talk to SME’s and the research base.

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

9. In 2010 one third of our technology licence deals were with UK companies; one third with US companies and one third with Europe and ROW.

10. We would naturally have a preference for UK companies as transaction costs should be lower; however, there is such a shortage of innovative companies in the UK that we deal with overseas companies in order to see our early-stage technologies receive the investment required for new products to reach the market. Experts describe this as the low “absorptive capacity” of the UK economy, and refer to the lack of “stickiness” of the UK economy in its ability to retain successful businesses in the UK.

11. Our overseas business partners show an enthusiasm for innovation and understanding of the issues way beyond UK counterparts. Examples here are with healthcare diagnostics and vaccine technologies.

12. The university spin-out companies which we set up start local to Oxford, and the majority remain in the UK. We have established 65 new companies since 2000; of the 52 remaining in business all have a UK presence. However, an increasing number have overseas investors and are developing their future with overseas customers; the risk of them leaving the UK only increases.

13. The question reveals a mis-placed prejudice. There are benefits to the UK of doing business with overseas companies: maintain and enhance the reputation of UK as a source of world class innovation, at the centre of the global knowledge based economy; flow of royalty income to the UK; induce location of corporate R&D activity in the UK, close to the research base; develop collaborations with overseas companies bringing investment and funding into the UK, strengthening the UK research base and innovation ecosystem.

14. The patent box should have a dramatic effect in attracting business activity to the UK (please hurry up and implement it).

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

15. The 1999 University Challenge Seed Fund scheme was excellent. Isis manages the Oxford UCSF which has made 115 awards totalling over £6m, in excess of the initial £4m fund due to successful exits. The Oxford UCSF has supported the creation of 31 spin-out companies and five licensing deals.

16. The Higher Education Innovation Fund is successful in supporting research commercialisation infrastructure at the UK’s leading research universities. In Isis, HEIF money supports Oxford University Consulting connecting academic expertise with business needs, and the team which manages the upstream due diligence of University intellectual property.

17. The TSB has received phenomenal amounts of government funding. To date it has deployed only a small proportion of this. Outside of its weighty administrative infrastructure what it does is good, it needs to do more of deploying its resources where they are needed.

TSB recently posted an article detailing 50 technology oriented businesses within the Oxfordshire Local Enterprise Partnership (LEP) who have some relationship with the TSB. Of these organisations, 14 are companies spun out of Oxford University by Isis, 14 are consultancy clients for Isis and 4 are members of the Oxford Innovation Society.

TSB support for three Oxford University spin-outs—Oxford Photovoltaics, Oxems and Yasa Motors—has been very successful to date.

18. It was a major government blunder to increase CGT from 10% (fully tapered) to 18%. The CGT Entrepreneur’s Relief is not high enough (although recently increased).

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

19. The majority of provisions should have a positive incremental effect, especially those where tax incentives encourage people and companies to invest time and money in research commercialisation.

20. There is a risk that the desire for open access to research data will in some circumstances conflict with the desire for research commercialisation.

21. There is a serious risk that continued reference to the “easy access IP” initiative will in fact damage the prospects for research commercialisation in the UK. The naïve approach trivialises the work involved in building strong partnerships between UK industry and the research base.1

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

22. Yes, of course, by promoting the existing schemes: EIS, SEIS, EMI, VCT, ECF, CGT-ER.

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

23. Tax incentives should be introduced which encourage investors and managers to take a longer time horizon for their investments in early stage technology businesses.

24. The R&D Tax Credit should be better/higher for companies that invest R&D budgets in collaborations with universities.

25. Re-establish a funding channel to universities specifically for proof-of-concept/seed funds.

26. Switch from a focus on “start-up” to “scale-up”. The UK is good at start-ups, including very good at creating new university spin-outs. It is less good at growing small companies into big companies.

27. Switch from supporting financial investors to supporting businesses and the people who invest time, energy and money in them over the long term.

28. Consider activities which encourage experienced, successful entrepreneurs and business people from overseas to develop sustainable businesses in the UK.

Declaration of Interests

Isis Innovation Ltd is wholly owned by the University of Oxford.

Isis Innovation Ltd has benefited from UCSF funding and continues to benefit from HEIF funding.

The principal authors of this submission are employees of Isis Innovation, and serve on a number of government advisory panels (eg Research Councils, TSB).

February 2012

1 www.isis-innovation.com/news/articles/EasyAccessIP.html

Prepared 11th March 2013