Science and TechnologyWritten evidence from the University of Oxford

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

1. There are many challenges. These include:

Securing funding at each of the various stages along the continuum from initial concept to full commercialisation.

Establishing and maintaining long term relationships between commercial organisations and researchers/HEIs.

Nurturing and supporting talented entrepreneurial researchers and specialist commercialisation support staff.

2. It is difficult to access funding at each of the various stages and over the course of time required to bring research to commercial viability. We need, above all, funds to support research that generates creative ideas. Research funders need to back “high-risk” potentially high “pay off” proposals. In the UK this is the area where Research Council support is so important. Researchers also need access to funds to develop commercially prospective ideas to later stages of technology readiness. Research Councils can and do play a role here with impact funding and knowledge exchange schemes, as of course does the Technology Strategy Board. The major medical research charities, especially the Wellcome Trust and CRUK, also invest in and in other ways support commercialisation.

3. We need a high degree of continuity in funding programs and to avoid “initiative-itis”, that is creating new agencies and or schemes or rebranding others to meet political or organisational “fads.”

4. Governments must continue to invest in research commercialisation programs that have been shown to succeed—such as HEIF.

5. The UK’s taxation and investment-incentive systems need to be internationally competitive.

6. Long-term relationships between universities and business need to be encouraged.

7. Commercial investors need to be encouraged to recognise universities as active partners in developing intellectual property and not simply as passive suppliers of research ideas.

8. Innovative approaches are needed. The Oxford-Man Institute of Quantitative Finance, for example, brings together an interdisciplinary team of academic researchers and industry-leading practitioners in a research environment which increases the probability of producing significant ideas which have a chance of shaping the future. The Structural Genomics Consortium, with sites in Oxford and Toronto, sees commercial competitors working together on research problems at pre-competitive stages of the commercialisation process, where industry might otherwise find collaboration difficult.

9. The UK needs to continue developing entrepreneurial skills amongst researchers, and fostering entrepreneurship among undergraduates and graduate students. We are delighted that Oxford Entrepreneurs launched in 2002 is not only the largest student society at Oxford University but also now the largest free business and entrepreneurship society in Europe with over 7,000 members. The network includes undergraduates, graduates, MBA students, active alumni, and external members. Isis Innovation, the University’s wholly-owned technology transfer company, is a major supporter of Oxford Entrepreneurs and contributes to other educational activities at the University. Its team of specialists in IP management, business creation and development, industry liaison, marketing and finance, works with University researchers on identifying, protecting and marketing technologies through licensing, spin-out company formation, consulting and material sales.

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

10. Any operation that involves capital intensive manufacture is very difficult in the UK. This applies across all sectors, from microelectronics, to new forms of energy generation and storage, and advanced healthcare developments (especially point-of-care biosensors). Difficulties also exist for the biomedical sector particularly the drug discovery sector. Regulatory issues also slow down and enhance the financial risk in much of the renewable energy sector.

11. The NHS has a vital role to play in the national innovation eco-system, taking advantage of the UK strengths in science and engineering. The University has a new relationship with the NHS, through the Oxford University Hospitals NHS Trust, which will help to facilitate excellent patient care and “bench to bedside” translational research.1 Government investment in BRUs and BRCs has also been vital—here at Oxford the NIHR Musculoskeletal Biomedical Research Unit and the Oxford Biomedical Research Centre, a partnership between the University of Oxford and Oxford University Hospitals, funded by the National Institute for Health Research, also play key roles in driving research and innovation (incl. wherever appropriate through commercialisation).

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

12. There are many such examples. But this is unsurprising given the shape of the global economy. Research conducted in the UK is internationally renowned, and highly sought after. Ideas and people flow world-wide. The UK must do business with overseas companies. UK university research, in turn, draws knowledge, talented people and investment to the UK. Market forces, in the end, influence how and where ideas are commercialised. There is a view that more of the research in UK universities could be commercialised in the UK if key sectors of the economy were receptive to new ideas, if there was less of a short-term focus, if there was more absorptive capacity, if there was a more entrepreneurial culture, if firms in the UK invested more in R&D (in-house and with other sectors), and if there was more incentive for the UK arms of multinationals to drive innovation in the UK.2

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

13. A series of independent evaluations, published by HEFCE, BIS and others point to significant benefits from the Higher Education Innovation Fund (HEIF). At Oxford HEIF funding has expanded our capability and capacity to engage with business and embed this capacity throughout the University, and the results as reported for example through the annual Higher Education Business Community Interaction (HE-BCI) Survey are impressive.3

14. Government co-investment in 1999 in the University Challenge Seed Fund (USCF) was influential. The Oxford UCSF, for example, supported the creation of 31 spin-out companies and five licensing deals.4 The Kinetique Fund made many significant investments in spin-out companies from King’s College including Theragenetics, and OSspray Limited, and Neurotex from Queen Mary, University of London. Imperial Innovations, formed back in 1986, “only really began to accelerate in the late 1990s, when the British government began to back technology transfer with schemes like the University Challenge Seed Fund” (see Nature Materials, December 2011).5

15. The UK Research Councils have provided special funding for Knowledge Exchange and Impact activities, which has helped to facilitate researcher-end user interactions.

16. Knowledge Transfer Networks contribute steady improvement in connecting businesses together, connecting companies with appropriate university groups and generally improve the transfer of know-how between the HE sector and business. Knowledge Transfer Partnerships also play a valuable role in this area. The Collaborative Research and Development (R&D) Program assists the industrial and research communities to work together on R&D projects. TSB competitions open to small and micro businesses in key technology areas can provide vital support to university spin-outs. It is too early to tell what the benefits of the Catapult program, will be; it will be vital that the new Catapult Centres are closely linked to the research base within leading universities.

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

17. The impact overall should be positive.

18. Impact needs to be judged over the medium to long-term.

19. It is imperative that the Government continues to supports a broad, high quality base in fundamental research to optimise the generation of ideas.

20. We would urge stability in strategies/programs and be wary of “initiative-itis” (see paragraph 3)

21. We have concerns about strategies that rely on predicting technology futures and “winners”—as Shpancer observed “[Humans] tend to be as confident about prediction as we are bad at it.”6

22. There are some other notes of caution, eg around strategies that over-emphasise so-called “applied research” or are politically-driven towards certain favoured areas or sites to the detriment of others. We hope that investment in the new Catapult centres will not divert funds away from already successful TSB programs; and policies around “Open Access” to research data must have due regard to the interests of research collaborators, investors and research commercialisation agents.7

6. 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?

23. Yes. Relationships between investors and universities are highly beneficial both to universities and to the private sector, resulting in valuable exchange of learning and greater understanding between different research cultures. The role of informed angel investors, offering business expertise as well as investment capital is important. Tax incentives may provide one route to encourage investors. However, it must be recognised that private equity investment will not meet all the needs of the science and engineering sectors and that basic research which may lead to commercial opportunities will often require longer timelines than can be accommodated by private equity investment.

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

24. We would welcome a further investment in university seed funds/proof of concept funds (see paragraph 13), perhaps on a matching basis. Substantial funding is required.8

25. Government must ensure that the UK’s taxation system is internationally competitive to attract investment and promote collaborative R&D between universities and companies.

26. Government and local authorities should support Business Incubators. Research sponsored by NESTA indicates that incubated firms have a much lower failure rate than for new businesses generally and that that business incubation environments can be a good way to attract and retain highly-skilled workers that might otherwise leave the region, especially where the incubator is attached to a university or research centre and has access to suitable “grow-on space”.9 Recent American research indicates that companies based on university research are 108 times more likely to go public than an average start-up.10 An example of this pro-active incubator activity is the University’s Begbroke Science Park where a team funded from Oxford’s HEIF allocation ensures that the provision of facilities and training is available for spin-offs and early stage start-ups.

27. Government must recognise how important it is that UK universities be able to attract and retain the “brightest and best” staff and students. As Universities UK recently observed in commenting on Student Immigration proposals:

The breadth and depth of UK universities’ international activities should be celebrated as a major success story and confirmation that the UK has a world-class university system. Universities are international organisations and depend on international mobility of students and staff to deliver teaching, research and knowledge exchange of the highest quality. The knowledge economy is global and is based on the free movement of expertise, ideas and people.

Restricting mobility will result in the UK losing its competitive edge as a country ... all areas including business, research and innovation will suffer.11

28. Oxford attracts excellent and innovative postgraduate research students (PGRs), including many international students. PGRs have been named in many invention disclosure and patent applications and we have many examples of successful student spin-outs and start-ups. PGRs are major drivers of research and innovation; the UK must continue to invest in order to attract local and international students with an enterprising mind and provide opportunities for them to create and enhance businesses in the UK.

29. In the Gareth Roberts Science Policy Lecture (October 2011), The Right Hon. David Willets, MP, Minister of State for Universities and Science, observed that “The research base is among our greatest national assets and vital for our future.”12 (This base he later observed “emphatically includes the arts, humanities and social sciences”).13 He remarked that all the evidence “points to the fact that the Coalition was right to protect the budget for science and research last October ....”14 We welcome the Science and Technology Committee’s Inquiry examining ways the UK can continue to support and enhance the generation of knowledge and the commercialisation of university research.

February 2012

1 www.ox.ac.uk/media/news_stories/2011/111101_1.html

2 See, for example, www.theworkfoundation.com/DownloadPublication/Report/304_Making%20the%20UK%20a%20Global%
20Innovation%20Hub%20HR.pdf; and www.sciencedirect.com/science/article/pii/S0048733304001003

3 Oxford’s HEIF 5 allocation was driven by activity metrics which exceeded those of its nearest rival by 30%.

4 See www.isis-innovation.com/researchers/UCSF-1.html

5 www.nature.com/nmat/journal/v11/n1/full/nmat3208.html

6 www.psychologytoday.com/blog/insight-therapy/201102/our-murky-crystal-ball

7 See www.universitiesuk.ac.uk/PARLIAMENTARYACTIVITIES/UUKINPARLIAMENT/Pages/
default.aspx

8 Eg Deloitte’s analysis of the Wyvern UCSF suggested that whilst the annual Internal Rate of Return (IRR) was very good at 20% per annum, this would have been higher if more funds had been available and the investment cap had been greater than £250k. See http://wyvernfund.com/assets/files/101008%20Deloittes%
20research%20paper.pdf

9 www.nesta.org.uk/publications/policy/assets/features/business_incubation_in_challenging_times

10 http://stevens.usc.edu/read_release.php?press_id=111

11 www.universitiesuk.ac.uk/Publications/Documents/UUKresponseToTheStudentImmigrationSystem.pdf

12 www.bis.gov.uk/news/speeches/david-willetts-gareth-roberts-science-policy-lecture-2011

13 “Our Hi Tech Future” speech 4 January 2012, Policy Exchange, London.

14 www.bis.gov.uk/news/speeches/david-willetts-gareth-roberts-science-policy-lecture-2011

Prepared 11th March 2013