investors

Should Universities become investors?

Some world leading Universities and R&D institutes have created their own investment vehicles. However, is this a feasible innovation instrument for research entities? Are the existing cases successful? Could University funds solve the funding gap from research to market in Europe?

The University of Oxford has created more companies in the past five years than in the previous 795”, said recently Chas Bountra, University of Oxford’s pro-vice chancellor for innovation. This dramatic ramp up of venture creation has been driven by Oxford Science Innovation, an investment fund set up in 2015 with $737 million raised from global investors including Sequoia Capital from the US to Tencent Holdings and Huawei Technologies from China. Should other European universities follow suit?

Although European Universities are steadily catching up with their counterparts in the United States in terms of innovation, there is still a long way to go. The problem is well-known: while Europe is home to world-class Universities in terms of research, we struggle to compete with the US when it comes to translating research into innovations, being these materialised through patents, collaborative projects or spin-offs.

Assessing this problem from an European perspective is indeed extremely difficult as the European landscape is dramatically heterogeneous. When it comes to capital raised by spin-offs, the European ranking is led by University of Cambridge ($2,216M), University of Oxford ($1,271M) and Imperial College of London ($714M) according to an analysis carried out by Global University Venturing that accounts the investments raised from 2013 to 2017. In this more recent analysis from 2019, the UK still maintains the leadership although Swiss Universities EPFL and ETH Zürich are clearly catching up. Apart from these few cases, the capital raised by University spin-offs in Europe is rather limited.

Beyond the role of TTOs

Universities have created active TTOs (Technology Transfer Offices) whose role is determinant in the success of creating spin-offs. KU Leuven, Europe’s most innovative University according to Reuters, today boasts 135 spin-off companies, a remarkable success driven by its significant effort in innovation resources: KU Leuven’s TTO is reported to employ about 100 employees who are totally focused on creating spin-offs, technology transfer and IP.

Although TTOs are widely present in European Universities, the creation of an investment vehicle is a much more ambitious step. There are many European Universities that have already done it (University of Oxford, Imperial College London, Cork Institute of Technology, TUM, etc.), but most are out of this game. European spin-offs face a daunting view when looking for go-to-market funding and, while the number of financing mechanisms is multiplying, it is also evident that the competition is ramping up (see number of proposals for the so popular EIC Accelerator). The reality is that most spin-offs struggle to find capital to reach the market.

An active role empowers innovation

Investment funds promoted by Universities can provide the funding required by spin-offs to bring research to the market. Although there are some experiences, there is still a lack of data that can support the feasibility and profitability of these funds. The existing data shows a clear correlation between the availability of a fund and the creation of spin-offs. Either way, it is clear that when looking at innovation, Universities need to be more in the driving seat of funding if they want their research to reach the market, either through active TTOs, or even, through the creation of investment funds and networks.

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