Beyond the Breakthrough with Thierry Heles

Whisky may not be the first industry to come to mind when you think of university innovation, but for the University of Kentucky — based in a US state known around the world for its bourbon industry — it’s an obvious next step in its tech transfer activities.

UK Innovate, the institution’s commercialisation arm, is spearheading a new organisation called Estate Whiskey Alliance (EWA) that will allow members to access and help guide research in areas such as sustainable whisky production and regenerative farming.

Run by director Landon Borders and operations manager Alexa Narel, the alliance builds on the university’s expertise through its James B. Beam Institute for Kentucky Spirits. But it’s not just for Kentucky: there’s already one co-founder from Canada (spirit producer Black Fox Farm and Distillery), and Estate Whiskey Alliance plans to expand into other whisky-producing nations such as Scotland and Japan.

There will be a highly visible benefit for consumers, too: the Estate Whiskey Alliance will authenticate and certify whisky made to strict, high standards — from milling to fermentation to barreling and ageing, everything has to occur on the distillery’s estate, and at least two-thirds of the mash bill grains have to be grown on estate-controlled land.

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Researchers with promising technology in the UK can apply for public innovation agency Innovate UK’s pre-accelerator programme ICURe, which supports them in reaching out to 100 potential customers to understand the market viability of their idea.

It’s a powerful initiative that helps would-be founders understand if their idea can make a good business and what it should look like. But securing money wasn’t, until recently, part of that programme and researchers weren’t taught to ask for cash — the thinking was that anything inventors had to offer at this stage didn’t yet have commercial value.

Pearse Coyle, founder and partner of the Deeptech Seed Fund, says that’s the wrong approach. He worked with Innovate UK to change the ICURe programme. The solution is a scorecard outlining potential customers’ willingness to pay for a pilot project and engage seriously with a spinout.

Coyle’s thesis is that spinouts that demonstrate this early traction are much more likely to be successful in the long run. He argues that spinouts should focus on asking for money early on — long before there’s a finished product — and avoid spending time in incubators which may add no value.

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Just over a fifth of academic institutions in Asia have access to a dedicated university venture fund, with a third of all funds found in Japan — that’s the finding of GUV’s latest regional analysis published last week.

It puts Asian universities behind those in the US, Europe, Australia and New Zealand, though the Japanese ecosystem deserves recognition for being very mature: out of 13 universities on the list, 11 have at least one fund. The University of Tokyo Edge Capital Partners is also a rare example of a fund that invests overseas, rather than just in spinouts or the local ecosystem.

On this episode of the Beyond the Breakthrough podcast, we are turning the table on usual host Thierry Heles, who wrote the analysis, with editor Kim Moore asking the questions.

You can listen to a previous episode, discussing the US and Europe findings, here.

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Should professors be spinout founders? An increasing number of universities are pushing their faculty to be more entrepreneurial but data suggests that that’s not always a good thing — for the professor, the spinout or the students.

Maria Roche, an assistant professor at Harvard Business School, examined the funding and exits of hundreds of biotech spinouts and discovered that if the startup’s technology is closely linked to the research in the original lab or the faculty is a founder, the spinout is much less likely to raise significant funding. Having an academic founder also doesn’t improve the odds of being acquired or going public.

For PhD students in the academic founder’s lab, the experience can be miserable because suddenly, this great mind they were hoping to learn from is busy running a startup. That has long-term implications: these students publish fewer studies themselves and are significantly more likely to go into consulting rather than becoming researchers themselves.

Roche is not against spinouts per se but warns that universities don’t seem to be aware of the cost. In this week’s episode of Beyond the Breakthrough, she offers tips on how to mitigate these effects.

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Despite the benefits of universities having a venture fund they can draw on to invest in companies they help commercialise, they are still a rarity in places with mature venture capital sectors like Europe and the US.

More top European universities have access to university venture funds than the US’s most research-intensive institutions — that’s the finding of Global University Venturing research published this summer. But the story isn’t quite that simple. Both geographies count an equal number of funds, but multi-university venture funds (investment vehicles backing spinouts from two or more institutions) are a more common feature in Europe.

One reason for that is deal flow: Ireland, for example, saw a total of 26 new spinouts founded in the whole country last year so a fund for a single institution wouldn’t be sustainable. Indeed, the Atlantic Bridge-managed University Bridge Fund is backed by multiple universities and invests throughout the nation.

Surprisingly, while raising a venture fund is a live discussion at universities on both continents, some are against setting up an investment vehicle to the point of declining money offered by alumni. There’s a few reasons for this, including financial risk, that we’ll dive into on this episode. Fill out a brief survey to help us with more university venture fund research.

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We look back at some of the highlights of season 3, which featured many a discussion about university incubator and accelerator programmes, including insights from Jim Shaikh (The Greenhouse at Imperial College London), Paul Devlin (Cardiff University), Brandon Paschal (LaunchLab at Stellenbosch University), and Duncan Johnson and Miles Kirby (NG Studios powered by Deeptech Labs).

This season also featured discussions around university venture funds (Anita Nel at Stellenbosch University and its University Technology Fund) and investing in the construction sector (Ilian Iliev at NetScientific).

We also tried to answer the question of what makes an ideal spinout founder with GUV’s own Fernando Moncada, as well as an episode guest-hosted by Imperial College London’s Simon Hepworth that specifically looked at immigrants as founders. John Dearie (American Center for Entrepreneurship), Alice Li (Cornell University’s Center for Technology Licensing), Desmond Cheung (an investor with Foresight Group) and Dorian Haci (founder and CEO of Imperial spinout MintNeuro) all contributed to that panel discussion.

Beyond the Breakthrough is taking a summer break — but keep your eyes peeled for a bonus episode or two coming later this month!

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Andy Shenk, the chief executive of Auckland UniServices, the commercialisation subsidiary of the University of Auckland, knows that collaborating with the Māori people is important. He also knows that big data and AI offer great opportunities, but tells me about some of the challenges too.

He also argues that the country’s remoteness actually makes space tech a strength for New Zealand, although the nation still struggles with a lack of serial entrepreneurs despite the fact that many people are open to trying their hands at a startup.

Auckland UniServices is also unique in that it doesn’t simply create its own spinouts and startups, but also operates businesses – including one that trained medical staff in delivering the covid-19 vaccine across New Zealand and several Pacific island nations.

Today we’re revisiting a classic episode from the archives. If you want to know more about Auckland UniServices, head on over to globalventuring.com/university where you can find a brand new op-ed from Andy’s colleague Will Charles looking at why university venture funds and low equity stakes are important.

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Setting up a venture fund in 2020 was a “huge paradigm shift” for Stellenbosch University in South Africa, because, for the first time, the executive leadership at the institution became interested in spinouts, says Anita Nel, the chief director for innovation and business development, because they understood that academic research had commercial value and a way to build, for example, local pharmaceutical expertise (the country had to wait six months longer than the northern hemisphere for a covid-19 vaccine because there were no vaccine developers or drug discovery companies in all of Africa).

External investors have taken note too: since the University Technology Fund (UTF) was launched with the backing from public-private investment vehicle SA SME Fund, there have been “hundreds of millions of rand” (ZAR100m = $5.4m) invested in the startups incubated by the university, says Brandon Paschal, the deputy director for spinout companies and funds who is also in charge of incubator LaunchLab.

The fund is a first not just for Stellenbosch University or South Africa, but for the whole continent because it invests solely in university spinouts from Stellenbosch University and the University of Cape Town (while University Mohammed VI Polytechnic in Morocco also has a fund, UM6P Ventures, though that one invests in startups across Africa).

The first University Technology Fund, which raised ZAR230m, has been deemed a success. Now, a second fund is being raised with one key difference: it will be a national fund after Nel overcame early hesitancy from other tech transfer offices in the country.

Immigrants are profoundly entrepreneurial people: they leave behind everything they know for a new country and new opportunities, often at a financial risk. This willingness to embrace change and build a new life from scratch means it should not be a surprise that in the US alone, 43% of Fortune 500 companies have been founded by immigrants.

But there are obstacles that governments around the world put in front of such people and those they subsequently want to hire for their startups. In the US, for example, the number of H-1B visas (which allow companies to hire foreign talent) is capped and only 65,000 such visas can be issued in total each fiscal year.

And while large corporations have the financial and legal resources to navigate routes like the H-1B or Global Talent visa in the UK, startups typically lack these means and so can miss out on talent even when they’re developing technology in a field that only has a handful of experts around the world.

John Dearie, president of the Center for American Entrepreneurship which lobbies policymakers for changes, points out that “the United States is the only industrial democracy on the planet that does not have a visa category specifically designed to attract and retain foreign-born entrepreneurs”.

Dearie is joined on this episode of Beyond the Breakthrough by three people who have first-hand experience of the challenges, and opportunities, around immigration: Alice Li, executive director of the Center for Technology Licensing at Cornell University; Desmond Cheung, senior associate at Foresight Group; and Dorian Haci, founder and CEO of neural implant startup MintNeuro.

Simon Hepworth, director of enterprise at Imperial College London, leads the discussion, which marks the third and final part in our mini-series in partnership with tech transfer association TenU on building spinouts.

Part 1 of this mini-series: The key ingredients of successful spinout teams Part 2 of this mini-series: Funding for all — unlocking diversity in spinouts

Alice Li previously joined the Beyond the Breakthrough podcast for an in-depth conversation about Cornell University’s ecosystem. Listen to that episode here.

Commercialising social sciences research is such a new area of technology transfer that when you spin out a company “you might be the first to do that type of deal,” says Paul Devlin, the head of research commercialisation and impact at Cardiff University.

And Cardiff is going all in: the institution is a founding member of Aspect, a UK-based multi-university organisation that was set up to drive the creation of social sciences spinouts. Two years ago, Cardiff opened a six-storey incubator, called sbarc|spark, which is dedicated to social sciences and home to the tech transfer office itself.

Devlin — who’s been in the job for 18 months — can already claim early successes such as HateLab, a platform to detect online hate speech and crime, that began as a social sciences research project but last year was spun out as Nisien.ai.

Devlin is also working with his boss Vanessa Cuthill and vice-chancellor Prof Wendy Larner to make sure tech transfer is measured by impact, rather than just VC investment raised — a metric that makes sense for life sciences or software spinouts, but not for social sciences.

Learn more about SETsquared in our interview with the enterprise partnership’s interim executive director Marty Reid.