Spin-out Companies Need Strategic Help to Ensure Success

Chemical science based spin-out companies need more effective and coherent means of financial support in certain key technology areas if they are to match their promise and grow into the new face of the UK chemical industry, states a report published this week.

The report, Chemical Science Spin-outs from UK Universities - Review of Critical Success Factors, is a joint study from the Royal Society of Chemistry and the Chemistry Leadership Council.

The chemical and pharmaceutical sectors are one of the UK's largest manufacturing industries and generate a £5bn trade surplus, but severe cost competition from Asia means that much traditional chemical production is moving overseas. Innovative products from university spin-out companies hold the key to the future health of the industry within the UK.

Among the key recommendations of the report are:

• More resources and support for intellectual property (IP) management. IP is the lifeblood of spin-outs but requires complex and expensive patent filing, maintenance and enforcement. Currently this task falls to the universities, but there are major concerns that some universities have neither the expertise nor budgets for this role. In particular, as a major incentive government should consider supporting the costs of patent filing in spinout companies as an R&D cost.
• More science parks with 'wet chemistry' facilities and specialised equipment. These would enable fledgling companies to leave university buildings and develop into fully recognised adult businesses that can attract more investors and customers. Lack of such facilities has seriously constrained growth of new businesses in some cases.
• Encouragement for early stage investing in the British risk-capital community both from "angel" investors who take the start-up risks but also from venture capital sources including British pension funds. Specifically a programme of education which opens the eyes of the venture capital community to the promise of new developments in chemical science and materials as a reason to invest in these areas which venture capital has often found difficult to assess.
• Expanding the networks of experienced individuals who can offer experienced advice to fledging companies. Tax concessions could help bring successful expatriate entrepreneurs back from overseas, as currently they may be reluctant to return and expose their non-UK earnings to UK taxation.   

Rodney Townsend, co-author of the report and Director of Science and Technology at the RSC, said: "The number and diversity of chemical science spinout companies from universities is a testament to the innovative strength of our academic science base. The need to inject more entrepreneurial know-how to match this inventiveness comes out very clearly from this study and the conclusions are relevant not just for chemistry but for all industry sectors. I hope that the recommendations are acted on decisively and quickly."

David Fyfe, co-author of the report and CEO of the spin-out company Cambridge Display Technology Ltd., commented: "This collaboration between the Chemistry Leadership Council and the Royal Society of Chemistry has highlighted many issues which mitigate against success in getting Britain's undoubtedly superb chemical and materials science to successful commercial exploitation. Many of the observations apply to the entire science and technology commercialisation scene and are therefore well worthy of examination and action by university authorities, the venture capital community, RDAs and government." 

Ends