University spin outs

My name is Emma Nolan. I head up the university’s Technology Transfer Team, also known as the IP Commercialisation Team, and I’m going to talk to you personally about university spin-outs, what, why, and how. Just a bit of background about me. I’ve been at the university since 2018, and I’ve been in technology transfer for the best part of my career, so in different roles; IP management, legal contracts, commercial contracts, setting up companies, getting investment, and negotiating licence deals, so the whole range of activities. Okay. Firstly, a definition; what are spin-out companies? I do like to start with a definition. They’re defined as registered companies set up to exploit intellectual property that has originated from within the university, and in which the university has shares. If we unpack that a little bit more, registered companies, new entities, separate legal entities from the university, generally privately owned companies. When we talk about intellectual property, that’s a whole other subject area. IP is basically anything that results from the university’s research base that has potential commercial values, and that includes IP such as patents, knowhow, copyright, software. Generally, a whole bundle of those IP rights would be required by a company to commercialise a technology. In which the university has shares. I don’t know if you’re aware, but the university has a distribution of revenue policy which applies to licensing and spin-out companies. When we set up a spin-out company, the university will get some shares. The founding academics will get some shares, and generally we try to set up a spin-out company with a management team in place, and typically they will get some shares as well, and I will talk in a bit more detail about management teams, because that’s quite an important point.

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Just to put spin-outs in the context of commercialisation, from a university really there are two routes to commercialise, with a little bit of a hybrid. The first route is that we find an existing player in the marketplace, so that would be a commercial organisation already set up with established marketing networks, distribution networks, R&D capability, suppliers, marketing chains, and we license our technology out to them in return for some royalties. That’s generally our first port of call. Now, if we can’t for whatever reason find a licensee who’s ready and willing to take on the technology, then we can set up a spin-out company. There could be lots of reasons why we just can’t find a licensee in the marketplace. It could be that the technology is too early, it needs more development, so we need to get investment into a company. It could be that we’ve got a platform technology that has application across a whole range of areas and we think that is best commercialised. We can drive more value than licensing to a single company that’s active in one particular sector. It could be that the academics are really keen on setting up a spin-out company, and we can build some value before perhaps selling it on to an industry player. Those are the two main routes. There is a hybrid called a joint venture. A joint venture is where we set up a spin-out company with an industrial partner having shares in the company. That’s a really neat model, because you have the advantages of a spin-out company, but you have the benefits of having somebody who is really familiar with the market having shares in your company, and that really helps to align interests. We do have a JV, and I will talk about that in a bit more detail, but they’re a nice, nice model.

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These are the University of Liverpool spin-outs that we’ve set up in the last three-to-four years. Liverpool didn’t have a huge track record in spin-out companies until relatively recently, so these are all fairly recent. I think LiftUpp is the oldest company that was set up in 2015. We actually sold that in 2018. That was a software-based company that came out of the dental school. I’m going to talk through just in a little bit of detail, the portfolio of companies, and then some of them I’ll talk in a little bit more detail later on. So I mentioned the JV route. Polymer Mimetics to the bottom left of the slide, is a joint venture with Scott Bader. I don’t know if you’ve heard of Scott Bader, but they’re a multinational chemicals company. This arose from the research of Professor Steve Rannard in chemistry. A new way of making polymers that have different, better functionalities potentially. It’s a really, really nice model. So Scott Bader have a majority share in the company. They’re really managing the operations of the company. They’re driving the commercial direction. They have a base in the science part with five full-time employees, and they’re funding PhD students in Steve’s group. All sorts of peripheral benefits, which is part of the reason we do spin-outs frankly. The two above, CageCapture and Porous Liquid Technologies, these both came out of Andy Cooper’s group. Both new types of materials that have application in gas and liquid separation. Again they’re quite different. PLT is a joint venture with Queen’s University Belfast, because the two profs, Andy Cooper has collaborative research with Professor James Stewart in Queen’s. So quite nice model. LiftUpp I’ve mentioned. Great model. Build it, sell it very quickly, particularly applicable to software spin-outs. Top middle we have Robotiz3D which is a spin-out from engineering. That’s Sebastiano Fichera and Paolo Paoletti. Robotiz3D is looking to develop autonomous vehicles to monitor and fix potholes. Gained a huge amount of media attention for some reason, but I think potholes might be an issue in the Liverpool City Region. Meta Additive in the middle. I will talk about Meta Additive in a bit more detail but that’s now Professor Kate Black from the school of engineering. Then to our right we have health and life science focused spin-out. So Tandem Nano is actually a cross-faculty collaboration between Professor Steve Rannard and Professor Andrew Owen. Tandem is developing long-acting injectable formulations of existing actives, both in pharma and in agritech. Nidor below Tandem. That’s from Professor Chris Probert who’s a gastroenterologist; diagnostic platform. Bottom right is PhenUtest, that’s our most recent spin-out company from Doug Kell. So when I was putting this slide together, I think the interesting thing for me was, although obviously all of these companies are targeting different sectors, but they all look different as well, they all have a different ethos, a different feel, so a really diverse portfolio, and the origins of these companies generally they’re driven by the founders, and that’s a really important point.

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Why get involved in a spinout company or why look to setup your own spinout company? The reasons are really as diverse as the portfolio of companies that I’ve just shown you, it’s really down to personal motivation of the academics, the academic founders. We can’t make a spinout work without the engagement of academic founders, and that can happen in a variety of ways, and I’ll talk about that in a little bit. I think the first thing that comes to mind when people think about setting up a spinout company perhaps is financial returns, maybe investment into the company, maybe financial returns if the company’s ultimately sold. That can be a motivator, there’s absolutely no reason why you shouldn’t get involved in a spinout company to make some money. Meta Additive, as I said, really interesting spinout company set up by Kate Black in 2019. Novel binders and inks for 3D printing, and we sold the company in September 2021, so an absolute lightning sale for that company. The returns from that even in the short-term, they’re life-changing, significant returns back to the university and back to the academic founders, obviously based on a huge amount of work from Kate Black who has made that company a success, real commitment there. The second reason, particularly if we’re thinking about health and life sciences is patient benefit, societal benefit. Tandem Nano, that is really driven from a largely philanthropic angle by the academic founders in that they want to create access to drugs, affordable drugs in low to middle income countries. I would say that’s their key motivator for getting their novel formulations to market. PhenUtest, Doug Kell as I mentioned, this is a point of care diagnostic test for UTIs, it’s very specific and enables the right antibiotic to be prescribed in a very short length of time, which helps with antimicrobial resistance issues, and for which there is no current gold standard test. Nidor Diagnostics, Chris Probert, gastroenterologist, Nidor’s first product, although it’s a platform technology, is a definitive diagnostic test for IBS, IBD, and the ability to distinguish different patient groups who will respond to different treatment pathways. There is no ability to do that for clinicians currently, and that’s a key driver for Chris Probert. So, third reason, slightly tongue in cheek but not really. Being part of a spinout can be in terms both exciting and scary. It’s definitely more like flying in a propeller plane than a Boeing 747, and that can suit some people. Start-ups just by their nature have to be more agile, they can react more quickly to changes in their environment, changes in the business plan, and effectively you’re working in a smaller team, so you’re much closer to the action. If you are at the right stage in your career path or in your life journey, and you have a maybe slightly higher tolerance for risk, then it can be a really interesting journey and it can offer an alternative career path to traditional academia.

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Now moving onto the how to set up a spinout company. Obviously, you need some technology. You need some technology that the market wants. So technology is there. It’s not, I would say, the key aspect for success in a spinout company. Timing is also critical. So we’re looking at spinning out a company that applies AI to diagnose certain eye conditions, and it looks interesting. We’re having a look at the market. There was a spinout from one of the Scottish universities maybe ten years ago, that looked to do the same thing, and the market just wasn’t ready at that time for applying AI to diagnostics. I think we are seeing it increasingly, and perhaps the timing for our technologies now, but it’s an important key factor in success, I would say. So we have a look at all of these elements when we’re helping academic founders to decide whether to set up a spinout company and how it should be formed. I’ve put talent and team, they’re interchangeable to some extent, but the real bedrock, the real foundations for any spinout company are the team. You’ve probably heard investors say, or people say, that investors invest in a team, and that’s absolutely true. So an inferior technology with a superior team will win out every time, because it’s all about the execution of the business plan. A team that can work together, that can collaborate, that can build networks. That’s absolutely fundamental to success. Then also, recognising when there are gaps in the team. Self-awareness, so not everybody can do everything, not everybody’s suited to every role. So understanding at which point in the company’s lifecycle you need to bring in new talent to support the growth of the company, also absolutely critical, and really needs some forward planning.

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Moving on to company structure. This isn’t a great slide, but anyway, it does the job. So I talked about the shareholders in the company, the university, the tech owner, the academic founders, and the management team. There will be a board of directors. The directors have legal and personal responsibilities for the success of the company. Ideally, the board would comprise some really experienced businesspeople as well as maybe some of the academic founders. Generally, there’s a CEO, chief executive officer. Then below that, you have your C-suite. So chief financial officer, chief operating officer, chief technical officer, chief medical officer. Not all of these would exist in a spinout company, but obviously it depends on the sector. For the academic founders, there’s an opportunity to get involved at any level, really, in that management structure. Certainly, they might take a board position if they want to have responsibility and take an active role in the management of the company. They may or may not be the CEO. We tend to look to find experienced CEOs, because ultimately, they’re the boss, and they need to have a really clear vision and direction and know what they’re doing in terms of the direction of the business. The C-suite, so CTO, CMO, these are often positions that academic founders might take up, but there are all sorts of ways in which academic founders can get involved in a spinout. They don’t have to take a full-time position in the company. Kate Black, for example, took a 12-month sabbatical to set up Meta Additive, and I think that was probably critical to its success. Other companies, Tandem Nano, Polymer Mimetics, we can put in place secondment arrangements one or two days a week, or more depending on what the company needs. Particularly if the academic founders have a heavy teaching load and they want to be bought out. We can engage them in a consultancy mechanism, so they get paid for their expertise and time. If they don’t want to have any role in the running of the company, then they can take a role on an advisory board, scientific board. All sorts of mechanisms available to engage.

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Okay, stages of the process. Our team is there to help. Part of our remit is to help academics to really decide whether setting up a spinout company is the right thing to do or not. Obviously it all starts with a form in the university, so if somebody has a good idea or they have some technology that they want us to evaluate, we ask them to fill in an invention disclosure record. We do some due diligence to check we own the intellectual property, we’ll evaluate the market, we’ll file a patent application and manage that whole process. We manage the university’s patent budget. We will help the academics to access translational funding. Certainly in health and life sciences, med tech, biotech, there’s big programme grants available which we need to de-risk for technology. We will sometimes reach out through our networks or engage recruitment consultants to bring in a CEO, to bring in management team, and then ultimately we’ll do all the legals around the spinout formation, licence the technology into the company. Typically post-formation we’ll take a board position, so we’re reasonably close to the company in the early days and we can help. The spinouts that we set up have access to the university’s enterprise investment fund, so we have quite a lot of money that we can invest as seed capital and start-up cost, help with cash flow in early-stage spinouts. Then we help with marketing and coms, because that’s mutually beneficial, and we reach out through our networks to help the company build its business as it grows.

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You are genuinely interested in commercialising some of your technology, some of your research I would say to any academic get yourself on an accelerator programme. There are loads of accelerators. We are part of the North by Northwest Consortium group of universities. We have access to Innovate UK funded programmes called Lean Launch pad and ICURe. The full ICURe is four months, it pays the salary of an early career researcher for that time, and there’s a budget for, it used to be like 20K for travelling around the world, now I think they focus more on digital engagement. Four-month customer validation journey, lots of training, how to talk to industry, it’s a really great programme. At the end of the programme, people in the cohort can go into a process whereby they can apply for ring-fenced Innovate UK funding for £300,000 into a newly-formed spinout company. So there is a little pot of gold at the end of that particular accelerator rainbow. Then we’re seeing also themed Lean Launch pad and ICURe, so BBSRC, the research councils, and some charities are getting involved. The EIT accelerator and incubator programmes, there’s a whole range across different sectors. Have a look and see if there’s anything that might be applicable to your sector. Cyber security, and then just locally there is a really good accelerator programme in Alderley Park, which gives members of the accelerator programme access to a really rich network of companies who are operating in Alderley Park.

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