University spin-outs have poor degree of success, says equity chief

BYLINE: Douglas Friedli

CALUM Paterson, the managing director of Scottish Equity Partners, has questioned a guiding assumption of Scottish economic policy - the idea that universities can provide a constant supply of wealth-generating companies.

Academic spin-outs and university research have been regarded as crucial to economic success since the Scottish Executive's Smart, Successful Scotland strategy was launched in 2001 by the then enterprise minister, Wendy Alexander.

But Paterson believes the focus on academic research is misplaced. "I think the commercialisation issue has been over-hyped in the past," he said. "It is not immediately obvious to me why the commercialisation of university science and technology, and in particular spin-out companies, should be such an obsessive focus for government economic development activity. It is easy to talk about a long term approach, but what is actually coming back out the other end in terms of sustainable companies?"

Paterson's firm has backed a handful of ex-university companies including Wolfson Microelectronics, MTEM and MicroEmissive Displays. But the venture capitalist claimed: "Of all the spin-outs that have come through the system, very few of them have gone on to achieve what could be described as real success. Generally, the challenges involved in transforming spin-outs into high value businesses are formidable."

Scottish Enterprise's operating plan, published last month, states: "Innovation and turning new technologies into successful businesses are vital to boosting productivity and competitiveness... Scotland's universities and research institutes... have a key role to play here."

But Paterson suggested that some universities may have exaggerated the commercial significance of their research in order to secure external funding.

He said: "In Scotland, university commercialisation [is] all about getting as many projects as possible through the system, as opposed to concentrating on the stuff that has the potential to be make a material impact. The quality of the approach adopted by universities to commercialisation is variable and inconsistent. Perhaps there should be a single entity in Scotland that pulls the best of it together in a focused way."

Paterson, whose firm raised GBP 160m last year, said that efforts to stimulate commercialisation would be better directed at getting technology out of universities and into existing companies with entrepreneurial management. He also suggested spin-outs from established companies could have greater economic potential than those originating on campuses.