According to a recent article in the Daily Telegraph, the world of university spinout companies is often ill-understood. The article suggests that such means of making research profitable and relevant outside of academia’s ivory towers may be getting bogged down in red tape, and in simmering resentment about who profits and benefits from the research. What exactly are spinouts, and why are they failing to live up to their potential? We investigate…

What are spinouts, and why the sudden explosion in numbers?

A university spinout company is essentially what it sounds like: a startup commercial venture set up and funded in whole or part by a university and/or its researchers. Its purpose is to leverage the commercial opportunities afforded by the sophisticated, groundbreaking research conducted in universities, especially in the “hard sciences” and medicine.

Since the introduction of the Research Excellence Framework (REF) in 2006, universities have been under increasing pressure to demonstrate that the research conducted inside their walls has value – or “impact” – beyond the academy. While the REF certainly covers all kinds of “value” beyond simply commercial and monetary value – academics can present the impact of their research in terms of influence on policy, for example – much scientific research that originated in a university lab has the potential to be productised and developed in the commercial sector, often with highly lucrative rewards for shareholders and investors. And it’s the question of who exactly owns and profits from these commercial ventures that is the most difficult to resolve in this brave new world.

What are the advantages of spin-off companies?

When the model works well, university-sponsored startups have the potential to significantly increase universities’ contributions to and relationships with their local areas in the manner envisaged by the REF. At a time when there’s acute “brain drain” from university towns and cities to London, university-sponsored startups can bring jobs to a local area and help it retain highly skilled workers, as well, of course, as contributing materially to the local economy. The productisation of research can help to maximise its utility too. Where there’s the right commercial support structure the chances increase that good ideas will take hold and be used widely, as opposed to remaining just good ideas – that is, underdeveloped and largely theoretical. Finally, and significantly, profitable spin-off companies support a model by which universities self-fund via their own research rather than receiving large maintenance grants and handouts from the public purse.

Are there any drawbacks?

For its critics, this kind of model represents all that is worst about the marketisation and commercialisation of contemporary academia, reducing research from a worthy intellectual pursuit in its own right to the harsh realities of the bottom line. There’s a worry that research whose “value” is intangible and non-monetary in nature will get pushed aside – or even not take place at all – if the evaluation of research depends increased on its ability to generate a profit for its parent institution.

There are ethical considerations too: many research fields rely in part on the use of human subjects, who are often asked to give generously of their time – and even risk their own wellbeing – for a nominal reward. When research is presented as a non-profit, altruistic endeavour, human subjects with a personal interest in the advancement of a field are often willing to offer themselves in this way. They may feel quite differently if that research is subsequently – maybe even years down the line – monetised and used to generate a substantial profit. And there can be complex issues around intellectual property rights when research makes the leap from intellectual to commercial endeavour.

Why does the Telegraph claim this model is at risk of failure?

Negotiating the transition from academic research to commercial venture is a tricky and fraught process, and the simple fact is that some universities are better at doing it than others. And institutions differ vastly in the ways in which they implement this transition. Oxford, for example, takes a mandatory majority stake in all spinout companies whose research originates in its labs, while Cambridge assesses each spinout on a case-by-case basis and may not take a stake at all.

And the Telegraph reports that by the time all of the necessary hoops have been jumped through and the universities have taken their cut, far too few university spinouts are competitive and sustainable in the global marketplace. A new government report may provide some answers to streamlining the process and making spinouts consistently profitable, but balancing commercial and intellectual interests – and ensuring that all stakeholders get a fair slice of the revenue and intangible benefits – is likely to be an ongoing balancing act for the spinout industry.