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Annual Review

31 December 2014

Stepping into a new year

GUV takes a look at what's in store for 2015, based on responses to our annual survey.

Author: Gregg Bayes-Brown, editor

Highlights for the year ahead

- More spin-outs

- Increased number of university venture funds

- Greater collaboration with industry

- Harnessing the ever-growing student startup sector

 

We are still a month away from having a complete picture for university venturing in 2014, with full data and analysis due out in our next issue, but the news and data collected so far by Global University Venturing gives the strong impression that it has been yet another strong year for the university innovation ecosystem.

But what about the year ahead? What will be the big challenges and opportunities next year? What are the hottest areas? What are the emerging trends? In order to answer these and other questions, we have turned to you, Global University Venturing readers, to help us shape the discussion for the year ahead. 

Spin-outs and licensing

There might be a continuing decline in academic spin-outs in the UK, a dive that started around the time of the 2008 financial crisis and is yet to level out, but this is certainly not the picture worldwide.

In the US, many university tech transfer departments have reported record-breaking years in terms of creating new companies, with particularly strong data coming out of University of California Los Angeles and Pennsylvania University, launching 17 and 26 respectively. Many of you expect this trend to continue into 2015, with 74.1% of our survey respondents indicating they expect to see more spin-outs launched next year than in 2014.

One part of the world Global University Venturing will be watching with great interest next year is France. A couple of years have now passed since the establishment of the French Sociétés d’Accélération du Transfert de Technologies (Satt) system, replacing university-run tech transfer offices with 14 regional tech transfer operations incorporating several universities and research institutes. Will 2015 be the year the Satt system finally takes off?

Gains from licensing are not being as enthusiastically predicted, however. While over half of our readership (59.3%) expects to see more cash flowing through licensing efforts, 29.9% predict it will stagnate over 2015, with 11.1% of you expecting to make less through your licensing due to deals expiring or flagging research budgets.

Venturing

University venture funds are certainly on the rise. This year many new funds were raised, including several large headline-making funds. Singularity University held a $50m raise earlier in the year, Osage University Partners is uniting institutions for a second time with a planned $200m, and Harvard has just announced a $100m second fund for Xfund.

However, the jury is still out on the overall effectiveness of such funds. Mike Kirkup, director of Waterloo’s incubator Velocity, highlights several of the issues facing university venture funds in his article, including geographic and institutional focus restricting the ability for success, internal misalignment, and universities being naturally risk-averse and the bleed of that conservatism into managing a fund.

Despite this, there are still opportunities for making a university venture fund work. Detaching it from the university, aiming to use an incubator as a sounding board, casting the net wider than just tech transfer to increase dealflow, and co-investing alongside or attracting investors with a long-term outlook to cornerstone the fund, all remain credible options when overcoming barriers to managing the fund effectively.

To that end, half of our respondents reported that they either have a university venturing fund or are considering funds for next year. However, it clearly remains a divisive issue, as others have ruled one out. Some have mentioned some of the factors Kirkup discusses as influencing their decision not to go ahead with a venture fund, while others are content with the funding opportunities that already exist around their ecosystem. Another issue reported has been getting the funds together in the first place. Finding the investors to back a fund can be half the battle, but budget cuts or a lack of funds to begin with are also playing a role in preventing the creation of new university venturing funds.

Working with corporates

One of the founding principles of Global University Venturing’s mission is to highlight how academia and the corporate world can work better together. While this is no easy task – with academia and industry having two very different outlooks, languages and missions – there is plenty of evidence to demonstrate this collaboration is taking place.

One of the top examples this year comes via Tel Aviv’s tech transfer office Ramot, which successfully raised $23.5m for its Technology Innovation Momentum Fund with support from India-based manufacturing conglomerate Tata Industries and US-based memory storage firm SanDisk – a deal that not only demonstrates what academic-industry collaboration can accomplish, but also what an international outlook can deliver.

Our university-based readers expect to develop more of this sort of relationship in the year ahead, with 70.4% expecting greater collaboration with corporates and associated venturing units in 2015, and only one solitary respondent expecting less.

In order to tap into this collaboration better, Global University Venturing’s 2015 Summit, due to take place in London on June 2-3, will be taking place alongside our sister publication Global Corporate Venturing’s Symposium. With representatives of the world’s leading institutions in one room and $4 trillion in revenues in the next, it is our expectation that both sides will go home with much more than just war stories in their pocket. A formal announcement on the double-header event will be made early next year. 

Student-led startups to rock in 2015

One of the most bantered about analogies concerning the rise of student entrepreneurship is that it is the new rock and roll. In much the same way that long-haired rockers inspired many to grab a guitar and take to the stage in the past few decades, the Zuckerberg effect has led to an increase in the number of students going to university with the set intention of building their networks, learning business skills and launching a startup.

In meeting the demand, many universities are setting up incubators – if they have not already – while looking to industry to bring expertise to the table for students to draw on or to start a corporate-backed incubator in the area. There is also a growing trend in threading entrepreneurship into the prospectus, with universities such as Waterloo putting much more focus on entrepreneurship in all aspects of university life, from undergraduates through to faculty – see our tech transfer regions feature for more information.

But where does this leave tech transfer operations? Some tech transfer offices have already begun to harness the growing talent passing through universities, such as Oxford’s Isis Innovation and its software incubator. It still proves a bone of contention for some who look to avoid diluting their tech transfer strategies by pouring resources into the student body, but for half of our audience, it represents an opportunity that they look to capitalise on over the next year, with another third considering expanding their roles to include supporting student entrepreneurship.

Immunotherapies come of age

For many operating in the university innovation space, life sciences is the bread and butter of any successful tech transfer operation. While this does not hold true for every university, especially those geared more towards engineering and computing, it cannot be denied that 2014 has been the year for immunotherapies.

This year alone, we have seen University of California Los Angeles’ Kite Pharma raise $128m through flotation, Oxford’s Adaptimmune bring in $104m in its series A funding round, and Juno Therapeutics go from startup to a $150m initial public offering, raising $310m in external funding along the way. With many more potential deals on the cards for 2015, Global University Venturing expects another stellar year in this white-hot arena.

Another financial crisis on the cards?

There is also the chance for derailment in the year ahead. UK Prime Minister David Cameron warned of the potential for another crash, saying there were red lights flashing on the dashboard of the world’s economy.

While this might be news to the UK government, financial journalists and analysts have been expecting a follow-on to the 2008 crisis for the past few years, with weak global growth and meagre attempts to fix the problems highlighted during the financial crisis as drivers for concern.

Further warnings can be derived from the recent report by the Organisation for Economic Co-operation and Development (OECD), which concludes that increased wealth inequality, driven by the neoliberal policies pursued by many western governments over the past 30 years, is actually hampering growth rather than driving it. The OECD estimates that the US has lost seven points in gross national product growth in the past two decades thanks to a driving focus on “trickle-down” economics, while the UK has lost nine.

Further, the OECD found that redistribution of wealth through taxes does not harm economic growth – a point of view at complete odds with the current austerity strategy pursued by multiple governments.

However, it is unlikely this warning will filter through to governments. Instead, wealth inequality will undoubtedly increase, and leave the public particularly exposed to a new financial crisis.

A trigger could come in the form of plummeting oil prices. Driven by increased US production of oil and therefore a shrinking demand for foreign oil, the commodity has fallen from $105 a barrel to $58 at the time of writing within a few months. While concerning, the drop is not without precedent. In fact, a drop from $140 to $43 has been recorded in the past 10 years – in the months before the 2008 crash.

Also making an unwelcome return to the headlines has been the potential of a Greek debt default.  While the alarm bells are not ringing as loudly as they were in 2010 and 2011, Greek bonds have taken a hammering in December, and the potential remains for political turmoil in the country to knock the country’s bailout programme off track. While government bonds for other heavily indebted eurozone countries such as Spain and Italy have not been affected by the latest news from Greece, unlike in 2011, it remains an unpleasant reminder of how perilous the situation is in the eurozone.

Of course, there is still plenty of optimism that a rough end to 2014 could yet translate into smooth sailing in 2015, especially from our readers – none mentioned the economy as a threat for the year ahead. However, it remains a concern, especially for universities already strained financially from budget cuts, and for their businesses should further funding constraints result in the disappearance of funding and trade.

However, with such financial concerns on the cards, perhaps 2015 will be the year universities find their voice to support increased education in science, technology, engineering and mathematics subjects, and demonstrate the work conducted on campus and off with spin-outs and successful startups.

Copyright Mawsonia Limited 2010. Please don´t cut articles from www.globaluniversityventuring.com or the PDF and redistribute by email or post to the web without written permission.

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