Spotlight on Newcastle University

One half of the Northern Accelerator program, Newcastle University is pushing academic innovation in the north-east of England, along with its partner university, Durham.  Seeking to produce 15 successful high-tech spinouts by the end of the summer of 2019, the pairing is picking up momentum with 13 companies already in various stages of creation – four of them past the point of incorporation.

At the heart of Newcastle’s spinout strategy is what it calls its ‘management solution’ policy, adopted five years ago.  “Broadly it means that either the academic involved leaves their academic career to run the company full-time, or that we bring in an executive to work alongside them,” said David Huntley, head of Company Creation at Newcastle University.  Without one of these two routes being taken, the university does not spin companies out.

It is understood that teaching full time and running a start-up venture are not commitments that can be balanced together easily.  In 80% of the cases it is the latter option of the outside CEO that is chosen.  “There are occasions where we manage the company through one of the academics – particularly if they are junior – but this is the exception, not the rule,” Huntley explained.  Often the university will be loath to lose an important member of its teaching staff, or the academic might not wish to move into a new, and far riskier, career track: so a business person stepping in to head up the company is usually seen as the best option. 

This leaves the Company Creation team with the important task of finding the correct individual to step into the role of CEO.  “That is difficult because you are trying to attract someone into an opportunity that has no staff, no sales, no cash, and no business plan,” Huntley said.  Upon introducing the academic and the potential executive, there is what Huntley likes to call the ‘three yeses moment,’ where the academic, the external, and Huntley himself all agree on the venture.  Once this moment is reached, a deal can be signed.

Based on the transfer of equity to the new CEO, the deal is graduated with increasing levels of equity being transferred as certain thresholds are reached.  Firstly, the CEO writes the business plan and invests in the venture; secondly the company is legally incorporated; and finally seed funding is raised – “the critical moment”.  The trick is convincing somebody who is talented enough to run the company – and therefore has other, less risky career options – that they can make more money through the successful commercialisation of a new technology. 

“All universities have great science and ideas - these are important but not sufficient.  You need people who understand how to make a business out of that,” said Dr Mick McLean, the CEO of Atelerix and one man who took Huntley up on that offer.  Holding patents for an innovative method of storage and transportation of cells using hydrogels, Atelerix seeks to replace the standard practice of cryo-preservation.  Rather than the expense and difficulties of keeping samples at -180 degrees, the Newcastle spinout’s tech can safely hold cells at room temperature, with applications in the drug discovery, therapeutics, and cell therapy industries. 

A partnership of McLean, inventor Professor Che Connon, and Senior Applications Scientist Dr Stephen Swioklo, Atelerix is a case in point of the management solution driven spinout around which Newcastle builds its innovation policy.  The key to this relationship, McLean suggested, is the correct division of labour.

Essential but unstimulating administration and company set-up activities are not best suited to inventors.  Legal work, insurance cover, banking and shares, writing and refining the business plan, approaching potential investors and customers: “If you leave it to the academic to do, either it doesn’t get done or it’s done in a piecemeal fashion,” McLean said.  Not only is this failing to efficiently capitalise on the IP’s potential but it is taking the academic away from what should be their key focus, developing the technology itself. 

And although it is useful – in some sectors essential – for the business exec to have a basic grasp of the technology side of the business this will always be secondary to the academic’s.  “I can act as the bridge between Che and potential investors, but fairly soon they will exhaust my knowledge and they’ll want to speak directly with the inventor – but that’s fine, as I can work as a screen to present ‘qualified’ leads and not waste Che’s time.” McLean noted. 

Much of this balance is common practice across spinout generation in the UK.  What David Huntley sees as Newcastle’s novel factor is the support Company Creation is able to give to CEOs like McLean, through the Northern Accelerator programme.  Backed by money from the European Regional Development Fund, a fee of £30,000 can be paid to the executive during the investor readiness process - something the University could not otherwise do.

Meant only to slightly de-risk the process, this sum is exclusively utilised when an outside CEO is brought in and is not designed to act as a regular wage or to replace the equity deal between the individual and the university.  “What I tell the executive from the beginning is ‘don’t come for the £30,000’ – it is just a means to an end… to keep body and soul together,” Huntley said.  The true prize is a healthy chunk of equity in a company that will go on to make plenty of money as it commercialises its innovative technology. 

And Huntley believes it is working, pointing towards an increase in the pace of Newcastle University’s spinout activity and the growing awareness of the Northern Accelerator programme among local business people, with 50 individuals signed up to act as potential future CEOs. 
One half of the Northern Accelerator program, Newcastle University is pushing academic innovation in the north-east of England, along with its partner university, Durham.  Seeking to produce 15 successful high-tech spinouts by the end of the summer of 2019, the pairing is picking up momentum with 13 companies already in various stages of creation – four of them past the point of incorporation. 
  -  Robert Swift

Posted on Thursday, 05 July 2018 under University news