Some questions for the end of the year, December 2019

Here are some thoughts on three areas of university technology transfer to ponder over the coming days: office size; conflict management; and changing values.

Q 1:  Who decides the size of the Technology Transfer Office in your university?

A:  A committee, somewhere inside the university (not the TTO).

In a recent survey of Technology Transfer Office staff over 100% described themselves a ‘busy’ or ‘over-worked’. In a separate survey of university researchers, a large number said they wanted more from their TTO and were sometimes frustrated by the time the TTO takes to get things done.

Generally the researchers in a university want the TTO to be better; the managers in the TTO know that, generally, better means bigger, in terms of larger budgets to manage patent positions for longer, more TT staff to support projects and find enthusiastic companies which want to take a licence and investors into new spin-out companies. In most cases, the route to more resource is for the TTO to ask the relevant university committee for more resource, larger budgets; then sadly, what with the cuts and all, what with the growth in other areas, etc. etc. the TTO remains roughly the same size. Even for the vanishingly small number of UK universities with a subsidiary company for their TTO, it will be a committee, somewhere inside the university, that eventually approves the budget allocation and business plan. Who is on these university committees? Academic researchers; many of whom will be colleagues, collaborators, mentors, leaders of the researchers who want a better TTO.

The responsibility for the size and effectiveness of the TTO lies with the university, not the TTO. This is important for the TTO in two ways: (a) the TTO can point this out to frustrated academic researchers and engage them in supporting requests for more resources (from the academics researchers on the committee); and (b) the TTO can think about how best to influence the committee.

I have been involved in a number of conversations with researchers and TTO staff this year where working through the question - who decides the size of the Technology Transfer Office in your university? – has been enormously helpful in reducing the stress and tensions in the working relationship. It is all part of the overall point that, in fact, we are working for the same organisation.

Q 2: Conflict Management in University Technology Transfer – What’s the Problem?

A: It is complicated.

The point that we are all working for the same organisation (see above) is not always taken without further discussion, and sometimes for good reason. University researchers, university TT staff, and university leadership encounter various conflicts of interests that need to be explored and resolved.

There are so many conflicts of interests in university technology transfer that it is difficult to know where to start. They can be placed into three broad groups: those faced by researchers, those faced by the TTO, and those faced by the university leadership. Let us assume that everyone involved is of the highest integrity, and the university has a conflict of interest procedure; nevertheless, the issues keep coming around and around. 

Here are some examples of the conflicts of interests that can arise:

University researchers:

The lead researcher is a board director, consultant and shareholder in a (spin-out) company that is one of a number of organisations funding research in the lead researcher’s lab; are resources and valuable research results allocated appropriately?

A researcher is encouraging the TTO to soften a deal with a company because the researcher thinks the company will soon fund some exciting new research in the lab.

A researcher is encouraging the TTO to lower the licensing royalty rate to a company in which the researcher hopes to get a new job fairly soon.

University TTO staff:

The TT manager is involved in various aspects of a spin-out transaction: support and advise the founding researchers, negotiate the licensing terms with the spin-out (often not yet represented by anyone other than the researchers), negotiate the university’s founding shareholding in the spin-out, negotiate the pre-money valuation with the first round investors and researchers. How can the TT manager represent all these interests at the same time?

The TTO project manager is encouraging the university researchers to accept a certain shareholding for themselves, a certain shareholding for the university, a set of licensing terms, the investment size and price, all at the same time. Quite understandably the researchers wonder how on earth the TTO can look after all these interests at the same time.

On top of this, the TT manager has privately been given the nod that the investor into a new spin-out is keen to offer him a job, and with that some shares down the line.

Conflicts can arise in licensing as well: the TT manager is under pressure to meet annual targets for the team, office or personally, and higher milestone payments for a reduction in future royalties may be a short-term help, but not be best for others in the longer term.

University leadership:

The vice-chancellor is under pressure from a potential donor to allow an IP pipeline deal on research in a newly donated building, or to soften the deal on a spin-out in which the donor’s friends are investing.

The pro-vice-chancellor is embarrassed nothing is being commercialised from his or her department or faculty and allocates more support in that direction. 

The pro-vice-chancellor, involved in approving certain spin-out decisions, is on the board of the university’s tied investment fund, involved in investing in university spin-outs.

So, what to do …?

Many of these potential conflicts can be managed in effective ways by transferring key responsibilities to other people. Declare and manage, declare and manage, declare and manage …. But maybe that is not enough.

The one that doesn’t seem to be going away is the one facing the TTO staff involved in spin-out companies.  The TT manager is put into a position of representing the interests of four parties - university, researcher(s), investor(s), company – and being on four sides of the same deal, each of which has an interest in the arrangements to launch the company. And there is a possible fifth set of interests if the TT managers have their own internal incentives within the TTO.

The TTO, researchers and university are all part of the same organisation; the TTO needs to be trusted by the researchers and the university to look after all these interests; the TTO needs to behave in a way to secure and maintain this trust; the university needs clear policies and the TTO clear guidelines and procedures, to achieve this. The company and the investors are external organisations and the TT manager is not on their side of the deal. 

Problems arise when the researchers have more confidence in the investors than they have in the TT staff, and researchers find themselves being used to represent the investors’ interest over their university’s interests.

Q 3.  How do you end up with ￡1 million from running a vineyard in England? 

A.  Start with ￡2 million.

A nice joke I first heard about twenty years ago.  I know, I know, where does all that money go? Maybe things have got easier now, as the chalk downs of Hampshire are transformed and warmed into the new Chablis. What has this got to do with anything? 

In 2017 technology investment business IP Group plc was valued on the London Stock Exchange at about ￡1 billion; not bad for a start-up from 2000.  IP Group launched a hostile takeover of Touchstone Innovations plc, the technology investment business that had grown from Imperial Innovations, the technology transfer commercialisation company once owned by Imperial College. At the time Touchstone was worth about ￡400 million.  The then chairman of Touchstone wrote a superb letter to shareholders explaining why the take-over would be a bad thing for Touchstone shareholders.

The current value of IP Group, having absorbed Touchstone, is about ￡750 million (boosted 10% this week, maybe by good news from Oxford Nanopore and the Boris-bounce), some ￡650 million down from the combined value a couple of years ago. I know, I know, where does all that money go?

The IP Group Board must be thinking about what to do; it will have its explanations to shareholders, have its reasons; a little bit of this, not enough of that, look it’s just gone up. Some of which may include the fall-out from the ‘unfortunate series of events’ at the Woodford Funds. Some of which may include the now decades old reminder that it is a long-term game. As an aside, if one of the male directors left, the company would exceed the 30% Club with the current three female directors out of then nine directors in all.

Many, many years ago I went on a British Venture Capital Association training course. It was excellent, I learned an enormous amount; mainly about how venture capital investors think.  Much of the time was spent discussing various case studies of troubled companies, where there was a VC investor on the board. On the first day the answers from the venture capital folk on the training course to all the case studies about struggling companies were ‘fire the Finance Director’.  The case studies on the second day were a bit more serious, the fictional companies were generally in deeper trouble, and the answers were ‘fire the Finance Director AND the CEO’.  Fair enough, but I do remember thinking it rather depends whether or not you can find a better one; a useful lesson to learn.

This is all important because investors in the UK early-stage tech scene need to see a return from investing in early stage technology businesses in the UK. University technology transfer in the UK is extremely successful in identifying protecting and transferring university research results into new spin-out companies (as well as to existing business). These new companies deserve a better environment in which to scale-up; a challenge the newly elected UK government is planning to take up, although much responsibility lies elsewhere as well.

On a cheerier note … Happy Holidays, Season’s Greetings! Tom