Turning pioneering ideas and technologies into commercial success
By Phil Cooper, Managing Director, Venture Wales
Universities in Wales face unprecedented change and uncertainty; struggling with spending cuts, pressure for tuition fee hikes and, in some cases, political demands to surrender their independence and merge with neighbouring institutions. Although uncomfortable in the short term, these circumstances do present opportunities as well as challenges. They underline the need for even more engagement with the wider economy, as institutions strive for greater financial sustainability.
Higher Education in Wales has long been recognised for its contribution to local economies. But the key question remains whether the sector is fulfilling its true wealth creation potential and how much more could it achieve?
It is widely accepted that knowledge-based businesses are an important determinant of economic growth and renewal. And universities, without doubt, have an important part to play in maximising the presence of such businesses in any local or regional economy. Their role in spawning spin¬out technology-led enterprises is well documented. But perhaps of even greater significance is their role in producing the graduate entrepreneurs responsible for good quality business start¬ups in general.
Clearly universities can make their greatest economic contribution when their graduates or staff are turning pioneering ideas and technologies, developed on campus, into commercial successes in the market place. This could be happening more than it is at present.
To illustrate this; Wales’ overall business birth rate equates to only 79% of the British average but, surprisingly, we have a larger proportion of high-growth start-ups than the rest of the UK. Almost every study shows that graduates make up a disproportionately high number of new firm founders here, and the number is increasing.
Wales, which accounts for 5% of UK higher education, generated 10% of all UK graduate-led business start¬ups and more than 12% of estimated turnover for all UK graduate start-up firms in 2008-9 -around £16.5m. The 2009/10 figures confirm these earlier trends.
This is welcome, and probably reflects the growing focus on enterprise awareness and skills within Welsh universities. In fact almost a quarter of all graduates who take enterprise advice actually go on to launch a new venture, and the business survival rates past the three year milestone are impressive.
However, research suggests many graduate entrepreneurs, although successful and innovative, don’t base their enterprises on their degree qualifications. This may reflect the limited possibilities for more sophisticated businesses in the contemporary Welsh economy or the need for more support from the universities to help them get off the ground.
Clearly universities can make their greatest economic contribution when their graduates or staff are turning pioneering ideas and technologies, developed on campus, into commercial successes in the market place. This could be happening more than it is at present.
One prominent venture capitalist recently admitted that there is wealth of good ideas, research and intellectual property stored in Welsh higher educational institutions but they were often left rotting on the vine rather than being converted into commercial propositions. Successfully commercialising these ideas is vital both for increasing income to universities themselves and for making a substantial contribution to economic growth and job creation.
The number of businesses spun out directly from Welsh universities are actually increasing, but the total remains very small -just 4% of all new such businesses. However, their true importance lies in the high-value activity at the heart of the business concerned. All of these spin¬outs were established to exploit Intellectual Property (IP) and were wholly or partly¬owned by the universities.
Interestingly, the number of graduate-founded businesses based on exploiting IP but outside universities fell by 60%, although the numbers are very small. This difference suggests that the internal university support is important in driving the numbers of graduate-founded IP¬based businesses.
On the other hand, the number of new IP-based businesses started by university staff, outside their institutions, increased by a third. However, yet again, the numbers are small. This indicates appropriate support may be lacking within the universities, and engagement with private sector start-up support agencies is not strong enough.
One area where Welsh universities are unfortunately under-performing is in their working relationships with small companies, which make up 99% of all enterprises and half of all private sector employment in Wales. Such companies often have ideas that could be enhanced or accelerated to market with university help. Sadly many regard HE as aloof and bureaucratic so they stay away and miss the opportunity. This lack of engagement certainly needs to be addressed.
Overall, the business support network in Wales is substantial, but it needs to be integrated more with the universities if full potential is to be realised.Welsh universities do tend to be more “enterprise aware” these days. All have successfully accessed Government and European funds, combined in some cases with commercial sponsorship, to develop new ideas. In addition all take part in the Welsh Government’s successful Graduate Start-Up Support Programme, which benefits from the assistance of private sector advisory services. Other initiatives, such as the Prince of Wales Innovation Scholarship, although new, are also helping develop IP-based businesses.
The fragile economy may pose many challenges to early-stage firms but it also provides an excellent stimulus for public and private sectors to work closer together to harness this resource, leading to a more robust economy with a stronger base of indigenous enterprises.
To achieve this we need to remove silos and forge greater links between skills and employment, between education and economic development and between knowledge and wealth creation. We have many areas of strength and good practice in different parts of the country’s HE sector. This needs to become the norm everywhere.
Phil Cooper is Managing Director of Venture Wales, the largest business start¬up and support company in Wales.
