[Column] Natalia Ahmadian: Four ways to accelerate tech transfer in Europe
The importance of university spin-offs has been recognized for decades. Several studies showed that Tech Transfer is beneficial for social welfare and entrepreneurial activity and thus, ensures positive economic developments. So it is desirable for every country to support and encourage students and researchers to commercialize their academic work.
In the United States, spin-off activities are more advanced than in Europe. This refers not only to the quantity of these firms but also to the quality. Several experts and studies have noted that the growth potential of companies coming from academic institutions in Europe is limited compared to their US pendants. Considering that some of the most prestigious research institutions are based in Europe, the reason for this gap needs to be elaborated. One of them lies within the comparatively immature spin-off landscape in Europe. The commercialization of academic research is a rather new phenomenon in Europe and thus the academic institutions lack experience in transforming their research into high-growth ventures. But additionally, the infrastructure and the legal frameworks at university level are key factors for improving the quality and quantity of spin-offs.
This article focuses on the most important aspects of the university’s infrastructure and how Earlybird UNI-X, a team at Earlybird Venture Capital, helps to take spin-off activity in Europe to the next level. We break this into four key pillars: 1) Tech university collaboration, 2) Academic expert networks, 3) Commercialization of spin-offs, and 4) Early-stage venture funding.
Working together with leading tech universities
One pillar is the research activity conducted at the academic institutions. In concrete terms, two factors are decisive — the quality and the orientation of the research.
Excellent research activities benefit the quality and quantity of spin-offs in several ways. On the one hand, it ensures that the stock of technology coming from a university is subject to high standards. Additionally, world-class research attracts more funding, both from the public and the private side. Thus, the staff has more resources to improve the outcome of different academic projects and increase the overall stock of technology at universities.
But besides the quality of the research, the orientation is also a crucial factor for successful entrepreneurial activities within universities. Several studies have shown that research projects in certain disciplines and their respective funding have a greater likelihood of ending up as spin-offs. Namely engineering-, computer science- and biomedical-oriented research tend to have favorable market preconditions so that transfer of technology can occur more successfully than in other disciplines.
Due to the above-mentioned reasons, Earlylbird UNI-X has decided to collaborate with leading research institutions around Europe. By bringing together different world-class academic institutions and thus allowing an interdisciplinary exchange between them, the quality of the research and the respective funding can be increased. Speaking of the transfer of this research, it is essential for Earlybird UNI-X to not only support the exchange between different tech researchers but also to bring business expertise to the table. This ensures that the commercialization of academic projects will be considered from the very early days onward.
Building a network of leading academic experts
Another key pillar of the university’s infrastructure is the academic expertise and staff behind the research projects. Statistics have shown that the high quality of the academic staff leads to more spin-offs coming from the respective institutions. This has several reasons — on the one side, the research excellence of professors helps entrepreneurs get more credibility on the conducted research that eventually leads to spin-offs. One the other side it is very likely that the professor’s prestige attracts more funding for research projects. This increases the overall research activity of a university and simultaneously the stock of technology that can be transferred.
By building a community of leading scientific experts focussing on different research areas, Earlybird UNI-X is massively supporting this component of the university’s infrastructure. This has several positive effects on the spin-off activity of academic institutions. The engagement of professors in the community will further improve their prestige so that they can attract more funding for research and tech transfer activities. Furthermore, the interdisciplinary exchange between professors coming from business and tech research increases the level of scientific excellence — and thus the quality of the generated spin-offs.
Actively supporting the commercialization of spin-offs
As already mentioned above, the commercialization of research activities is an essential part of the tech transfer process. A great amount of the research conducted at universities cannot be turned into profitable businesses. Studies have shown that the likelihood of building market-ready companies out of research activities is higher when universities are collaborating with several industry partners. This helps the scientific staff to identify the problems and needs of the companies and thus they can respond to them accordingly. The exchange also proves an actual demand for the tech to be transferred into businesses. Furthermore, collaborating with established companies offers the opportunity to get additional funding for research projects. The reduced information asymmetries make the capital more accessible, and the research easier compared to government-funded projects.
Earlybird UNI-X has identified that the interaction between industry and universities is currently not sufficiently developed and thus, provides its portfolio companies access to an extensive industry network. This allows the spin-offs to get industry feedback from an early stage on. Additionally, the access to established companies operating in various fields is a great source for early adopters and a first market validation. Due to sparring with industry experts, pain points can be identified, and development of market ready products is faster and more practical — thus making the commercialization easier.
Providing access to early-stage venture funding
The last pillar of the infrastructure needed for successful spin-offs is access to early-stage funding. Some universities have already set up their own funds to support their spin-offs from the onset. This first funding can be a good source to cover the first expenses such as business plans or small prototypes. Additionally, the provision of money by the universities may have a positive impact on the signaling for external funding as it implies a first evaluation of the product. However, the evaluation is rather one-sided since the university a) pursues a strong self-interest and b) also focuses more on the quality of the research and less on the commercialization.
It’s clear that access to external Venture Capital funding is essential in order to turn spin-offs into high-growth companies. Why so? It signals feedback from a third party, which primarily challenges and pays attention to the commercialization and growth potential of the company. Furthermore, the university’s own funds can only support the spin-offs up to a certain size. For the scaling phase, external venture funding is nearly always required. Additionally VC-backed firms benefit from a positive signaling to external stakeholders, since the due diligence conducted by a tier 1 investor stands for a high quality of a company. This is why Earlybird UNI-X actively engages with spin-off founders to provide access to external venture funding. Additionally, the portfolio companies will benefit from an extensive network of Business Angel and Co-Investor that can provide funding in all stages.
At Earlybird UNI-X, we strongly believe that the creation of university spin-offs should be further supported. By collaborating with all the relevant stakeholders we will accelerate the tech transfer activities in Europe and help build the right infrastructure for founders, academic institutions and investors. If you have further ideas on how to improve spin-off activities or are a deep tech founder in Western Europe looking for pre-seed and seed funding, please contact the Earlybird UNI-X team.