Australia has things to teach the UK about spin-out success

Universities have long been the bedrock of groundbreaking research and scholarly advancement. Yet the journey from academic discovery to societal impact often faces a critical gap: effective commercialisation.

This is never easy. Last week, three US experts in intellectual property (IP) argued in Times Higher Education that, contrary to popular opinion, the UK and the US are comparable when it comes to spin-out efficiency. The highest-performing institutions in both countries generate about two or three spin-outs a year per $100 million (£80 million) of research expenditure.

However, the authors are also right to observe that the UK lacks confidence in the effectiveness of its university innovation system. This is why the government’s review of university spin-outs, also published last week, comes at a critical time.

The report highlights room for improvement, offering many sensible recommendations for enhancing the ecosystem. This is not just about financial gain; it’s a strategic imperative for universities to translate IP into real-world applications to help drive economic growth and secure the UK’s ambition to be a science and technology superpower.

It is certainly true that the UK shouldn’t just be looking to the US for models of best practice. In my experience, Australia is also doing a lot of things right.

UniQuest, the University of Queensland’s commercialisation arm, illustrates the significance of a strategic and coordinated approach to IP commercialisation. UQ, where I was formerly provost, ranks among the top 10 per cent of universities globally for revenue generation from IP, raising A$3 billion (£1.6 billion) in annual sales of UniQuest-licensed products. This success stems from close collaboration with researchers, partnership managers (employed to scout for IP and promote it to business development directors) and the investment community.

According to a recent survey by Knowledge Commercialisation Australasia (KCA), Australia’s 37 public universities, which collectively spend approximately A$11.9 billion a year on research, had 311 active research spin-outs and start-ups in 2021, with total equity of A$726 million held in them. Commercialisation revenue grew to A$251 million in 2021. The UK university sector, which is around four times larger, generated 1,379 spin-outs in 2020-21, with commercialisation revenue of £172 million, set against research expenditure across the sector of about £20 billion, according to the NCUB report State of the Relationship 2022.

In the last few years, the Australian government has pledged strong support for researchers working towards commercialisation, including a A$2 billion package to bridge the so-called “valley of death” between discovery and market launch.

One of the key recommendations of the UK review, led by University of Oxford vice-chancellor Irene Tracey and Andrew Williamson, a managing partner of the University of Cambridge’s in-house venture capital fund, is the establishment of clear, market-aligned guidelines for spin-out deals. This includes standard equity splits and a collaborative framework for deal negotiations, ensuring fairness and efficiency. Additionally, the review advocates for increased data transparency on spin-outs and their deal terms, alongside the implementation of a national spin-out register, enhancing visibility and accountability in the commercialisation process.

This is of critical importance for the confidence of the investor community, which needs a system that is open and navigable.

Enhanced collaboration between spin-out companies and the labs of the inventors will also be vital in adding value to technology development and scale-up. Not all spin-outs are founded by the academics who did the original research, but those that pursue commercial paths quite independently from their academic progenitors are statistically more likely to fail.

Another critical aspect is the funding and support for technology transfer offices (TTOs). The report’s recommendation for shared TTOs, especially among smaller research universities, can create economies of scale and pooled expertise, benefiting a wider range of institutions. This approach can be particularly advantageous for disciplines such as social sciences, humanities and the arts, which are increasingly demonstrating their potential for commercialisation.

This is an approach we already see in Australia, where smaller and newly established university TTOs partner with well-established TTOs or commercialisation vehicles. This results in immediate increases in the number of invention disclosures (patents or IP rights applications and declarations), facilitates investment deals and enhances the commercialisation process as a whole.  

At the University of Surrey, we have experience of leading engagement between research and industry across a range of clusters, from space and cyber to animal health, working with partner universities and deep vertical cross-sections of industrial sectors. Our recently established pan-university research institutes (People-Centred AI; Sustainability) have been designed to fuse our hard and social science expertise, broadening our impact beyond creating the technologies of the future to working across industry and policy spheres to maximise impact and drive change. We have also established an innovation and commercialisation company, Innovate Surrey Ltd, to help drive this mission.

Integrating commercialisation efforts with academic pursuits is also essential, and I endorse the report’s recommendation for PhD students to have access to entrepreneurship training and internship opportunities in spin-outs, venture capital firms or TTOs. It’s about embedding a culture of entrepreneurship within the academic fabric of the institution. 

In these ways, UK universities can fulfil the imperative to ramp up their efforts to further enhance their contributions to society.

Max Lu is president and vice-chancellor at the University of Surrey. He also sits on the UK prime minister’s Council for Science and Technology.