2005年10月号
海外トレンド
“Technology Transfer - the Oxford Experience” Keio University Intellectual Property Center Symposium
顔写真

Tim Cook Profile

Managing Director of Isis Innovation
(University of Oxford Innovation)



Thank you very much and I’ll talk for about one hour on this subject, so your tea will be delayed for which I apologize. I will go as quickly as the translators will allow, but I’m sure if I speak too rapidly, they will wave and I will slow down.

Thank you very much to Keio University for inviting me to speak here. This lecture came about through the joint project that ISIS Innovations has with Mitsu Company. And I’d like to thank them for there help both in organizing my talk this afternoon, but also in helping Oxford University and Japan communicate better with each other. And we look forward to a long relationship there.

After 25 years, in industry I rejoined the university eight years ago and since then I’ve been trying to understand the mysteries of the relationship between the world of academia and the world of industry. In this lecture, I’ll describe how it works in Oxford and describe some of the philosophy and the tactics and the strategies that we have developed there and try and devise some underlying principles that may be useful elsewhere. I have three main messages to give to you. The first one is that this activity is always going to be difficult. It’s difficult because we are trying to stimulate relationship between two very different value systems. The value systems of academia which are the open exchange of information, the sharing of knowledge and generally giving away the intellectual assets. And the world of business where we want to protect, enhance and sell the intellectual assets. So the first message is this is never going to be easy. The second message is that there is no single recipe for success. In answer to "What’s the best way to commercialize university inventions?" And the third message is, the best solutions can only be developed by people who’ve got a real in depth understanding of how there university works and how the commercial world around them works. So three messages. So if you sleep I’ll repeat these messages at the end and you’ll be able to tell your colleges that you listened to my whole lecture and they won’t know any better.

So Oxford University is the UK’s oldest university. It was started around A.D. 1100, no ones quite sure when. The first overseas student we had in Oxford was in 1190 A.D. He was Emo of Friesland, which is in Holland. And the fact that we still have student records going back to 1190 will give you some estimate of the quantity of paper that now exists in Oxford. There are about 3,700 researchers at the moment. We spend 43 billion yen a year on research. We’ve won prizes for being the UK’s most innovative university. And what is less well known is that we have the largest chemistry department in the western world. I say western, because we are not quite sure what happens in China. We produce 80 chemistry doctorates a year, which compares favorably with the biggest American universities, who are much better know for chemistry. And 180 first degree chemists a year. The biggest in the States, I believe is Austin 115. I’ll refer back to chemistry later on.

But a more fundamental question, what is a university and what is a university for? Because I’m going to be talking about the communications between these two different worlds, it seems sensible to work out what the university world is. And I would suggest that a great university is defined by great academics: great researchers, great thinkers, great teachers. It is not defined by great administrators, or by great technology transfers with due respect to my colleges in ISIS Innovations and in Keio IBC. Or is it actually with due respect to the leaders here, even defined by great leaders? Although of course all those of us who live in list two make a contribution to the recruitment and retention of the academics in list one. If you visit the city of Oxford and ask one of the inhabitants, "Where is the university?" They will look mystified. Because Oxford University is not in one place in the city, it’s spread throughout the city. And the Oxford Innovation Model is similarly spread throughout the university. You can’t go to one office in Oxford, and say this is where the innovation works. So it permeates the university. The counsel of the university contains non-academics. External business people from the world of banking, retail, finance. The administration in the university recruits outside the world of academia as well as inside of it. Of the 3,700 and increasing number are involved in commercial activities. And among the students, there’s an increasing amount of commercial activity, even amongst undergraduates and I’ll talk a little more about that.

The resources that the university devotes to supporting innovation are similarly spread throughout the structure and they are put in the most appropriate locations to catalyze the interaction that we’re trying to do. The resources that the university invests in innovation are first in the University Central Administration. There is an office called the Research Services Office. That’s located next to the vice-Chancellor of the university. On the same floor as the universities Finance Director, the universities Director of Legal Services. In other words, this is a core activity in the universities administrative structure. It administers 32 billion a year of grants and contracts, out of a total of 46 billion yen of research. ISIS Innovation, the company of which I am responsible is a company wholly owned by the university. And our job is the commercialization of university inventions by patenting, licensing, helping academic starts spin out, and helping sell academic consultancy. The university has a science park, again wholly owned. It’s not owned by a finance company or by a property developer. It’s owned wholly by the university and that provides premises both for research business incubation and also some premise for the companies that we start. There’s a group in the Business School, called the Science Enterprise Center which is located in the Said Business School which is the University Business School. And their job is commercial training for scientists. They run a course in the evening, every Tuesday and this has an average attendance of 200 scientists who listen to lectures on marketing, cash-flow forecasting, business planning all the subjects you would be surprised that university scientists are interested in. They attend these. I’ve just heard that on the next course, which has just started there are 415 scientists registered. This is slightly embarrassing, because the biggest lecture room we have will only take 350 so we’ll have to rely to another lecture room through close circuit TV. Finally there’s a student club, called the Oxford Entrepreneur’s Club and that’s got 600 plus members. So you can see that the universities attitude to innovation spreads throughout the structure. And this is a partial reporting structure. You’ll imagine in a 900 year old university, if I were to try and describe the total reporting structure it would take the rest of our lives and more space than what we’ve got on the board. So this is partial reporting structure.

The most senior body in the university is the Counsel. This is advised by an intellectual property advisory group. This group helps the university set its policy, but the membership of this group is important. It contains the professor of intellectual property, who is an out and out academic intellectual property expert. It contains patent agent, who is now on the faculty of the business school. I’m a member of it, as is the head of the Research Services Office. As are four or five senior academics who’ve all started companies. So the universities council is advised by a group of people who not only have to devise the policy, but also have to implement it. This means that we have an intellectual property policy, which is well informed and practicable. The universities research is divided into 5 academic divisions: medical, math and physical, life and environmental, humanities and social sciences. And all the research schools are in one of these five divisions. And then there’s a central administration. In terms of the resources for innovation the Begbroke Science Park was actually started from math and physical sciences division, although there is an increasing amount of biological activity there particularly bio-nano science. The Research Services Office and ISIS Innovation are all apart of the central administration. Although our offices are located two miles north of the city because that was the only place we could find a big enough office with a car park. And finally the Science Enterprise Center is located in the Business School, which gives it access to both the Business School faculty who take part in the teaching of their courses, but also the facilities there for lecture rooms,
seminar rooms, and the business links that the business school has. The key ingredients of the model start with a rich portfolio of a wholly owned intellectual property rights. There’s clearly strong research, but the Oxford research is funded by 700 different bodies. So there isn’t a single research sponsor that can have an undue influence on the way that we manage our intellectual property. There is a clear intellectual property policy that is led from the top of the university and is widely supported. This is terribly important because in a university commercialization of intellectual property can be seen to running counter to free academic exchange. And unless there is a free policy in which the leaders of the university support, the job moves from being difficult to being impossible. There is significant investment in administration to support research and technology transfer. Currently, there are about 68 staff spread between the Research Services Office and ISIS Innovation. There is a clear internal demarcation of responsibility with such a complicated structure, it’s very important that everybody knows what there part of the story is so that they do there part, but don’t fall over other parts. But this in a university of course can lead to a lot of internal warfare and therefore this has to be balanced by effective internal and external communications. I mentioned the clear intellectual property policy and this was finalized in October 2000. In 1985, 15 years before this the universities intellectual property policy was that the researchers owned their own inventions. There then followed a 15 year negotiation and at the end of that time the university owned it all. This was a radical change in policy. A change in policy of 180 degrees, but it was negotiated so when the policy was finalized there were no objections to it from the researchers and I’ll explain why that was in a moment.

The university supports those researchers who wish to commercialize their research. The reason I put wish to in bold italics is because no one in Oxford is forced to commercialize their inventions. We encourage them, we support them, but every time ISIS Innovations commercializes something the first reaction is that the researcher comes to us and asks us to help them commercialize it. And the research shares the benefits. So when we sign a license the researchers get some cash. When we start a company the researchers get some shares. When we organize consultancies, researchers get a cash share of the money we make. The universities rules on royalty sharing is that ISIS Innovation pays all the costs on the patent which is 240 million yen last year. When the royalties start to flow we keep 100 percent of them. We find this very satisfactory, but we are only allowed to do that until we’ve paid off the costs of filing the patent after which we keep 30 percent and we send the rest to the university, which it distributes through the payroll. Up to the first million yen, the researchers get most of it. This covers the administrative costs and tax payments that the university has to make, but it essentially all goes to the researchers. After this the researchers get 45 percent, the university takes 30 percent and 25 percent goes to the department and when the deals get really big the researchers get less, the university gets more and so does the department.

When we start a company the equity is split between the academics, the university, the investors and the managers. And I’ve put this rule at the top which looks rather silly. The reason I put it there is when we start to form a company everyone says what percentage of the shares they want. And it always adds up to significantly more than 100 percent. And we say to them the total equity in the company can’t exceed 100 percent and this is better than being rude to them and telling them they shouldn’t be stupid. And so this is the rule. In terms of how the equity is shared between these four lots. The university and the academic gets similar amounts. There is not a hard and fast rule, but the reason we say they should get similar amounts is because if the academic doesn’t want to do it there won’t be a company and if the academic wasn’t in Oxford there probably wouldn’t be a company either. So equal shares seems fare. Of course we negotiate some academics think they should get more than the university. No academics ever think they should get less than the university. And what typically happens an academic comes to ISIS Innovations and says I should get 80 and the university should get 20. And I say, I will refer that view to the next meeting of the Intellectual Property Advisory Group which is in June. So if you come back to see me in June I’ll tell you whether the university accepted your proposal. The academic says then, well I don’t want to wait tell June, would you be happier with 60/40 and then we negotiate a bit. And usually we reach an agreement somewhere between 50/50, 60/40 of course ISIS Innovations decides whether this academic is being reasonable or not and the university to date has always accepted our recommendation. The investors who put money into the organization get whatever they negotiate for. The managers who are going to run the company, again get 5 to 15 percent depending on how good we think they are. The important point about this slide is that everyone on this list has an effective veto. If the academic doesn’t want to do it, it’s not going to happen. If the university doesn’t put in the intellectual property it’s not going to happen. If the investors don’t invest of course nobody gets any money. So therefore the fact that everyone in effective veto means they all try really hard to make an effective agreement that adds up to not more than 100 percent.

In terms of how we bridge the gap between the world inside the university and the world outside the university. All the research funding that I mentioned is managed by the Research Services Office, which is inside the university. When an academic wants to commercialize they come to ISIS and they fill out a form, which among other things contains details of who funded their research. This office then checks who owns the intellectual property. If the university owns it they assign it to ISIS Innovation. We then file our patent, start spinout, set up consulting, sign license. Very often this activity gives rise for a need of ongoing research. We refer those negotiations back to the Research Services Office. Now this is annoying for our industrial contacts because they are talking to Research Services about the research and they are talking to ISIS Innovation about the license. And of course a company would rather talk to one person who speaks for the whole university. In fact it’s less of a problem because there are about the same number of people in each of these offices and they tend to work in pairs. So we will have someone in Research Services talking about the research and someone in ISIS talking about the license in the same meeting. And that partnership works well. The benefit of this structure is that all of the obligations that the university has taken on as a result of taking research funding are held in one place. So we won’t be selling intellectual property that is already owned by someone else as a result of their sponsoring research. And this clarity will reduce the level of litigation the university will face in the future. Some universities organize their industrial sponsored research from their technology transfer office. The danger is that something might get sold that the university doesn’t own.

Looking back at history, I started my job at ISIS Innovation on the first of May 1997, which was the same day that our new Prime Minister started his job in London. Tony Blair was appointed on the same day that I was. It will be interesting to see which of us lasts out longest. Anyways when I joined ISIS there were three employees. The university was putting in a tiny amount of money, which didn’t cover the salary and it didn’t work. Three employees isn’t enough to commercialize the intellectual output of the University of Oxford. I suggested the university should increase the budget to 300 thousand pounds, then to half a million pounds. And in 2000, I asked the university to put 1 million pounds a year into ISIS Innovation for 5 years. And the university agreed, which was quite a surprise.

So if you want evidence of a change in the culture at Oxford University from intellectual property, it goes from nothing to a million pounds a year in three years. I was then able to recruit some staff, open some files. We’ve currently have over 700 open case files. So if you thought that relying on researchers coming to ISIS was going to limit the volume of work we’ve got, no it doesn’t. We filed some patents, we did some deals and we started some companies. So if you have a good research spend, which most research intensive universities do, and you spend a tiny amount of that research spend on technology transfer this is one half of one percent of Oxford University research spend you get some results. You’ll notice the number of spinout companies has dropped this year. This was due to a change in the tax law in the UK, which I’ll tell you about in a few slides time. But it is important for those of you who have contact with politicians to make sure that politicians understand how this works because a slight change in the law can have a drastic change in whether it is possible or not to start spinout companies.

You’ll notice that this chart ends in March 2004, this is last March from what I’ve told you it probably won’t surprise you to learn that I went back to the university and asked for 20 percent more each year for the next 5 years and you probably won’t be surprised that the university has agreed to put in 220 million yen a year for the next 5 years. So the story will continue.

And these are the current staff and ISIS Innovation. David Baghurst my colleague is here and he’ll take part in the next part of this discussion. There are three main groups physical sciences, life sciences, and business administration and consulting and then there’s administration over here. The most important people here on this chart are the project managers. These people have about 40 active case files each. That sounds a huge number, but thirty of them are always in the computer waiting for the patent agent to come back or waiting for an academic to apply to an email or something. So there are about 10 active of which three or four are in crisis at any one time. The project managers nearly all have science doctorates. But what doesn’t show here is that they’ve nearly all had experience in industrial companies. So they can be credible in the two different worlds of academia and industry.

And these were spinouts from Oxford before 1998. The significance of 1998 is the university started investing in technology transfer in 1997. So these companies are nothing to do with ISIS Innovation. You can see it started a long time ago, 1959. You can see the ones that have been IPOD or have been sold are worth a lot. This is about 1.2 billion pounds. During this period the university did not offer any assistance to academics who wanted to start companies. So each of these companies was started by a big personality academic who not only was a successful researcher, but also had the energy to find someone to invest, to find someone to write a business plan, to find someone to run the company. These are very rare individuals. Martin Wood when he started this company stayed in the university for 10 years. With the exception of Oxford Biomedica, the founding academics of all these companies are still in the university today. Doing what they did before they started their companies. I’ll come back to this later. But in general we don’t turn successful academics into management trainees. We do this for two reasons. One we don’t want to loose good academics. Two they generally don’t make very good industrial managers.

I mentioned that these were all started by unusual people. These unusual people only come along about once every four years. So although this list is worth a lot of money, there are not many companies on it. Compare that with since the university has been investing in technology transfer where you get a lot more companies. The university puts ISIS time and effort into these. Puts its own intellectual property into the licenses for them. It does not invest money in them. The funding all comes from external investors. So there’s 5 billion yen comes from business angels, which generally gets the companies through there first one or two years. After which there’s 42 billion of venture capital. The venture capitalists would not invest in the first year of these companies. We need the business angel finance and more importantly the time of those business angels to get the companies into a state where venture capitalists will invest in them.

I mentioned that there was a change in the law in 2003, which spoilt this business. Before 2003 the researchers shares were treated as capital, so they did not need to pay tax on them tell they sold them. Also in the UK the tax on capital gains can taper down to 10 percent if you hold the shares long enough. Whereas income tax is forty percent. After 2003 the researcher’s shares were treated as income, so instead of paying 10 percent tax they paid forty percent tax. But more seriously the tax was due in the year that the researchers got the shares. This was when they didn’t have any cash. So they couldn’t pay the tax bill. The result is spinouts stopped for about 8 months. There has now been a modification to the act, the payment terms were modified, but it still had a very serious on spinout companies from all UK universities. These are Oxford spinouts from 1990 to 2004 and the numbers in squares here were the numbers of spinouts in that year. And you can see what happened. The university started investing in ISIS in 1997 and the rate of spinouts went up. Gordon Brown the Chancellor of the Exchequer changed the rules in 2003 and they came crashing back down again. We are hoping that he’s going to change the law back in which case they’ll go back up again. But as I say, if you have any influence with your government make sure that they realize a small change in the tax laws can drastically effect the amount of technology they get out of there universities.

When we start a company we don’t take out the head of the research group as I said. We move some post-docs into the company and we recruit a managing director from outside. The previous speaker was taking about the difficulty of finding these people and I’ll talk a bit more where we get them from later. There is still a good technology interchange between the head of the research group and his x-students because they know each other and they work together. But the great thing about bringing someone in from outside is that he knows about management, he knows about universities. One benefit is that the research group continues to be productive in the university. So when I was the manager of a spinout company it was good to have a research group in the university that had not just lost its head.

One of the problems with spinouts is that in a university research group the most expensive people are the scientists. There may be a few secretaries and technicians, but in general the support is the low cost part of the exercise and the science is the main activity. Of course it is it’s a university. However in the company the scientists may only be a small part of the company. You have production staff, sales and marketing staff, finance and administration staff. But the senior university professors have learnt all their prejudices working in this world. So the will see the most expensive part of the company as having to fit into their perception of the low cost part of their research group. This increases the tension of spinning out because we have to explain to a professor in Oxford why we want to recruit a salesman on a hire salary than the professor is on. When the academic comes to ISIS he is given an ISIS project manager. We run a business angel network to help them raise private finance. We have a managers network to put them in touch with appropriate managers. We then introduce them to companies of local lawyers, accountants, and bankers. And the company is set up. To the left of this event, all these people work for nothing. It is quite interesting persuading lawyers, accountants, and banks to work for nothing. But once your university has a reputation for producing successful spinouts they do this as an investment because once the companies formed they get high value clients. Not only that you can persuade lawyers, accountants and bankers to sponsor conferences in your tech transfer office because they want to market there professional services. And we’ll come back to that later.

The reason this model works, I think that there is world class research and a strong intellectual property policy. The administration of the university is commercially aware all the way through and they are investing real money into technology transfer for the next 5 years. The system management systems in the university are integrated and part of there objective is to maximize innovation. And finally, I have not mentioned this before, there is a cluster around Oxford of science parks not owned by the university. The Oxford Trust is a charitable organization setup to promote the commercialization of science. There is a two days event called venture fest where 1800 people come to Oxford to meet each other and talk about spinouts. And then there are all the professionals the accountants, the lawyers, the patent agents, the banks and the commercial property owners. Who see the university as a way for helping them to promote their own business.

I believe we are ten years into a culture change in Oxford and there are three perimeters that map this culture change. The first is the entrepreneurial culture in the university. How many academics have done commercial things? The second one is the senior offices of the university and the fact that they are actually still putting university funds into tech transfer. And finally it’s the local professionals who I’ve just mentioned. Now I believe all three of these need to develop together, but I believe the university must lead the change. And the reason I say the university must lead the change is twofold. One the ideas are in the university. If the university provides a technology transfer resource the change will happen faster. Before the university invested in ISIS the university did one spinout every four years. Now it’s doing them 32 times as fast. So if you invest the resource near the source of idea you get more transfer. The second reason is that I believe if the university doesn’t lead this change the university may not share in the benefits. Because the local investors will do deals with the academics and the university will be carved out. This is what happened in Oxford pre-97.

We’ve recently set up in ISIS a new activity called ISIS Enterprise. For the last 8 years ISIS has only worked on technology invented in Oxford, but every two weeks we have a group of people coming around asking us how we do. We’ve had a party from Keio University in fact came last year. And we believe there is a business there spreading this expertise to other universities and research institutes. So we offer consulting expertise and advising technology transfer. We offer long term working partnerships or short-term consultancies. Or we will host within ISIS people from other universities mostly from outside the UK. Who come to learn how we do what we do. And at the same time develop relationships between their universities and Oxford University.

So the conclusion from the first half of my talk is that by investing a small amount of the research spend at the interface between research and industry Oxford has developed a successful model to generate both economic and social benefits from its research. And the second conclusion is that we now want to see whether we can do this outside Oxford.

Now I mentioned that my talk was in two halves so we will now get on to the part about the tactics of technology transfer. I’ve called this some tricks that might help. So this is particularly addressed to those of you who are trying to stimulate communication between the two planets. I’ve got one side on philosophy, three on technology audits, five on attracting and handling inventions, two on how we find managers for our spinout companies which as we have already heard is a critical factor, one on cash flows, a couple on the university in the economy it finds itself, and then two jokey slides on how someone in a technology transfer office you can try and manage a university.

So the philosophy is that we support researchers who wish to transfer technology. We encourage them, but we don’t make them. The researchers interest is key and our most critical access is researcher confidence because if the researchers don’t want to do this they won’t do this. We generate researcher enthusiasm by marketing internally, by having a clear university intellectual property policy, by employing high quality intermediaries. If the researchers don’t trust the ISIS staff with their ideas, which they see as their children they won’t come to us. And they have to be experienced in both research and industry.

When people start a new technology transfer office they usually organize what I call an event based technology audit. And what they do is the book to go and see an important academic. And the academic can usually remember what he’s done the previous three weeks and he can remember the visit for the next three weeks. So you track inventions, which are made plus or minus three weeks of the visit. And now for every ISIS project manager there are 230 academics at Oxford so if they spend one day a week doing technology audits they’ll do one every 5 years for a particular academics. Many academics change universities about every three years so this is not going to work. But there is another reason why this is not a good idea. The usual practice is to go and talk to the researchers as I said and the result is one of three things. Either you take an hour of the researchers time and tell them they’ve got nothing worth patenting or you take an hour of their time and disagree whether they’ve got anything. They think they have got a good invention and you say you’re not going to patent it. Or find some gold. Outcomes one and two are very counterproductive to a technology transfer office trying to establish credibility with researchers.

And there is a better way of achieving outcome three. And this is what I’ve called relationship based technology audit. Here there’s an ongoing relationship between the technology transfer staff and the researchers. This means whenever they invent anything they come and find us. In other words we get inventions captured whenever they occur. And I’ll explain in more detail how this works. I’ve called it putting up a lighthouse. The technology transfer office spends a lot of time and effort on public relations directed inside the university. In other words we do mail shots, newsletters, magazine articles, we’ve got a very active web page, we give lectures on intellectual property, handouts, IP training. If the chemistry society wants somebody to talk about starting companies we do it. Last Wednesday, I spoke to the Brasenose College Biomedical Society. There’s lots of opportunities for internal marketing. Also the local radio, the local TV and the local press is a good way for the universities tech transfer office to communicate with its researchers because here you catch them at home. The university does of course have its own newspaper, but if you use the local media it seems to have more credibility than anything official coming out of the university. And well of course as national media. We also depend departmental seminars, college lunches in other words they live in the same world as the researchers. So there is an ongoing relationship so we don’t need to do this confrontational technology auditing. We believe that the sociology of this is the most critical factor because if you don’t get this relationship right the researchers simply won’t tell you about their inventions. If we take all the inventions in the university, the ones we know about and the ones that we don’t know about and I rate them on there attractiveness to us. You’ll get some sort of curve where these are the inventions that we want to see and these are the inventions that we don’t care about. And this attractiveness is going to be a function of two things. One the strength of the science and two a parameter that I’ve called the commercialize ability of the academic. By that I mean does this academic arrive on time for meetings, can this academic speak in plain language that a commercial person will understand why this should be commercialized, do they have any embarrassing habits that are going to prevent someone from investing in their technology. All the time we are talking about building relationships between academics and industry. And this soft interpersonal element is crucially important to the success or failure.

This commercial ability is the parameter I want to talk about a bit. Now you remember I talked about the lighthouse and people coming to ISIS. One other thing if you will accept anyone doing science in Oxford University is going to be quite good at science this parameter becomes a constant and this curb reduces the commercialization of the academic. So if you go back to my model of the lighthouse and waiting for the academics to come to us. The ones who’ve got a high commercialize ability are the ones who will choose and come and talk to us. In other words, we’ve got a self selecting sample of the people we want to talk to. The length of this arrow is of course the length of the technology transfer office. I don’t actually know how far down this curve it comes, but this is the resources we’ve got. And by using this method, I can put our resources, which are always going to be less than I would like into the most effective projects. And this is all very well except for Dr. Quite. Dr. Quite is a very quite man who has invented a cure for cancer, but he’s so quite and shy that he’s never going to come out of his lab. And the model as has been described to you so far will miss him. So the university will lose that opportunity. However in each department in the university there is at least one technology transfer enthusiast. This is someone who has made some money out of us, expects to make some money out of us, or just believes that technology transfer is the right thing for Oxford University to do. These individuals are all the people in the department who are hyper active socially. In other words they are the people who know what everybody else is doing. So what will happen is ISIS will get a phone call from someone from one of these supporters to say go and see Dr. Quite because he’s invented a cure for cancer.

Now I’ve already explained to you that we don’t do event based technology audits. And what I’m now talking about sounds like an event based technology audit. But the big difference is we’ve been directed somewhere where we know there’s something good. So Dr. Quite gets pulled up into the action zone and we catch his invention. Now until three years ago, this was very hypothetical and I’ve got no experimental proof that it works.

However three years ago we did a project. I mentioned in my first slide that Oxford has big chemistry department and it needed a new building. And this new building was going to cost 12 billion yen. And the university had saved up two billion yen so we had a big gap. Beeson Gregory is a bank in the UK and they had already invested in one or two spinouts from ISIS so we knew them and they knew us. The government, the national government said they’d give Oxford 6 billion if Oxford could match it. So we a short fall of 4 billion. Beeson Gregory said, we will give you 4 billion yen for 50 percent of the universities interests in chemistry spinouts and licenses for 15 years. They started with different numbers and we negotiated as far as that. Now this is an interesting offer, but the question is, is this a good deal for Oxford? Which is what senior members of the university asked me before they signed the deal. I had no idea what was going to come out of Oxford chemistry for the next 15 years, nor did anyone else. So I said, look at the ways this deal could go wrong. Either nothing comes out of chemistry in which case you’ve got a 12 billion yen building for 2 billion yen so that’s a good deal. Or they will make a huge amount of money. But if they make a huge amount of money, Oxford University makes a huge amount of money because we’ve only sold 50 percent of what comes out of chemistry. So we did the deal. Now as a result of this deal these bankers insisted on an event based technology audit because they wanted to make sure that they’d extract the maximum value from their investment. There are 80 chemistry faculty in Oxford, so we organized 10 lunch parties with 8 chemists at each lunch. And did a very gentle, non-confrontational technology audit. Interestingly, hardly any new chemistry projects came out of that exercise. So that means that the mechanism I described on the previous slide had brought out all the good chemistry projects without doing this technology audit. If I define the commercial access and the academic access as two orthogonal accesses that’s probably a reasonable representation of the two different value systems. The commercial access thinks that the academic access never delivers on its promise and the academics think that the industrialists are out to cheat them of their inventions. So spontaneously there is not a huge level of trust. By employing project managers who speak both languages and have credibility on both accesses they can persuade the academic to risk talking to the industrialist and they can persuade the industrialist to risk wasting time talking the academic. What happens once this interaction is started both parties receive their initial preconceptions are in fact misconceptions. The industrialists find that the academics are quite conscious and work hard. The academics find that the industrialists are useful people who can help them do what they do. In other words you get an exothermic reaction once you’ve managed to get the component parts together.

There is a further problem if I take these two axis and lay them down. So here’s the academic axis and here’s the commercial axis and here’s our two dimensional intermediary. This is a license so here you’ve got inventional university, licensee and bio-lingual intermediary helping the two work together. However you need some investment if your going to start a spinout company. So there’s an investor axis. I used to think that the investor axis was part of the commercial axis, but actually it’s not. Investors are people who put money in and want money out. In general, they don’t have a profound understanding of commercial management. So you might think a spinout is over here between the investor axis and the academic axis, but this is not the case because spin out companies need management. So actually the spinout is over here with a projection onto all three axises. So you need a three dimensional intermediary who can speak to the academics about there work, can speak to the investors about their cash, and can speak to the commercial managers about their management. The fact that this is three-dimensional is why this is so difficult. The academic axis turns pounds into research, the commercial axis turns research into products, and the investor axis turn money into more money. And then you can sort of see a cycle going around this, but you can see why this is always going to be tricky.

One of the problems that spinout companies have is that they can never afford the level of management that they need and if they don’t get this level of management they’re not going to get on to the next stage. And a friend of mind came up with this picture, which might be helpful. If the task is to get this boat away from this beach the direction of travel is defined as away from the beach you don’t need to be an expert in global navigation or in the world pharmaceutical markets. However whenever the boat gets out beyond the headlands it does matter that you know whether you want to steer it north, east, or south but by this time the company is two years old and you’ve got a bigger boat. So you can recruit a captain for the boat who knows about world pharmaceutical markets and you send your rowing boat man back to the beach for another rowing boat. If we look at the cash flow profile of spinout companies I’ve got some typical patterns. This is a modest European level of investment where business angels put in a modest investment and they get a slow return. This I’ve called the California model where you put in 25 million dollars and everybody gets rich quickly. The C-curve is less popular, but more common. Here you put in 25 million dollars and they spend it and they come and ask you for another 25 million dollars and that happens quite a bit. We don’t do any of those. We do this one. So we fund the company modestly with private investment for its first two years by which time there is complete team. Its got a clear business plan, its got some management track record and some credibility. And then we raise venture capital. Interestingly this corner generally corresponds with the end of the rowing boat and the start of the experienced industry wise management.

If I do a sketch of the bits of a university from the point of view of commercialization I’ve called the gene poll who are the founding scientists who start companies. Every university has some of these people who regardless of what the university does are going to be commercially active. Also in the university there are executives and policies. There are other academics who are not commercially active and there’s a technology transfer office. And all these are connected together inside the university. However this university exists in a commercial environment and I’ve called it a sub-culture in a barter economy. By that I mean here’s the university and there’s probably a couple more universities in the vicinity. But also in this reaction there are all the local professionals. The venture capitalists, lawyers, headhunters, accountants, banks, people who run industrial property. All these people are in this business for their own objectives. They’re not there to support the university, they’re there to run their businesses. But if connected together they can see the universities as a resource. I spent sometime looking at how Stanford in California works. And you could look at Stanford or MIT, they’ve got a very well developed local selection of professionals who do well from the university, but also enable the university to have a fertile environment in which to transfer its technology. But as well as these, you’ve got some individuals. I’ve called them itinerary managers. These are the consultants, the brokers, the people with address books, the business angels the people who know everybody. And also on top this you’ve got a bunch of students who are floating about, some of whom will be useful. Now this total organism is the thing we’re trying to optimism. Although I’ve talked mostly about what happens inside the university. It’s only when that whole picture is working that the whole thing works. And it takes a long time for this to happen. I still believe it’s the right thing for the university to start stimulating this, but until the professionals see the university as someone with whom they want to deal, then I think it will always be a less than optimum setup.

The last two slides I prepared are the advice I give to new recruits to ISIS Innovation when they come into the university of Oxford. And I say to them that managing a university is like leading an elephant with a thin rubber band. The elephant’s the university and this is you with your rubber band. And the first thing that you have to do is walk along with the elephant in whichever direction the elephant happens to be traveling until the elephant gets used to your presence. After that you can start to pull gently on your rubber band. If you pull to hard, or if you pull to suddenly you will break your rubber band, after which you will have no further influence over the direction of travel of the elephant. And this seems to work alright, but don’t think you will ever have complete control of your university colleges. I went to Russia about a month ago and as I came back on the plan this cartoon was in the newspaper. And this is the technology transfer office here and he’s saying to his friend here, "Okay, I’ve got him now hit him with the rock." And of course he hasn’t got him at all. The university will always win, so therefore my last message to those of you who are in the technology transfer office is, you might be able to influence your university, but I don’t think you’ll ever control it. Thank you for your attention.