How to Commercialise Your Research
At this point, you probably have or want to have an idea for a startup company based on findings in your research. Here, we’ll provide an overview of the steps required to take an idea from academic discovery and turn it into a commercial entity. As licensing opportunities are typically handled by technology transfer teams within the university, this guide for academics will be focused on spinning out the technology into a company.
We break these down in 5 Steps to Launching a Research Company, as outlined below. We will provide an overview of each one, and will be expanding the content around these areas with subsequent articles, so do check back in the future. If you’d like further information about any of the steps, get in touch.
1. Spotting the Opportunity
Assuming a discovery has been made in the lab or through other academic pursuit, what you currently have is a spark, a mote of potential. In translating this idea into the market, it’s important to find the right tinder before laying the spark down. Typically, we work with academic teams that are looking to refine this understanding. What does a good opportunity for commercialisation look like?
Research commercialisation is typically a “Technology Push” opportunity, though there are exceptions particularly across medical technologies. Technology push involves the creation of a technology without a specific end application in mind. The goal of the exercise is to link the technology as closely as possible to a Market Need, a requirement of a customer for such a solution or technology.
Even in cases of clear broad application, as an example the case of Ziylo, that commercialised glucose binding technology aiming to treat diabetes, the specific end application, whether it should be a diagnostic or therapeutic, took several years post-spinout to determine
For many technologies, multiple applications may be possible across a broad range of sectors. This can be exciting, but also overwhelming when it comes to trying to narrow down the “best fit” to create a compelling reason to start the company.
Perhaps counter intuitively, most investors don’t want to hear that a technology can solve every problem in existence, they want to understand how it will solve a very specific problem, and how you will find the shortest path between where you are and the marketplace so the company can start to generate revenue.
Our words of advice are:
Start by defining the possible application areas for the technology
Spend time investigating all of them, removing all but the most exciting options
Determine which is most promising path forward for the time being
This is iterative. It can take a company years to fully define there offering, but usually its possible to limit to 1 or 2 applications prior to starting the company to provide a clear and concise message to stakeholders
2. Build Your Case
In the future, there are a number of stage gating steps that will determine if you are going to be successful. We explore this idea fulling in our article on “Setting Yourself Up for Spinout Success.”
To spin out, you will need to convince your:
University - to protect your idea and/or allow you to spinout with the idea
Investors - that the venture will be successful and profitable
Cofounders - to commit to the vision and the long road ahead
Prior to doing any of those things, you want to stack the odds of success in your favour. To do this, you will need to secure the knowledge to build a viable business, the advisors or team to support you, and most importantly: proof of interest from customers in the market.
Let’s explore slightly deeper, just the last of these points Market Need.
Products should always address a need, not a want. People often express “wants”, but they ultimately buy “needs”. The popular adage among marketer goes “Consumers want a Ferrari but they buy a Toyota.”
The only way to determine market need is to talk to potential customers. And lots of them. The more evidence you can present of customers encountering a problem they can’t solve, and reacting positively to your proposed solution the better. This focuses further development activity on a specific customer group to meet the specific needs they encounter.
Without evidence of firm market need, patenting an idea keeps Patent Attorneys well paid, but investors nervous.
3. Define a Protection Strategy
Your idea is considered intellectual property (IP); an intangible asset that can have real world value. Protecting your IP is crucial.
Most universities will have a Technology Transfer Office (TTO) or equivalent that supports academics precisely with protecting their ideas. Typically, working with a patent attorney and the university, you will lay out a protection strategy for the idea to allow you to begin to commercially exploit it.
Typically, academic discoveries are protected through a patent or by defining specific know-how and keeping it as a trade secret. There are inevitably advantages and disadvantages to all protection strategies, which we won’t cover here. Instead, we will just highlight why patent protection is such a valuable asset.
Patents protect intellectual property and grant your right to deny others commercial exploitation of your invention. Maybe counter-intuitively, they don’t guarantee your right to sell your invention however, just your right to stop others. These rights are termed “prevention rights”.
Patents can be commercially leveraged in one of two ways:
licensing to a 3rd party in exchange for some benefit
providing a monopoly right to a company to sell the invention
If you are employed by the University or funded by and industry collaborator:
University owns the IPIf you are a student or PhD researcher that is not industry funded, usually:
You own the IPIf both your supervisor and you (PhD researcher) discover an idea:
University and PhD jointly own IP
4. Prepare a Commercialisation Strategy
To spinout, five factors must (approximately) simultaneously come together.
1. A Commercialisation Plan
As a stage-gating exercise, most universities will require a Business Plan before signing off the new spinout’s formation. Pulling together a plan for how to build a financially stable business takes time and most initial plans don’t survive first contact with the marketplace. The temptation here will be to outsource the Business Plan’s creation to a consultant. We would recommend keeping this activity largely inhouse as its important in developing the commercial reasoning and conviction required to convince others of the strength of the plan.
2. Agreement with co-founders
Deciding both the roles and responsibilities of the founding team within the venture as it moves forward, as well as the distribution of equity amongst the founders can be a delicate process. Launching and running a new venture, alongside continuing development of the technology, requires diverse skill sets and responsibilities. Those moving into the venture full-time, will need to assess where each of them can bring the most value and assume roles where their strengths can be best utilised to take the spin out forwards. The level of involvement in the day to day running of the new venture should be reflected in the equity split across the founding team. Some of the founders may not take on full time roles within the spin-out, but their contribution to this point should still be recognised. It’s important to start talking about co-founding and equity early and to keep these conversations open and transparent to reach an agreement.
3. Agreement on spinout terms
In addition to your fellow inventors, the university is also a co-founder of the venture and in many cases the owner of the core IP to be used in the spinout. Most universities will have standard terms covering access to the IP and their level of input and involvement in the spinout. Often, agreements are reached in exchange for equity in the company, royalties, and/or licensing fees. Entering into this agreement, is likely to be the first time you encounter formal commercial discussions, so do take the time to fully understand and clarify the deal you are making.
4. Initial Funding/Investment
Particularly in the case of IP-centric ideas, launching a new company can be expensive. Typically you should look to secure funding to cover the costs of running the company for ~18 months to get started. There is no ‘right amount’ to raise, in this time period you should aim to complete a meaningful milestone to raise the companies valuation. Factor in the 6-9 month period it takes to raise investment and secure funding.
Funding can be pooled from a few different sources; InnovateUK, supports 3-month ICURe fellowships as well as larger innovation 12-24 month grants. InnovateUK grants will usually require match funding from the private sector of 30% of the total project size.
This private match funding can be secured from personal connections across the 3Fs: Friends, Family, Fools as well as Angel Investors who are high net worth individuals that invest in early stage teams. Sometimes, depending on the innovation, there may also be interest in spinout collaboration from Industry.
Early entrepreneurs typically assume Venture Capital is the de facto funding source. However, these groups look to invest much larger amounts $1m+ and seek shorter times to market and higher return on investment (ROI) than most early IP-centric companies can achieve. We typically advise approaching these groups for future funding rounds.
5. Company Workspace
While your work to date will have been conducted in university research space, upon incorporating you will need to be working in spaces suitable for commercial work. Some universities may have commercial space available for you to remain on site, but it’s likely that you’ll need to find a start-up affordable innovation workspace. When selecting a company base, you should consider if keeping close links to the academic group will be essential in realising the product. You should also ensure that your chosen workspace suits the needs of your company. Some cities are well-known as ‘the place to go’ for companies operating in a particular sector, so do locate where is best for your company to grow, wherever that might be in the world.
5. Launching the Company
Actually launching of the company is the easy part. It connects a long pathway up until this point with a future of exciting activity driving the technology into the marketplace. The road ahead for most IP-centric spinouts is typically 3-7 years before ever selling the first product. That may sound daunting, but it’s an adventure. To help you on the path we highly recommend the points below:
Find a community of companies in related sectors to support you
Build your visibility as a brand to start attracting attention
Stay focused on the mission, but don’t be scared to change course
