Supporting Spin-outs: Lessons from Oxford and Beyond25 April 2018 Expert Session 2, MITA, Vilnius

Britta C Wyatt Managing Consultant, Oxentia Ltd

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Topics

• Introduction to the University of Oxford• History

• Research areas

• The Oxford Ecosystem & support for KEC

• Technology Transfer at Oxford – supporting spinouts (and other innovations!)• Services - What does it do?

• Results – What are the metrics and success rates?

• Structures - How does it deliver the services?

• The Changing Landscape • How the model has evolved in response to recent changes

© Oxentia 2018

About me

Britta C WyattManaging ConsultantOxentia, Ltd

• ICT Strategy, Business Planning, Start-ups & Entrepreneurship, Early Stage Investment, Technology Commercialisation, Innovation Strategy

• MBA from top 10 most entrepreneurial campuses (2004)• Worked for #1 university business incubator in Europe (2010)

Education

Denison University

(US)

University of NH(US)

Fidelity Investments

(US)

Liberty Mutual & LIU

(US)

Experience

NDRC(Ireland)

MBABA

Oxentia(UK)

DevonshireInvestors

(US)

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Training & Mentoring Innovation Research & Strategy

Technology Commercialisation

Technology Transfer & KEC Management

Innovation ecosystem reviews Benchmarking studiesProgramme designBusiness planningImpact evaluationsHigher education strategy

IP portfolio reviewsIP policy advice and workshopsProcess and infrastructure adviceEstablishing and supporting TTOsIncubator development and supportPlanning and managing seed funds

Technology transfer workshopsPractical entrepreneurshipManaging innovationInternationalisation and marketingBusiness and entrepreneur mentoring

Marketing and lead generation Finding licensees and sales partnersMarket analysis and commercial strategyValuation and financial modellingPatent Strategy and IP landscapingCreating Spin-outsTechnology scouting and frontier search

‘Working in partnership with our global clients to build capacity, develop capabilityand enable innovation for the benefit of economies and societies.’

Oxentia – Oxford’s Global Innovation ConsultancyOur mission & services

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A very brief introduction…Oxford University Innovation & Oxentia

Formed in 1988, as the Technology Transfer company of the University of Oxford

Established in 2004 to address an increasing interest in technology transfer best practice

Providing Consultancy and Training in Technology commercialisation, knowledge exchange and innovation management throughout the worldWinner of a Queen’s Award for Enterprise –

International Trade 2015

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The University of Oxford & OUI

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University of Oxford

• The oldest university in the English-speaking

world (founded c.1188)

• A leader in learning, teaching and research

• 26 British Prime Ministers educated at Oxford

• Royal Society founded from Oxford in 1640

• 51 Nobel prize winners

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University of Oxford

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Oxford University InnovationKEC Services

Launch innovative ideasLicenses & Spinouts

Start-upsClinical Outcomes Measures

Materials Sales

Invest in new venturesSeed Funds

Crowdfunding (OxReach)Oxford Start-up Incubator

Provide or access consultancyAcademic Consulting (OUC)

“We help Oxford ideas come to life”Oxford University Innovation is a wholly-owned subsidiary of the University of Oxford. We manage the University’s technology transfer and consulting activities and provide

an innovation management service to clients around the world.

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Creating and facilitating impact in society

University entrepreneurial culture Industry, business & the wider world

Commercialising university research and expertise

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KEC process

protect

identify

market

translate license/

spin-out

post deal

Finding it Determining what to do with it Getting the best deal

• Internal marketing

• Ownership• Evaluation

• IP protection strategy

• Proof of Concept• Development• Endorsement

• Overview• Customer targets• Promotion

• Valuation• Negotiation• Legal matters

• Billing• Auditing• Re-negotiation

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Oxford University InnovationDeal Flow & Financial Performance

2016 201516 MONTHS 12 MONTHSAPR 15 - JUL 16 APR 14 - MAR 15

£22.2m £24.6m

£.9.6m £13.6m

14.4m £25m

2873 2490

855 597

418 305

21 5

4 Not reported

Number of University spinouts• #1 UK (2006-2016)Funding raised for spinouts • £52.6m seed funding (2017)• £1.4bn external funding (2011-2017)

Number of PCT applications• #1 EU (university)• #16 worldwide (university)• #4 British (all)

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Oxford University Innovation 18% of Licenses are to Oxford Ventures

http://techtransfercentral.com/reprints/ttt/214-isis-innovation/

Large or corporate34%

Spin-out or start-up from Oxford

18%

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Oxford Spin-outs

• Success rates are 87% after 3 years (vs 54% UK)

• OUI celebrated its 150th spinout this year

• Now averaging 20 spinouts/year (up from 5)

• Over its 30-year lifetime, 1/3 of all OUI spinouts formed in the last 3 years

• Oxford produced nearly half of university spinouts in the UK in 2016

Why? How does it work? (And why the sudden increase?)

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What factors influence Oxford’s model & success?

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World Leading Research

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University of OxfordDivisions & Research Theme Examples

Staff• 1,800 academic staff,• 5,400 research and

research support staff,• 5,900 graduate research

students

Research Volume• Largest volume of

world-leading (4*) research in the UK

Research Spend• £612m highest research

spend in the UK (2014)

Headcount: 5,237 Headcount: 1,669Headcount: 2,566 Headcount: 907

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Overview of OUI Activity by Division FY 15/16Spinouts are mainly STEM… but Start-ups are mixed

Start-ups(Incorporated)Licences SpinoutsDisclosures

Material Sale, Option, Agreement

Start-ups(Joined Incubator) Consulting

0

10

20

30

40

50

60

70

80

90

100

No. of Disclosures No. of ProjectsAffiliated with a

Licence

No. of ProjectsAffiliated with

Material Sale, Option,or Assignment Deal

No. of Spin-outs OUC Deals No. of VenturesJoining the ISI

No. of VenturesIncorporated from

the ISI

Per

cen

tage

/ %

UASOtherSocial SciencesHumanitiesMSDMPLS

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Team

• 78 Staff• Typically PhDs

• Hub & Spoke Model• High visibility hot desks in

divisions and main buildings• Regular reporting to division

& department heads

• Functions• Licensing & Ventures• Consulting• Investment & New Ventures• Clinical Outcomes• Start-up Incubator• Support teams

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Translational Funding Sources

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Translational Funding Sources Funding from proof of concept to spinout

Oxford University Challenge Seed Fund• Launched 1999 with £4m (£1m OU)

• Contributors UK Government, Wellcome Trust and Gatsby Foundation

• Over £9m invested in 162 projects

• One of the few UCSF funds still running in its original form

• 42 spinouts created

Oxford Invention Fund• Launched in 2010 with £1.5m

• Donate to support development of new technologies from Oxford

• Donations from University, alumni and Johnson & Johnson

• Over £2.5m invested in 42 projects

• 11 spinouts created

University of Oxford Innovation Fund• EIS/SEIS funds for investors managed by Parkwalk

Advisors

• Funds 1,2 & 3 (£1.25m, £1.75m &£1.4m) fully committed

• Raising £2m for fund 4

Oxford Angels Network • For Business Angels and early-stage VCs

• 270 registered members

• No membership fee

• Quarterly meetings, newsletters

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Networking

Oxford Innovation Society

• Fosters business~university links

• Exclusive access to new technology

Oxford Angels Network

• Receive new investment opportunities

• Attend pitching events

Publications

Printed publications

• Annual Report

• Innovation Insights (3/yr)

• Brochures

Online

• Website with news and content for academics, investors, industry, consultancy clients, media etc.

Social

LinkedIn

• Follow oxford-university-innovation

Twitter

• Follow @OxUInnovation

Networks and MarketingOUI’s commitment to encouraging & seeking engagement

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Oxfordshire’s Innovation and Entrepreneurship cluster

Research and Education

Uni of OxfordOxford Brookes

STFC

CompaniesSpinouts

Corporates

Business Support

Startup IncubatorThe Foundry

Oxfordshire LEPOxford

Entrepreneurs

Physical Infrastructure

Milton ParkBegbroke

Science ParkHarwell Science

Park

InvestorsOSIOCP

IP GroupAngel Networks

People & SkillsOUI

OxentiaEntrepreneurs

NED / CEO’s

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Does this effect how we build spin-outs?

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Benefit Sharing

• Licenses:• The University’s IP Policy defines how license revenues are shared:• Tiered model

• Spinouts:• Academic Founder & University Shareholding is negotiated case-by-case• 50-50 starting point• Academics agree amongst themselves how they will split their share

• Start-ups:• Incubator receives 10% equity stake • In exchange for funds, mentoring, training, facilities, support

Total net revenue Researchers personally

University General Fund

Department Funds Isis Innovation

To £72K 60% 10% 0% 30%

£72K to £720K 31.5% 21% 17.5% 30%

Over £720K 15.75% 28% 26.25% 30%

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Spin-out Process & Decisions

• OAN • OSI, Lab282,

UICF, OIF• Translational Funding

• CEO Network

• Oxford Trademark • Shareholders’

Agreement• Articles &

Memorandum• IP License

• Guidelines & Policies

• University Finance

• OUI Spin-out Board

• IP• Business Case• Tech Status

Academic Decision

to Proceed

Initial Evaluation

& Due Diligence

Obtain Permission

Agree University & Founder

Equity

Legal Documenta

tion & License

Identify Manageme

nt Team

Business Plan & Raise

Investment

Launch!

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Spin-out Formation Process

What is the role of the TTO in the spin-out process?

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Spin-out Company Formation ProcessHistorically…

• Preferable to have…• IP (aka patent)• CEO• Investment• Not suitable for licensing?

• TTO will support with…• Initial Evaluation and Due Diligence• Business Planning• Identifying Management• Identifying Investment

• In exchange for…• 50-50 equity share

Spin-Out Guidance for Academics

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But things have been changing…

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News in Oxford

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3-4x more spin-outs per year

Impact and Industry Driven

Funding

High Profile Support Services

Capital Injection

Impacts on TT Process & Support

• Procedural & Policy Changes• Decision making process• Role of TTO (vs investor)• Equity position• Incubation model

• Culture Changes• Explosion of interest

in spinouts & entrepreneurship

• New types (and sources) of ideas

• Downwards trend in equity shares

© Oxentia 2018 34

Spin-out Company Formation ProcessHistorically…

• Preferable to have…• IP (aka patent)• CEO• Investment• Not suitable for licensing?

• TTO will support with…• Initial Evaluation and Due Diligence• Business Planning• Identifying Management• Identifying Investment

• In exchange for…• 50-50 equity share

Spin-Out Guidance for Academics

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Spin-out Company Formation ProcessToday…

• Preferable to have…• IP (aka patent)• CEO• Investment• Not suitable for licensing?• But not required

• TTO (and/or investors) will support with…• Initial Evaluation and Due Diligence• Business Planning• Identifying Management• Identifying Investment• Administration?

• In exchange for…• 50-50 equity share, adjusted to account for

conditions predefined in guidance

Spin-Out Guidance for Academics

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Spin-out Process & Decisions

• OAN • OSI, Lab282,

UICF, OIF• Translational Funding

• CEO Network

• Oxford Trademark • Shareholders’

Agreement• Articles &

Memorandum• IP License

• Guidelines & Policies

• University Finance

• OUI Spin-out Board

• IP• Business Case• Tech Status

Academic Decision

to Proceed

Initial Evaluation

& Due Diligence

Obtain Permission

Agree University & Founder

Equity

Legal Documenta

tion & License

Identify Manageme

nt Team

Business Plan & Raise

Investment

Launch!Academic Decision

to Proceed

Initial Evaluation

& Due Diligence

Obtain Permission

Agree University & Founder

Equity

Legal Documenta

tion & License

Identify Manageme

nt Team

Business Plan & Raise

Investment

Launch!

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New Funding InstrumentsOxford Sciences Innovation - Oxford’s £600m Spinout Investment Fund

• Oxford Sciences Innovation formed in 2015, initially with £350m

• Investing in spinouts from Oxford (MPLS & Medical Sciences Divisions), Harwell & Culham laboratories

• Additional £230m raised in 2016

• Investing in new and existing spinout companies• working inclusively with other investors• £100k – £10mn investments

• Works in collaboration with others to stimulate and support innovation from Oxford

• EG investing in LAB282, with Evotec, to accelerate drug discovery from Oxford

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New Funding InstrumentsLAB282

• How can a drug development company help with translation and biotech spinouts?

• Collaboration between the University, OUI, Evotec and OSI

• Funding to help translate basic research in disease-related biological pathways into focused drug discovery programmes

• £30m fund, £50-£250k awards, with potential follow-on

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New Funding InstrumentsImpacts on TT Process & Support?

• Efficiencies & Transparency

• Streamline negotiations (and make more amicable?)• Express License Agreement • Academic Shareholding - Clear & transparent guidelines• More flexibility with the process (CEO, Investment)• Investor (OSI) takes a greater role• Managing and bringing together paries

• Lesson: • Relationship-driven• Support vs equity• Cultural change

Express License Agreement: https://innovation.ox.ac.uk/wp-content/uploads/2014/08/OUI-Spinout-Express-Licence.pdf

Minimise outward cashflow • Initial up-front payment of £50k, paid pro-rata• No minimum sums, no milestones, except small exit fee• Royalty only kicks in for sales over £25m• Royalty matrix based on maturity and margin

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New Interest from SSH

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New Interest from SSHImpacts on TT Process & Support?

• Exploring New Models• No patent? No problem!• Social Enterprise Models

(for-impact vs for-profit)• Incubation• OxReach Crowd-funding

• Lessons: • Different language, motivations,

and type of impact• Lower returns?• What package of support to

provide? Watch this space!

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New Interest in Incubation

• Enterprising Oxford

• Co-workspaces in Oxfordshire

• Oxford Start-up Incubator

• The Foundry

https://www.eship.ox.ac.uk/workspaces-oxfordshire

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New Interest in IncubationImpacts on TT Process & Support?

• Oxford Start-up Incubator (managed by OUI)• Assist in the creation and development of non patent

led businesses• Open to researchers, employees, students and alumni• Comprehensive support includes

• commercial advice & mentoring; • workshops and training sessions;• desk space; and• access to business and investment networks

• Lessons• Collaborating (competing?) • Exploring New Models

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Changes in the Oxford E&I EcosystemImpact on TT

£££

Culture

Pipeline (volume)

Pipeline (type)

TTO Process & Support

Transparency

Equity/ Benefit Sharing

Level of Support

Efficiencies

Expectations of Returns

Results?

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Summary

• Lessons• Emphasis on spinouts as contributing to local economic development• Capital investment (and funding policy) can be a catalyst for culture change• The importance of transparency and relationships• “One size fits all” no longer works• New models are being explored for social enterprise and SSH• Flexibility in equity position in response to external trends

• Questions for the future• Will the initial bump in numbers even out?• Will OUI spin-out success rates be maintained?• What will be the impact on OUI’s “sustainable” revenue model? • (And will there be a change in KPIs?)• How will staff adapt to the growth in interest?

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Britta C Wyatt Managing Consultant, Oxentia Ltd

Policy and benchmarking studies

Incubator Support

KEC Partnerships

Translational Funding Impact Reviews

Technology Transfer Training

Innovation Ecosystem Reviews

Technology & Market Due Diligence

Accelerator Programmes

Supporting Innovation & Entrepreneurship Around the World

+44(0)1865 637 272 www.oxentia.com

+44(0)7584 131608 @Oxentia

britta.wyatt@oxentia.com linkedin.com/company/oxentia