Start-ups: from campus to commerce
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Hello and welcome to Business Daily from the BBC World Service. I'm Sam Fenwick. All this week we're bringing you a special series of programmes focusing on start-ups, new and emerging companies that are often ambitious to gain investment and grow. We'll hear the stories of entrepreneurs in India, Argentina, Finland and Armenia. And we're going to start the series with an idea developed in the US –

the businesses or start-ups that are known as university spin-outs. We have helped create an innovation ecosystem around MIT that supports our spin-outs, not only on day one, but as they're growing, 10 people, 50 people, hopefully 100 people, to really build these huge businesses. These start-up ventures contribute billions of dollars to the US economy through job creation, innovation and by attracting investment.

And they've caught the attention of the UK government. Today, I want to talk about economic growth. We investigate how the UK finance minister intends to supercharge the economy with a bold plan to create the Silicon Valley of Europe. Ending the era of low expectations, putting Britain on a different path.

But what evidence is there that they can have the same effect in other countries? We don't have unicorns, very, very fast-growing and big companies. That's one of the problems. From campus to commerce, the spin-out revolution, here on Business Daily from the BBC World Service. Please give a warm welcome to the president and head of mobile experience, T.M. Rowe.

Samsung's launch of its new smartphone, the Galaxy S25. The launch took place in San Jose, California at the end of January. The event was live-streamed globally, allowing fans from all over the world to join in the excitement.

But for a small group of scientists from Oxford in the south of England, the excitement was reaching a whole other level. So everyone in the company gathered after work in the office and true to the stereotype, we ordered in some pizzas. This moment in time for us, a

A culmination of vast amounts of computer science, software engineering, people huddled over laptops, coding, all culminating in this rather glitzy Samsung presentation. Now, you might be wondering, how does Galaxy AI anticipate what I need? Their friend and colleague, Professor Ian Horrocks, was about to

appear on the big screen alongside TM Rowe, head of Samsung's mobile business, and Drew Blackard, the VP of product management. Let's hear from one of the pioneers of the field, Ian Horrocks. Hi, everyone. It's an honor and a pleasure for me to speak to you today.

And it was not long into this event when a huge cheer, as you can imagine, went up in the office when one of our founding professors was projected onto one of these huge screens at the event. And he proceeded to describe this technology that we've spent years building and perfecting and how it was going to be

powering some of the technology at the heart of Samsung's now flagship product. Oxford Semantic Technologies developed the AI tech which operates in the new Samsung phone. The company started out as a small university experiment, but over the years it grew, attracted investment and was recently sold to South Korean electronics giant Samsung for an undisclosed fee.

Peter Crocker is the co-founder of OST. A couple of people in the university many years ago sat down to perform this research project and start writing some lines of code for an idea they had. There the research was born. That idea incubated within the university and brings together

data, background information and expert knowledge to help the system answer what can sometimes be complex questions, but do so very, very quickly. Think of it as a digital Sherlock Holmes, if you like, piecing together

relevant pieces of information, looking for patterns amongst that data and then making deductions. And it's those deductions that allow us to answer questions really quickly. And at a point in time, that idea takes flight, if you like, and gets spun out. Oxford Semantic Technologies became a university spin-out company. These are start-ups which spring from groundbreaking university research.

The process starts with a bright idea, leading to the development of intellectual property, which is typically held by the university.

the university will take a stake in the company. Now, in the UK, that'll be 10% for less IP-intensive spin-outs and between 10% and 25% for more IP-intensive companies. Japanese universities typically take between 5% and 10%, but in contrast, US universities generally hold less equity because they are wealthier institutions. Don't hold that quote.

This is where a lot of Oxford University spin-outs begin. It's a bustling hub in the heart of the city where innovation and creativity are key. These researchers and scientists are aspiring entrepreneurs and a lot of what they're working on is top secret. There seems to be a lot of secret meetings going on in cubicles all around me. And as I walk past with my microphone out, I've noticed that a lot of people have stopped talking. I'll try and get an early night's sleep.

Oxford University is the leading academic institution in the UK for generating spin-out companies, with 205 spin-outs created between 2011 and 2022. The University of Cambridge follows with 145, while Imperial College London generated 108 spin-outs in the same period. Oxford University spin-outs have been supported by the university's partner company, Oxford Science Enterprises.

It provides everything from securing funding to pairing academics up with CEOs who have experience in launching successful companies. Here's Ed Bussey. He's the CEO of OSE. We have people within our organisation, what we call entrepreneurs in residence. So these are people who are commercially proven. They've built a business, grown it, sold it. We bring them in. And that's the point. This is about how do you maximise the success rate of your companies? And the best way to do that is

is to ensure that the academic is surrounded and supported by the best possible founding team. Talk to me now about investment capital. How

How does that work? How much money has this organisation invested so far? So we've invested as OSE, along with what we call our co-investors, of the order of £2 billion over the last eight years or so. And where's that money come from? We are backed by 75 international shareholders.

ranging from pension funds like Aviva, M&G, LNG, sovereign wealth funds, Qatar, Oman, Singapore, some institutional investors like Lansdowne Capital, Google Ventures, etc. I think what's striking is our cap table is very international, number one. And secondly, there is a real belief in our mission. Obviously, we need to deliver a financial return for our shareholders. That's why we exist.

But the reason we also exist is because we are seeking to build companies that will solve the world's greatest challenges. And that is not just an empty marketing strapline. It is actually what we are doing. And many of our investors are what we call impact investors. So they're very focused on deploying their capital in a way that's going to make a positive difference for the planet, whether that's around food security or climate. And when you look at our portfolio, it's pretty mind blowing. And

An independent review found that within the last decade, 1,300 spin-outs from 91 British universities have generated more than $25 billion in investments and created nearly 30,000 jobs in the UK. The UK government wants to harness this type of growth by developing a big research and development hub between the university cities of Oxford and Cambridge.

Here's the UK's Finance Minister, Rachel Reeves, setting out her plans. Oxford and Cambridge offer huge potential for our nation's growth prospects. Only 66 miles apart, these cities are home to two of the best universities in the world. And the area is a hub for globally renowned science and technology firms.

This area has the potential to be Europe's Silicon Valley. The UK is copying a model used by the Massachusetts Institute of Technology, MIT, and Stanford University in California, which are widely recognised as world-leading universities for creating spin-out companies. MIT, in the Boston area of the northeast of the US, is a thriving centre for technology and innovation.

University says that the environment provides opportunities for collaboration, networking and access to resources. It's the birthplace for many successful spin-outs, which have become household names like Dropbox, the popular cloud storage service, iRobot, known for creating the first commercially successful robotic vacuum, the Roomba, and Boston Dynamics, which is famous for its advanced robots like Atlas, Spot and Stretch.

Fiona Murray is a Professor of Entrepreneurship and Associate Dean of Innovation at MIT's School of Management. MIT has been at the spin-out game, if you like, for a very long time. We've always had, I think, in our founding charter that our job is to do something useful. So that's been something that has always been very front of mind. And so we attract people who actually want to make a difference in the world and who absolutely want to be at the forefront of knowledge, but they really want to be at the forefront of impact. When

When we celebrate the university, we're of course celebrating our Nobel Prize winners, but we are also celebrating those people who've created some of these companies. And then we have over the years built up a system of supports within the institution that I think make a big difference to supporting that process, to lowering the friction, increases the resources, etc.

And at the same time, we have been fortunate to have, but also have helped create an innovation ecosystem around MIT that supports our spin-outs, not only on day one, but as they're growing, 10 people, 50 people, hopefully 100 people to really build these huge businesses. You're listening to Business Daily from the BBC World Service.

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University spin-out companies have the potential to stimulate economic growth, with many on the lookout for the next $1 billion startup like Google or Airbnb. But not all ventures will be successful. And I'm going to start the Zoom recording now. OK, OK.

I'm professor of applied economics in Polytechnic University of Marche in Ancora. Professor Donato Iacobusi has been studying the success rate of Italian university spin-outs since the late 1990s. He says that since then, more than 2,500 spin-offs have been created at a pace of more than 100 a year.

but not all of them are considered successful. When we consider the impact in terms of how many employees or the sales or the value added, we must admit that the majority of spin-offs didn't grow. The majority of them are no more active.

Most of all, we don't have those which are called unicorns. Very, very fast growing and big companies. Just one over 100 million euros. That's one of the problems. So of the 2,000 spin-offs that have come out of Italian universities, only one of those has reached 100 million euros. Yes.

So within Italy, what do you see from your research as being the main weaknesses? Typically, spin-offs are promoted by a large team of people. They typically have a very strong technological background, but little or no experience in managing businesses or the commercialization. So that's why it is, in my opinion and in my experience, it is very important for spin-offs

to find support in the local ecosystem. So once the spin-off is created, it is very important that they may find incubators that may help them to overcome those weaknesses. So is that why, when you look at MIT, they are more successful? I am absolutely convinced about that. This is what I say to all my students and young researchers today.

We are no less able than people in MIT or in Oxford to develop technology. Europe in general is at the forefront of research in many areas. What we lack is what is outside the university. We are putting on our safety glasses and then we will put on lab coats as soon as we get into the lab. Something sticky on the foot? That's right. One of our...

Major concerns in a lab like this is keeping down any contamination. Back in Oxford, I'm meeting with Dr. Virginia Corliss. She's the CEO of MOA, another spin-out company. It's using the world's most advanced plant science to reinvent the way farmers protect their crops from weeds. So let's go have a look at how we discover new herbicides at MOA.

Moa doesn't have a commercial product to sell yet, but it has had $60 million of investment. Dr Corliss says that this kind of business relies heavily on the backing of Oxford University and the network that supports its spin-out companies. Really understanding where is the market opportunity, where can you get that first foothold to build a good business and bring this innovation to the market can be very challenging. And having the right support system to help innovators

find those opportunities is really essential. Are they quite challenging conversations to be having with investors? Give us some money and maybe in five years' time we might be able to give you some return on that as this product starts to be sold to farmers.

It's really important that we continue to strengthen that investor ecosystem and particularly not just at that very early stage but also those investors in the middle of the story. As a company like ours has proven out that the core innovation will work.

but still needs that investor support to get all the way to market. Having that very strong ecosystem connecting together the early stage investors and the growth stage investors to get these innovations all the way to where they're needed, which in our case is on farmers' fields, is really essential. It's not just the UK that recognises the economic potential of university spin-outs. Germany's strong emphasis on research has fostered a thriving spin-out culture.

China is rapidly advancing its ecosystem with substantial government investment in high-tech industries. And Canadian universities like the University of Toronto are active in creating spin-outs in life sciences and clean technology. So does Fiona Murray from MIT think this could create more competition between institutions? So I think there is going to be competition from one innovation ecosystem to another for attention.

And we're going to compete to try to be the best. But I think that there is enough capital and enough talent that we will see a number of flourishing university-based innovation ecosystems around the world. And so I don't actually think that there's a sort of upper bound, a maximum, and we've got to sort of slice up a pie. I believe that this is a growing pie. And the question is, can we make sure that, for example, the UK, Oxford can be one of those special places on earth? We

We absolutely know that somewhere like Munich will be one of those special places, in Zurich and MIT in Boston is one, so is Silicon Valley. And I think we also have to make sure that we, given that we live in complex political times, that we don't end up in a sort of a race to the bottom between US and European ecosystems as well. I think we have to have a sort of a flow of talent transatlantic and a flow of capital. Professor Fiona Murray.

So university spin-offs have proven their worth, transforming groundbreaking research into thriving businesses. What's clear, though, is that they require time, expertise and a lot of investment to succeed. That's all for today's Business Daily. Thanks for listening.

If you're just starting your personal finance journey, Financially Inclined is exactly what you need. I'm Janely Espinal, host of Financially Inclined, and each week we discuss money lessons you need to know. Listen to Financially Inclined wherever you get your podcasts.