Slide 1

University Spin-offs:Seeding the field

Hermann Hauser

London 3rd June 2003

Slide 2

Content

• Historical Background

• Spin-outs: How do they happen?

• Cambridge: an Example

• Future Innovation

• Conclusions

Slide 3

Slide 4

NASDAQ Close (Historical) October 1984 - Today

Source: CSFB Tech Pvt Equity Conf. Nov 02

0

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Slide 5

NASDAQ Close (1985 -2002)

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Actual Closing ValuesRegression Values

Note: Regression Analysis performed on data between Jan 85 – Jan 95 and the results extended from there onwardsSource: NASDAQ; Amadeus Research

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AQ C

losin

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(Log

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Slide 6

US and EuropeVenture-backed Tech IPOs

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xits

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Source: VentureOne

Slide 8

UK Total High Tech VC Investment (All Stages, £m)

1093

1615 1658

546

177116

47 73130158 114

281 240 253319

595707

14867

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Source: BVCA

£m

Slide 9

Time to Exit (Deals)

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1985 1990 1995 2000 2005

Time to Exit

Years5 – 7 years

1 – 3 years

?

Source: Amadeus analysis

6 – 8 years

Slide 10

Innovation: How does it happen?

Slide 11

Alfred Marshall on Clusters

When an industry has chosen a locality for itself, it is likely to stay there long: so great are the advantages which people following the same skilled trade get from near neighborhood to one another. The mysteries of trade become no mysteries; but are as it were IN THE AIR, and children learn many of them unconsciously.

Slide 12

Clusters: Silicon Valley

• World Class University• Entrepreneurial Spirit• Venture Capital• Supportive Government: CGT, R&D credits,

Immigration• Close Relationship with Lead Companies• Infrastructure: Legal, Accounting, Leasing• Real Estate: Availability, Short Leases

• People Network!

Slide 13

Four Necessary Ingredients

Human Capital“Tech Talent”

Business Model Beacons

“Success Stories”

Service Infrastructure

“Well-paidHangers on”

Ready Venture Capital

“Fast Money”

Slide 14

Five Dysfunctional Imperatives

• Soul wrenching personal sacrifices– Creating new industries is hard

• Frictionless labor markets– No corporate loyalty

• High tolerance for chaos– Start-ups are messy and unpredictable

• Social acceptance of failure– Entrepreneurs often crash and burn

• Income inequality – Those that don’t get rich as Croesus

Slide 15

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Per

form

ance

/Pri

ce

Optical

Storage

9 Months

12 Months

18 Months

Time to Double

Source: KPCB

Semiconductors

Rate of Innovation is Accelerating

Slide 16

Cambridge: An Example

Slide 17

World Class University

• 72 Nobel Laureats: global #1• Notable contributions to Science:

– Newton: Gravity– Thompson, Rutherford, Chadwick: e,p,n– Richard Friend: LEPs, Plastic Electronics– Crick & Watson: DNA– Millstone: monoclonal anti-bodies– Sanger: DNA sequencing method, Insulin

Slide 18

History of Silicon Fen

• Cambridge Instruments 19th Century• Cambridge Science Park, St John’s Innovation Centre• 1980s: Cambridge Phenomenon, Sinclair, CCL, Pye• Acorn = Fairchild of Silicon Fen

– 30 Companies started by Acorn Alumni– ARM, VIRATA, E*Trade UK, E14, etc

• Consultancy spin-outs: CSR, Domino, TTPCom• Acambis, Celltech, CAT

Slide 19

Independent Research

• Cambridge Manufacturing Institute:– Cambridge: 1,600 companies, 40k jobs– Oxford: 1,000 companies

• Oxford Economic Observatory– Oxford: 2,000 companies, 50k jobs– Cambridge: 1,400 companies but much

smaller

Slide 20

Silicon Fen

• Cambridge Based

• World Class University:

• 1,600 High-Tech Companies

• Employment: 40,000 People

• ARM: First >$5bn Company

• BUT

Slide 21

Cambridge vs. Stanford

• Both World Class Academic Institutions

• Stanford Alumni founded Companies worth ~ 500 bn

• Cambridge Alumni: ~ 10 bn

• Are we really 50x WORSE

Slide 22

Grounds for Optimism

• Global Strategic Partnering: ARM

• US accepted as Lead Market: VIRATA

• Better Management Talent: E*Trade UK

• Globalisation of Technology: CSR

• New Access to Capital Markets:

LSE, NASDAQ, EASDAQ, AIM

Slide 23

Slide 24

Cambridge Business Angels

• Great Eastern Investment Forum• Cambridge Angels• Share Options in ARM, VIRATA,

Autonomy ~ $1bn• BIGGER impact in Cambridge than VC,

Government schemes, • Creates Start-Up Pool for VCs• Changes Culture

Slide 25

Entrepreneurship

• Start in Schools

• Entrepreneurship Courses for ALL University Students

• Courses for Graduates who want to Start Businesses

• Courses for Practising Entrepreneurs

• Associated Incubator

Slide 26

University Enterprises Ltd

• Efficient commercialisation process

• Entrepreneurship Centre: BP writing

• Technology Transfer Office: IPR

• University Challenge Fund: Seed Fund

• Licences to large companies

• Equity in Spin-offs: could make BIG contribution to endowment!

Slide 27

www.cambridgenetwork.co.uk• Launched July 1998

• Now 3000+ pages

• Directory of 1,000 companies

• Over 1500 submissions,

• Search of members’ Web sites, with intelligent agent capability

Slide 28

The Future is Wet

Slide 29

Future Areas for Innovation

• Biotech– Proteomics– Microarrays– Bio-Informatics

• Plastic Electronics– Ink-jet printing of circuits

• Nanotechnology• Software• Wireless

Slide 30

Old vs. New in Mainframe and PC era

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Microsoft

IntelCompaq

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Digital Equipment Corp.

NCRAmdahl

Data General

Capital fled legacy systems

New winners emerged

Source: Thomas Weisel Partners

A similar shift may be about to begin in Semiconductors !

Slide 31

The European Opportunity

PC Era was a US Era

• US Processor Intel• US Software Microsoft• US Top Companies

Compaq, Dell, IBM• US Dominant Market• US Standards

Mobile Era is a EU Era

• EU Processor ARM• EU Software Symbian,

GSM• EU Top Companies Nokia,

Ericsson, Vodafone• EU Dominant Market• EU Standards

Slide 32

Photolithographic patterning, high temperatures & vacuum processing

Direct printing & solution processing

Conventional Semiconductor

Printed PlasticElectronics

Silicon vs. Plastic…

Slide 33

Low Cost

Source: Fraunhofer Institut, Munich

Slide 34

Conclusion

• Spin-outs need:– Clusters with world class universities– People Networks– Supportive Government

• High-tech spin-outs bring growth

• But it is a global race!