Crossing tech's valley of death
- publish258
- Apr 17
- 6 min read
Updated: May 26
In origin, breakthrough innovations might be shifting decisively from corporate labs to university research, but only an eighth of this intellectual property makes it across tech’s valley of death. Ed Cole discusses the prospects for finding more star commercialisers
Ed Cole
In deep tech, few innovations make it across the valley of death: the gap between research and the market. Even in the United States, estimates suggest that only 16 percent of the value created in research is released through licensing or equity (Knowledge at Wharton, January 2021).
Researchers lack support and don’t have the entrepreneurial skills it takes to become commercially involved. Investors are deterred by the high risks of commercialising early-stage research. Universities are guided by policies that expect too much equity, sometimes as high as 50 percent, further deterring investors. The IP that is created remains unused. So what can we learn from ventures that have found their way across tech’s valley of death? and is there a way to replicate their performance for future ventures?
Glorious exceptions
At Oxford Brookes University in the 1990s, well before the start of knowledge exchange and technology transfer as widespread standalone disciplines, this cycle was broken by research into antibodies that is now being widely used to test for Downs Syndrome and ovarian reserves, as an indicator of fertility. Through a series of creative commercial steps, including a material transfer agreement, a joint venture, a cross-licence and an acquisition, Oxford Brookes is still earning royalties of £6 million a year. Even if it’s a modern university founded in the 1990s, this income puts it financially among the UK’s research elite.
It began with an inspirational professor, Nigel Groome, developing an unusually large portfolio of 60 antibodies with the potential for use as treatments or in diagnostics. It was scientifically impressive, but would have no value commercially, unless applications could be found.
So researchers elsewhere were involved through material transfer agreements, which gave them access to the knowledge on condition all modifications were returned to Oxford Brookes. The results were marketed through a distributor, Biorad, which unusually created a joint venture with the university, Oxford Bio Innovation. Both partners seconded it people and it operated from the campus, before becoming a standalone company.
The rights in a selection of its antibodies were then licensed to a company in the US, Diagnostic Systems Laboratories, and a cross-licence was agreed with the Australian owner of a master patent that could have otherwise blocked any future developments. DSL then consolidated everything by buying Oxford Bio Innovation, as well as the Australian patent owner, before selling itself to a pharma major, Beckman Coulter.
To reach this position, Oxford Brookes had already taken two unusual steps for a university: setting up a joint venture and agreeing a cross-licence. Now it completed a third by agreeing a royalty with Beckman Coulter on any sales that used one of four inputs: the patents, the cell lines, the antibodies or the know-how. It’s a deal that is still going strong and an example of how to innovate around problems about bringing a technology to market. In this case, a whole suite of intellectual assets, such as patents, copyrights, trade marks, trade secrets, designs, data and competitor analysis, were deployed in making a robust, high-value deal.
Innovation’s big shift
In his research at Wharton Business School, Professor David Hsu has identified a strengthening trend for universities to produce pathbreaking innovation across many disciplines. ‘We’re past the age of corporate R&D labs,’ he says. ‘All that is business history.’
Instead, modern research universities, he argues, ‘tend to be increasingly interested in translating academic research into something that makes a social impact, with associated economic development considerations. That’s a big shift.’
‘We’re talking about not just incremental innovations that could be done elsewhere, but rather more fundamental research at universities,’ he says. ‘In terms of the quality and quantity of their inventions, they are much more basic, much more original, and have many more forward citations. There are many more claims. This is all true of university patents as compared to corporate patents.’
On average, according to his calculations, universities capture 16 percent of the value they help create through licensing revenues or equity stakes in the start-ups that their research spawns. Within those figures, it appears that some researchers and universities are much better able to commercialise their discoveries than others.
He has isolated two factors that shape this commercial landscape. One is the degree to which an academic team is interdisciplinary. The second is the presence of a star commercialiser.
‘Interestingly enough, it’s not the star academic that is correlated with commercialisation,’ says Hsu. ‘It’s the star commercialiser, those with substantial prior experience bringing products to market via start-up formation.’
Star commercialisers
It’s a pattern that Oxford Brookes has started to recognise. In the 13 years to 2020, it didn’t spin out any further innovations. So, instead of relying on one-off inspirations, it joined a pre-acceleration programme, ICURe, that seeks to take promising innovations from British universities across the valley of death by equipping researchers with the entrepreneurial skills to derisk their technologies, plan a start-up and make a convincing case to investors.
In 2018, a PhD spin-off from the University of Bristol, Ziylo, which had been on the ICURe programmes, was sold to Novo Nordisk for £632 million ($800 million). Its synthetic molecules promise to open up the next generation of treatments for diabetes by remaining latent in the bloodstream until triggered by a rise in glucose. For Novo Nordisk, the premium was justified by keeping its lead in treating the 380 million people who suffer from diabetes worldwide.
It’s a headline deal, of course, although over the last ten years ICURe has coached 3000 researchers, leading to 320 spin-offs that have so far raised investment of £600 million. So how do they go about helping researchers to test and validate their innovations?
First, they have to apply. Then they will join a boot camp with their cohort to learn about how business thinks and how they can express the value they offer, not just to investors, but to everyone in the industry. They’ll be making a lot of assumptions by now, so they are given £35,000 over three months to test their value propositions to explore how the real world responds to their innovations.
During this process, they are mentored in a team of four: an entrepreneurial lead, a business advisor, a principal investigator and a tech transfer professional. After checking their value proposition with the market, they then present to a panel that will give them one of three recommendations: create a spin-off, offer a licence or do some more follow-up work. They might not become as much of a commercial star as Ziylo, whose academic founders are now continuing their research in a new spin-off, but they will be significantly closer to translating their research into use.
IP rights
Depending on the outcome from the panel, postgrad commercialisers may well find themselves in discussions with their universities about the equity in a potential spin-off. At the top level, a vigorous debate has now started about what a share a university should expect.
Historically, the benchmark was 50 percent, based on the classical assumption that the university had taken the lead in derisking the technology. In practice, many investors are deterred by the size of such a stake, so 30 percent might be more usual, as it is only the start of a long commercial process.
A recent report by British university leaders is now even making the case for between 10 and 25 percent for IP-rich ventures and 10 percent for less intensive ones. In some of the major universities in the US, the trend now is toward taking 5 percent in non-dilutable shares.
In a deal as gamechanging as for Oxford Brookes, the process is often more creative and fluid. Even if the patents in its platform technologies have now expired, it is still being paid a royalty for its know-how. It will only lapse when an alternative technology is taken through the whole process of testing and approval. Instead of narrowly defining its IP as a fixed asset, it relied instead on becoming a commercial star, a policy which will continue to benefit the university for many years to come.
• 'Crossing Tech's Valley of Death', an article by Ed Cole ,first appeared in Managing Intellectual Property Today, 2025 edition, published by Novaro, ISBN: 978-1-0685644-1-3. See here for further details.
