Mapping Start-ups

I was reading Electronics Weekly last week, as you do, and noticed their ‘start-up map’. Listing all the young electronic businesses across the UK, it was really interesting to look at their geographical spread.

I’m afraid the Yorkshire region doesn’t exactly look like a hot bed of emerging technology within this sub-sector of technology. In total 5 companies were based within the boundaries of Yorkshire. Although I didn’t find this particularly surprising what did astound me were the numbers of companies coming out of the South East. 24 businesses were listed under Cambridge alone. No wonder we have difficultly persuading VCs to travel ‘up north’ - they have exciting investment prospects on their doorstep, and plenty of them.

That said, I know that the majority of companies that access Connect Yorkshire’s services have an IT base. Yorkshire definitely has greater activity within other sub-sectors of the technology industry, particularly within the digital and creative areas. Looking at the number of start-ups in the electronics sector in isolation is therefore not a true reflection of Yorkshire’s high tech talent. Our last Investment Forum in November proved that high quality deals in a sizable number are there for the taking.

For me what the map highlights is the power of transcending traditional regional boundaries particularly when attracting big spenders from the south. The North East had 4 businesses listed whilst the Manchester area had 6. If this start-up activity were pooled with Yorkshire’s 5 businesses then the pulling power of the north would be greater. Perhaps then it would be easier to convince a VC the train journey was worth the time and expense!

YORKSHIRE’S TECHNOLOGY SECTOR 2020

Technology has been a buzz word in Yorkshire’s economic strategy for a number of years now. Technology is seen as an industry that has the potential to revitalise sub-regional economies, following the withdrawal of traditional industries. However despite all of this hype Yorkshire and Humber is still ranked eighth in a table of the most innovative regions in the UK.

So, how will the next 14 years shape up for the technology sector? I would argue that it depends largely on a change in culture among both our students at schools and universities and in business.

Creating the entrepreneurial attitude takes a lot of change. When you get right down to it, the attitudes of the young come from their role models, parents and teachers. We need to encourage our schools to celebrate British business success, and create a different attitude towards entrepreneurship.

A great example of a different attitude is America’s approach to business failure; I understand that in the US venture capitalists don’t like investing in you unless you’ve had at least one business failure. Here they turn up their nose at anyone whose company has gone onto insolvency. The Americans like those who have had the hard experience of trouble and the bottle to try again.

At Connect Yorkshire we prime technology companies for investment and growth. Every year about 40-50 technology companies attend our various programmes. The vast majority of these have been started by people who have been working in an industry for 10 or more years. They see a gap in the market, or a new development not being exploited by their employer, and try to build a technology business to fill that gap. Contrary to popular belief, the majority of new technology businesses do not come out of universities.

Universities by their very nature concentrate on academic research, and not on business creation. Research funding largely comes from the public sector, and is awarded purely on the quality of research – as judged by other academics, not on how much a university has contributed to the regional or national economy.

The way to ensure a better research to innovation ratio is to increase the amount of research inspired by commercial needs. This is where funding from research–led businesses is invaluable.
At the heart of the issue is that while research and innovation – defined as the commercial exploitation of ideas - maybe symbiotic, they are not synonymous; research does not necessarily yield innovation.

Over the last 20-30 years we have had three major technology businesses in Yorkshire, Systime in the 80’s, and Pace and Filtronic have continuing success from the 90’s to today. Systime employees have gone on to found numerous IT businesses in their own right. A few more success stories on this scale will give the technology sector in 2020 a significant boost.

Local medical device companies harbour a huge wealth of talented scientists; individuals experienced in product development, regulatory and advanced manufacturing. Johnson and Johnson Wound Management in Gargrave, Smith and Nephew in York and Hull and Depuy in Leeds are huge international companies with a strong footing in the region. Could it be by 2020, Yorkshire is considered the hub of Britain’s medical device industry?

It’s a strong possibility and emerging companies such as Cell Tran, Ullsys, and Avanticare prove with the correct support anything is possible. Success breeds success and if Yorkshire is perceived as a centre of medical device excellence the battle of attracting and then retaining key individuals to the region will be a lot easier. This will be helped by the activities of IP2IPO at Leeds and York Universities and Bio Fusion at Sheffield University.

These White Rose universities have the ability to support a flourishing medical device industry as we head towards 2020. In addition, I believe there will be many more technology businesses coming out of the students from Sheffield Hallam, Leeds Met, Hull, Bradford and the other non White Rose universities.

Brains must earn a crust too

We produce some of the best research academics in the world, yet their knowledge is locked away within the hallowed halls of academia.

The UK economy would benefit hugely from the innovation and technology which universities produce, but despite noises from central government about business and academia working together, the vast majority of academic revenue remains untapped.

Yorkshire has 12 higher education establishments - some with world class research and teaching credentials. Almost 80 per cent of the departments at the University of York, for example, were given 5 or 5* ratings fro research, meaning research was of international importance. Three of our universities are within the top 30 in the UK.

Why then is the Yorkshire and Humber region languishing in 8th place for innovation in the UK? Only the North East, Northern Ireland and Wales fare worse.

The answer is that the mindset behind attributing and recognising academic excellence is wrong. Currently the Research Assessment Review is carried out every four to five years. The process involves a panel of 685 people reviewing almost a quarter of a million pieces of research from 56,000 academics.

On the back of this huge bureaucratic exercise approximately £1 billion of research funding is allocated to UK universities. Incredibly nowhere is a university’s contribution to business or the economy mentioned.

In 2002 the government’s Investing in Innovation report stated that: “In an increasingly knowledge-driven global economy invention and innovation are critical to Britain’s long-term competitiveness. This requires a virtuous circle of innovation: from the very best research in science, engineering and technology in universities and science labs to the successful exploitation of new ideas, new science and new technologies by businesses.”

Currently the allocation of research grants appears to miss half of this “virtuous circle”. Yes, it assesses the quality of research, but it takes no account of “successful exploitation”.

In common with other sectors, higher education is subjected to league tables which institutions desperately try to climb. Research ratings play an important part along with other factors such as teaching quality assessment and entry standards.

However if we look at how university’s are ranked by employers the results are strikingly different from the usual research/teaching quality league tables published in five of the national broadsheets – the Daily Telegraph, Financial Times, The Times, and the Sunday Times.

For example the University of York is ranked from second (in the Daily Telegraph) to eighth (in the Financial Times). However when surveyed by 200 firms which regularly recruit graduates York’s ranking slips to twenty-ninth.By contrast, Leeds University is ranked between twenty–second (in the Telegraph) and thirty-fifth (in the Times); when it comes employers Leeds is ranked ninth in the UK.

Of course within Yorkshire there have been significant, if not fundamental, steps towards improving the situation. Three of our university’s have organisations which carry out a commercialisation function. Leeds University works with Techtran and IP2IPO. Sheffield University has two organisations - SUEL (Sheffield University Enterprises Ltd) and Bio Fusion, which is tasked with commercialising the IP output from the Biology and Chemistry departments. York, which is relatively new to the technology transfer game, has employed business development officers to help with its commercialisation activity.

SUEL has spun out 40 companies and created 60 external jobs. Techtran has also had its share of success with high profile spinouts including Syntopix and Potopharmacia under its belt. In York the Science City partnership between the university and the city council has created 60 companies and 2,600 jobs in the wider science and technology sector.

Other organisations such as Connect Yorkshire are also playing their part in helping young technology companies grow and become successful businesses contributing to the regional and national economies.

There have been some spectacular successes. BioFusion, spun out of Sheffield University, floated on AIM and raised £8.2 million. Bradford Particle Design, started by Dr Gwyn Humphreys of Bradford University in 1995 was acquired by Inhale Therapeutic Systems for £137m. Molecular Skincare, founded by Dr Simon Ward of Sheffield University, was brought by York Pharma for around £5.5 million.

These are fantastic achievements, but they are achieved despite the pervading culture of academic institutions and not because of it. To fulfil our national and regional potential we need fundamental changes in how we evaluate our universities. We must not be squeamish - the rest of the UK runs on capitalist money making principals and we cannot afford for our top brains not to.