Here’s what I mean

Nick White over at the LinkedIn SpinOut group points to a story put out by the University of Edinburgh. According to a summary by Richard Wachman in The Guardian, the University claims 40 start ups in a year, raising £3m in start up financing. A new record for Scottish universities. That’s 131 start ups in 5 years, employing 300 folks. Well, it’s all very good as numbers go, but there’s no way to tell what is going on from the report, and anyone writing it would *know that*. What is their purpose? What are we supposed to do with the numbers?

Averages in this business mean next to nothing. 40 starts at £3m means about £75,000 a start up. Chump change. Where is that investment coming from? Government sources? Private investors? The pockets of the principals? Even still, that’s just an average and there’s no reason to expect everyone got a check and were sent on their way. More likely: a few got modest investment, some few more got angel investment or seed funds, and a bunch are just sitting there, hopeful.

It’s pretty direct to incorporate a company and drop IP into it. That’s a clever thing. At that point it may also be easy to hire someone to manage it, working part time, or perhaps for equity only. Often that’s a grad student or an inventor or an inventor’s business buddy friend. What one has done is change the framework under which research IP is managed. Shifting it from a university office to a company structure can be a very good thing. But it also can mean that 40 of the top research results from the university are now exclusive with companies that have next to nothing by way of resources. I’ve seen university spin outs fail because they went out too early and lost their research footing before they had investment lined up.

So it’s a step to incorporate, but it’s not the same thing as having companies with operations, with product, selling and servicing in the local economy. What we want to see is how those companies are doing, what they are drawing from available local resources, and what they are contributing back. That’s what makes companies worth having around, their going-concernedness.

The press report doesn’t get into this. It’s a success. Yes, we can see that. We can even nod with appreciation at the effort to do this. But it’s also a misleading report because it doesn’t provide the data for the structure of the claim. How much has it cost the university to start these 40 companies? What’s the operating expense for ERI, the patenting expense, the uncollected debt on the books? Show us the total pay of the 300 employees for those 131 companies–3 per company, but averages don’t mean anything There could be 100 employees in one company, 50 in another, 20 in a third, 10 in a fourth, and one or occasionally two each in 107 others.

In that case, that 85% are still in business would suggest that there’s maybe a pile of living dead companies with rusting technologies that used to be shiny in the lab. The success would be carried by three or four companies over five years. Still, that might be a real success. Better to try than not. And putting it that way might be better than to create the idea that 100+ other companies are lined up to do the same thing, when that perhaps is not likely.

Potential can be a scam. That’s why securities laws put some sharp demands on forward looking statements. It can’t be all fluff and spin if investors are going to have a sense of the risks and benefits. And the taxpayers are being treated as investors. No question there. That’s a purpose of the report. To make sure the public supports the government that supports the university that has done its job and pumped out 40 new companies. It’s just that we can’t tell from the report if this means anything yet. It’s a record, spewing companies like rainfall. It is surely a kind of productivity. I’d be proud to be part of that team.

But what is actually going on? Should taxpayers want to invest? Should they be impressed? Should they say to themselves, well that’s working well, pay it no attention when funding gets tight? Or do they think perhaps they aren’t getting the whole story, or even essential parts of it? Where’s the critical element of the press to ask what all the spin really means? Are the companies filling up available commercial space? Are they revitalizing a district and its shops? Are they paper things, golems, that don’t have any meaningful footprint yet?

Time will tell. But reporting from university press offices and tech transfer shops and development/advancement groups won’t be where we find out what’s going on. These folks cannot be candid or complete. It is not in their DNA. They’d get sacked in a moment if they did. A shame, really. Given this, it would sure help if the business press and the education press would make some investigative effort to verify and put context around these stories. Not to be a naive pass-through, or all rah-rah, or viscerally critical, but to get to what an informed public really needs to know about its investment in these activities. That’s what we need to know in all this, before everyone gets all wrapped up in metrics.

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