This week, The THES joins forces with the Royal Institution to host 'Making Money from Ideas'. Here, panel chairmen David Thomas, David Auckland and John Ashworth discuss some key issues affecting the commercialising of university research

When a university research project appears to be producing results with commercial potential, what is needed to make sure this potential is fully realised?

The short answer is good management and adequate funding. If the university has its own technology-transfer unit, this is an obvious source of management advice. However, if the university lacks such a unit, a commercial technology transfer company should be contacted.

Technology transfer is a profession in its own right, with its practitioners - ideally ex-researchers - being well versed in patenting and licensing and in launching spin-off companies. Collaboration between an academic with innovative ideas and a technology-transfer executive with business skills is essential for successful commercial exploitation.

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Normally, the first consideration will be whether the intellectual property underlying the academic's ideas can be protected. Patenting may be the answer - unless the innovation has already been published. Since the university will own the patent, it is reasonable to expect it to pay the patent application costs.

The next step is to explore routes of exploitation. Should it be by exclusive licensing to a single company, or by non-exclusive licensing to a number of companies? Is outright sale a possibility or is the launch of a spin-off company an attractive proposition?

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Licensing should certainly be investigated, but in many cases the technology will be at such an early stage that further research must be undertaken before a definite commercial prospect can be established. Nevertheless, a company may be willing to finance this research in exchange for an option on an exclusive licence pending the results. Of course, placing a monetary value on underlying intellectual property is never easy - it is worth what it can be sold for - so shop around.

While the university's own technology-transfer company may have funds to support development, an alternative is to seek venture capital for a start-up company - but only if the academic is prepared to make a substantial commitment to the project.

A well-written business plan is essential. While the academic and the technology-transfer executive will be deeply involved in its preparation, other inputs in marketing and accounting may well be required. Potential investors will need to feel that the plan is realistic. Most importantly, they will wish to be assured that the company will be managed efficiently. It is commonly said in venture-capital circles that a project with second-rate science and first-rate management is a better investment prospect than one with first-rate science and second-rate management.

The section of the plan dealing with management aspects should be well prepared, and should include a curriculum vitae of anyone already identified for a management or marketing role. It may be that one of the investors is prepared to take an active part in company management. It is easy to underestimate the amount of time and expertise involved in management, such as dealing with Companies House, the Inland Revenue, and company auditors and lawyers.

Most academics lack the knowledge, and indeed the time, to tackle such tasks. Better that the academics concentrate on the science, leaving management to other professionals employed by the company. Treating a start-up company as a DIY activity will seldom lead to success.

David Thomas is managing director of Synaptica Limited, a spin-off company from Oxford University.

CONSULT CAREFULLY BEFORE SPINNING OFF

Politicians and policy makers in London, Brussels and elsewhere have become convinced that newly created small firms could be as important a source of innovation, new technology and employment creation in Europe as they seem to be in the United States. To this end, the government has recently created the University Challenge Fund to encourage academics to consider setting up, or becoming involved with, such spin-off companies.

But even under the most supportive conditions, only a small minority of the staff of higher education institutions are going to be interested in, or capable of, such activities. I am worried that we might be raising unrealistic expectations among academics of the possibilities of commercial success and, among politicians, of the ability of HEIs to create jobs.

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It is at least as important to concentrate on the other ways in which academics can assist in the creation of employment and stimulate the innovative activities of existing businesses.

Most of these will fall under the general heading of "consultancy" and thus it is important for all HEIs to have proper arrangements designed to support the consultancy activities of their staff.

A lot of hard-won experience has been gained over the past 25 years about how various different arrangements work. It is essential to start from the recognition that consultancy activities are quite different in kind from the teaching, scholarship and research for which academics are trained. The normal management processes of HEIs, which are designed to support those pedagogic and scholarly activities, are quite unsuited to support consultancy activities.

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The best, and most usual, solution is for the HEI to set up a wholly-owned subsidiary in the form of a company limited by guarantee with its own professional management structure.

Academics should be represented on the boards of such companies as non-executive directors. The professional managers of the company will be responsible for negotiating and managing the consultancy contracts, while the marketing function will usually be shared. What the customer firm requires will need to be supplied to time, specification and cost - all somewhat problematic concepts in academe - and the academic must accept that what s/he will be asked to supply is not necessarily what s/he thinks is needed.

For a small firm that is hardly able to manage the technology it has, the adoption of an established, high-tech process can be threatening, and reassurance can be as important as novelty. There often needs to be an extensive period of trust building before a customer will rely on the university consultancy.

Success can be very satisfying. In much of the UK, the local university is the nearest major source of expertise in many fields. The profits made by the consultancy are a welcome addition to HEI revenues, and the contacts and goodwill generated among local businesses are an important long-term investment.

John Ashworth is chairman of the British Library.

DO NOT INCUBATE TO ACCUMULATE

The success of an economy is determined increasingly by the rate at which it converts new scientific knowledge into marketable products and services.

There is a belief that the optimum mechanism for achieving this is the small high-tech company owned and led by science-trained individuals, exploiting their expertise in areas that only they are equipped to identify and develop.

Founded on US experience, it has led to the process of business incubation that provides the entrepreneurially inclined with a supportive environment in which to develop business skills while initiating and growing companies.

Many of the most successful incubators are associated with universities. They are proving to be an efficient interface through which to transfer technology, to the point where incubation has become formally recognised in the US as a mechanism for stimulating economic growth. Hence the increasing interest in business incubation in Britain.

US studies show that successful incubators are run as efficient businesses with clearly defined income streams. But newly formed enterprises can rarely afford the support required to sustain them, so incubators cannot rely on their clients for income. Equity stakes are not a solution because they distort incubation and hinder further investment.

With these factors in mind, it is worth considering why a university should contemplate business incubation. If an institution sees it as a means of generating revenue then it should abandon all plans now. Incubation has to be viewed in more profound terms, as providing the basis for extending the academic curriculum to include entrepreneurial creativity. Having accepted incubation, an institution must complete the picture by integrating it into the academic framework. This may best be done by combining an incubator with a school of enterprise to form a centre for enterprise in which the incubator serves as a "laboratory", while the school caters for teaching, training and research in the creation and growth of innovative scientific enterprises.

Such a centre would provide a facility for people to develop their creative and entrepreneurial instincts, while simultaneously stimulating a long-term flow of projects for incubation. Through the school's research programmes, understanding of the processes needed to launch and sustain innovative high-tech companies would be advanced, helping to determine the changes required of business support and financial structures to maintain a high-tech small enterprise sector.

The amalgamation of incubation into a formal academic structure would ensure financial viability, increasing income streams through the addition of teaching and research, possibly supplemented by regional and national assistance aimed at fostering such enterprise. But most importantly, it would draw the universities into the mainstream of the economy.

David Auckland is professor of business creation at the University of Manchester.

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