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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
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
NASA
Q C
losin
g Va
lue
Slide 5
NASDAQ Close (1985 -2002)
1
10
100
1000
10000
Jun-
84
Jun-
85
Jun-
86
Jun-
87
Jun-
88
Jun-
89
Jun-
90
Jun-
91
Jun-
92
Jun-
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Jun-
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Jun-
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Jun-
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Jun-
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Jun-
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Jun-
99
Jun-
00
Jun-
01
Jun-
02
Jun-
03
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
NASD
AQ C
losin
g Va
lues
(Log
Sca
le)
Slide 6
US and EuropeVenture-backed Tech IPOs
0
20
40
60
80
100
120
140
160
180
200
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
Num
ber
of E
xits
Europe IPO
US IPO
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
0
300
600
900
1200
1500
1800
Source: BVCA
£m
Slide 9
Time to Exit (Deals)
0
2
4
6
8
10
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
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
Microsoft
IntelCompaq
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
01/3
0/87
07/3
1/87
01/2
9/88
07/2
9/88
01/3
1/89
07/3
1/89
01/3
1/90
07/3
1/90
01/3
1/91
07/3
1/91
01/3
1/92
07/3
1/92
01/2
9/93
07/3
0/93
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!