In 2000, a number of researchers set up a small business that makes vaccines with a cell that had been removed from an aborted fetus ten years earlier. It is smart science, innovative, applicable. And profitable. In 2011 the Utrecht company, Crucell, is taken over for billions by pharmaceutical giant Johnson & Johnson. The directors of the company, once boring scientists, are suddenly filthy rich.
Crucell is a so-called spin-off: a company that is founded by researchers or students and that uses scientific knowledge acquired at the university. Since the establishment of Crucell, scientists are increasingly exchanging the lab coat for the tailor-made suit. All Dutch universities together have about 2,100 spin-offs, of which 600 have been established in the last five years. These include spin-offs such as Crucell that market knowledge of the university, but also companies without a direct link with science, such as Thuisbezorgd.nl. A small fifty thousand people are currently working on special high-tech campuses, where many spin-offs are established. A complete economy around spin-offs has emerged.
The spin-off trend came from America about 25 years ago. That is what universities are looking for by bringing science directly to the market through companies. The promise of spin-offs is beautiful: it yields money and at the same time academic knowledge is practically applied. It is no coincidence that the government set aside more than 60 million euros in 2010 for supporting spin-offs. The aim was to stimulate the ‘third core task’ (after education and research) of universities: the application of science in society.
In Crucell Rebels, journalist Mark Blaisse describes the story of the spin-off in smells and colors. It is about expensive cars, evenings full of drinks and excessive sweets. Does the life of a spin-off entrepreneur really look like this? Does it actually yield so much money and are they all such success stories? How do you bring the establishment of a company that brings new science to the market a good end? De Volkskrant consulted experts and universities, spoke successful (and less successful) entrepreneurs and put the four main lessons that 25 years of spin-offs have taught us in a row.
1. Do not make a scientist a ceo
In a corner in the lab of the liquid crystal department at Eindhoven University of Technology, there are devices with a sticker. ‘FreshStrips’ is written on it. ‘We print our labels’, Koen Nickmans (29) points to one of the devices. ‘And with this device we push the labels in until they are in the right starting phase.’
The young Fleming Nickmans is a prototype spin-offman: half scientist, half entrepreneur. His newly founded company, FreshStrips, develops labels of liquid crystals that discolor under the influence of heat. The labels are potentially interesting for manufacturers of packaging: you can check whether a product has been exposed to heat for too long and is possibly spoiled.
Nickmans received his PhD at Eindhoven University of Technology last year. Little changed in his daily environment, because the university provided him with an office in his old lab. Nickmans: ‘In the lab I work on technology, but I often sit here at my desk to convert the acquired knowledge into patents. They must be very strong. ”
Nickmans patent writing serves an important purpose: to find investors. Before Fresh Strips can sell labels, waiting years of development and someone has to pay that. ‘At the moment, the patents of our technology are the only thing that gives our company value,’ says Nickmans.
It sounds nice, as a scientist make money with your invention. However, no matter how much potential your discovery has, doing business requires much more than just a clever idea. And then it turns out: scientists are often not such good entrepreneurs themselves. If there is one golden tip for enterprising researchers, it is that they do not have to do business themselves. It is now standard procedure to look for external spin-offs for new spin-offs, according to a survey among universities. These CEOs do not need to have knowledge of the technology, but are good at pursuing commercial objectives. The involved scientist himself is then often Chief Technology Officer, Chief Science Officer, or head of a technical department.
Sven De Cleyn is manager of the Flemish accelerator imec.istart and has been researching almost two hundred European academic spin-offs as a PhD student at the University of Antwerp. He often saw enterprising researchers who held the reins themselves. ‘I call it engineer syndrome: the scientist who continues to tinker with his product until 110 percent is perfect,’ says De Cleyn. “While 80 percent had been good too.” Nickmans laughs at the question whether he recognizes this. ‘Sometimes I want to experiment too much, yes. Sending sample copies of our labels feels a bit like giving away a part of yourself, from the research you’ve been working on for so long. Then you are inclined to make it even more perfect. We could work on the perfect product for another twenty years. ‘
Fortunately, Nickmans has a CEO who occasionally calls him to order, an old friend who takes care of the commercial part. It was partly thanks to his work that Fresh Strips managed to tap funds from a chemical company, and can move ahead in the coming years. ‘Without involving an external CEO at the start, I would never have gotten this far’, says Nickmans.
2. Do not do it for the money
Nickmans hopes to grow in the coming years until his company reaches the finish line: a lucrative acquisition by a large group. The directors of Crucell raised millions when their company was sold. But they were not the only saliva buyers. Utrecht University and UMC Utrecht owned six hundred thousand shares of the company from the founding of Crucell. The stock exchange of Crucell, in 2000, gave both institutions 25 million.
That is not wrong. Spin-offs are not only a useful application of knowledge, but also a possible source of income. They know that at the universities themselves. In April of this year, Dutch universities published a guideline together. This contains instructions on how the shares of a spin-off can be divided between the founding researcher and the university. For example, Eindhoven University of Technology allows Nickmans to use the laboratory where he did his doctoral research. For such services, such as a start-up loan or the granting of patents, a university may, among other things, reclaim shares in the company.
For universities that pot with money is not that important at all, according to a survey. ‘The primary goal of spin-offs for TU Delft is to create new, innovative activities and not profit maximization on equities,’ says a spokesman for Eindhoven University of Technology. The same goes for a spokesperson for TU Delft: ‘You do not have to invest in spin-offs to get big money.’
Would it? The claims made by the spokespersons correspond to what appears from annual reports from universities. The result from participating interests does not yield substantial amounts at any university. The University of Twente, which is most active in the spin-off area in the Netherlands, earned eight tons of participations in 2017. That is nothing compared to the approximately 300 million universities that receive government grants on an average annual basis.
Nils Beers, chairman of start-up foundation Startup Delta, agrees that this is not about money. Beers: ‘What is more important now: making a profit or using scientific knowledge? You can research a lot as a university, but if nobody goes to work, you have nothing to do with it. ‘ In the end, making a profit is not useful, says Beers. Even the American MIT, the university that is most successful worldwide with spin-offs, accounts for only 5 percent of its budget here.
As far as Beers is concerned, even the full revenue model of spin-offs should be allowed. For example, the custom of universities to protect their knowledge through patents. Beers: ‘Now you see that spin-offs get started with a patent and eventually are bought by a multinational. Then as a society you still have little to do with it, and the profit for the university is minimal. Just make your knowledge public, then anyone can get started. ”
3. Do not be blind on the next Google
The main function of spin-offs is not to win the financial jackpot, but to apply science in society. But if you can not look at profit, how do you determine whether a spin-off is successful?
An example of success: two Stanford PhD students thought they could make money in 1996 from a research project. On the server of the university they started a website that sorted web pages based on the number of links to the page. The site ‘google.stanford.edu’ would later come up on its own feet and write history.
Google is of course a rather extreme example, but also in the Netherlands some spin-offs fared well. Nils Beers lists some successes: Epyon, which is developing charging stations for electric cars from TU Delft, was taken over by multinational ABB. Ampelmann, also from TU Delft, which builds high-tech walkways for work at sea, was the first Dutch spin-off that took over a competitor, probably for many millions. Crucell was also exceptionally successful.
But: ‘It is really only a very small percentage that will become so successful’, says Beers. Most spin-offs are completely different.
Lumicks sells laser instruments to research groups and pharmaceutical companies all over the world. ‘With the laser you can, as it were, grasp molecules’, co-founder and biophysicist Gijs Wuite (VU) explains. ‘For example, you can study human DNA on the molecule.’ As a researcher, Wuite received applications from all over the world to use his equipment. ‘Then a PhD student came up with an idea: why not start a company to sell the devices?’ Five years later, Lumicks employs fifty people. The company is doing well. Even without becoming a globally known multinational such as Google, Lumicks fulfills an important role in biotechnology.
On average, according to a study by Buck Consultants, spin-offs employ thirteen people. ‘It just depends on how you define success,’ says Beers. ‘If you employ five or ten people, is it a success? Or only when you become the next Google? Small businesses also have a certain use. ‘ You can also see that in the figures: most spin-offs remain small, but do not go bankrupt. No less than 80 percent will remain. In young companies, that percentage is normally much lower: between 40 and 60 percent.
4. Be honest about your planning
Will it never go wrong? Success stories like those of Crucell conceal that business is ultimately a risky business. Especially if you, as the founders of Crucell did, paint too rosy pictures with investors to pick up money. Investors often want to see fast results. That is often at odds with the nature of spin-offs, which bring new technology to the market that requires longer development time.
When Steven Staal graduated in 2004 as an electrical engineer at the University of Twente, he already knew that he wanted to become an entrepreneur. He founded Medimate with a companion. The company developed devices for manic-depressive patients with which they can measure their blood values at home.
There was only one problem: the product that Medimate wanted to sell did not exist at all. ‘We already knew it would be a very long process’, says Staal in the year 2018 on the phone. ‘Certainly in the medical industry it takes years before a product meets all safety requirements. And then you also have to conquer a market that does not know this type of product at all. ‘
Staal and his partner went city and country in search of subsidies and investors. Each time they kept a ‘too optimistic’ story, as Staal puts it – if they would call the real development time, no investor would be interested. And the money came in little by little. Staal’s partner was able to cancel his job. The Medimate would become reality step by step.
In 2014, Medimate went straight to the market when the patience with the main investor was gone. Trust in the management was canceled. Medimate went bankrupt.
It is a recognizable story for researcher De Cleyn. A common mistake, according to his research, is to venture into the sea with venture capitalists too early. ‘They are looking for fast results, often within five years. These are usually too short terms for a spin-off ‘, says De Cleyn. Spin-offs often provide something innovative, a product that nobody knows. That is complicated for several reasons. Safety rules must be met and customers must get to know the product. Finding an investor who has an eye for the long development process is then necessary. ‘Or you wait a little longer with the market,’ says De Cleyn. ‘It can sometimes pay off to plan your product for a bit longer at the university. You can often better market a second product than the first: people are already used to it. ‘
With Medimate it still went well. After the bankruptcy, a new start was made with a new investor who has an eye for the long term, says Staal. The first Medimates now enter the market. There is hope again. Staal: ‘Around 2021 I hope that we will finally become profitable.’