Busting the myth of the start-up

Governments around the world are championing start-ups. From Brisbane to Bangalore to Bristol to Boston, efforts to create a start-up culture have been prioritised.

But starting up companies is often the easy part: the bigger challenge lies with scaling them up to grow into significant businesses. That means having the confidence, skills and resources to grow rapidly. Start-ups should become scale-ups rather than sell-outs.

Are we suffering from a start-up delusion? Too much focus on start-ups can serve as a distraction from scaling-up existing high potential firms.

So what is the best environment for successful scale-ups? As well as stimulating start-ups and creating spin-outs, universities can encourage their rapid and sustained growth through the provision of talent, access to space and facilities, and by building connections within their networks. This support matters because very few start-ups manage to grow and those that do are major sources of jobs growth, productivity improvements and enhanced innovation. Universities are especially important contributors to the growth of science-based companies in fields such as the life sciences, new materials and machine learning.

The economist Alfred Marshall recognised in 1890 that firms clustered to access skilled labour and specialised knowledge. Universities are part of this process by convening communities of knowledge exchange and encouraging their collective learning. This enlarges the total pool of ideas and innovation beyond the level that the members in aggregate can attain independently.

Cambridge in the UK has a vibrant ecosystem of over 1,500 high-tech firms. Reports consistently attribute the cluster’s success to an enduring sense of community built around the university, as well as powerful networking and support structures, such as the Cambridge Network, focusing on the ICT sector and One Nucleus for life sciences. These formal networks provide start-ups and large corporates with access to laboratories, technology, skills, office facilities, business expertise, venture capital and financial advice.

Companies such as ARM and Autonomy grew into multi-billion dollar businesses following their foundation at Cambridge University science and business parks. They scaled up amongst the community of technology companies, where the university supplies skilled graduates, access to world-leading research in its labs and provides a magnet for other technology companies that act as suppliers, customers and collaborators.

There is concern, however, that such companies are comparatively rare, and there is a great amount of interest in the problems of scale-up companies, defined as those growing annual turnover or employment at more than 20% over a three-year period. This has led in Britain to the creation of the Scale-Up Institute, designed to improve opportunities for such rapidly growing firms. There have been similar concerns in the USA, with particular unease about the capacity of financial markets to provide the backing needed for scale-up. This has led some to suggest that growth supported by capital needs to be rebalanced by growth backed by the provision of supportive spaces.[1] This is a key area where universities assist scale up firms in science-based sectors.

Abzena is a life sciences group offering biopharmaceutical services and technologies based on antibodies and other proteins. With its origins at Imperial College London, five smaller companies merged to create Abzena, including those created by scientists from two other universities. Abzena moved its headquarters from London to Cambridge in 2014 because of its need for space to grow. Along with a Cambridge landowner, Imperial College invested to provide Abzena with a new world-class science facility for its expansion, using the university’s own capital and its development expertise. The company presently works with academic groups and firms all over the world, including most of the top 20 biopharmaceutical companies.

Autolus is commercializing a new generation of engineered T-cell therapies for tumours. Founded by Martin Pule, a scientist at University College London (UCL), the spin-out was supported by UCL’s technology transfer organization. Its potential for growth attracted £30m from healthcare investment company Syncona. To prepare for scale-up the company chose to locate in specially refurbished facilities at Imperial College’s White City Campus in London, providing access to talent and space for expansion.

Universities assist companies such as Abzena and Autolus in a number of ways, reflecting their growing ambitions and novel strategies for working with business. Universities have been creating edge-of-town science parks to support the growth of technology businesses for decades. More recently, some have developed space where companies and academics can co-locate and develop new fast-growth companies, in urban innovation districts such as Kendall Square, Boston Mass.; Mission Bay, San Francisco; King’s Cross and White City in London and Tuspark in Beijing.

Universities in these and other cities are creating new campuses aimed at proactively building on their convening power and providing an environment and conditions where companies can thrive. Connections with academics and their spaces, facilities and scientific instruments provide opportunities for companies to build technological products and services or in some cases to better understand the science underlying their business. Universities commonly have their own expertise in intellectual property protection, or attract specialist legal firms capable of advising firms on how to protect their IP from infringement as they grow.

The primary contribution universities make, which helps companies overcome one of their major restraints on growth, is access to talent. Universities educate talented and skilled employees in science, technology, and a wide range of supporting disciplines, including strategy and innovation management. Rapidly growing companies need to learn to cope with changing demands and access the scientific, managerial and leadership skills required as organisations respond quickly to new opportunities.

Access to specialist scientific and technological skills is particularly valued if employees can work across disciplines and possess business and commercial perspectives. Working with universities offers proximity to an entrepreneurial community of people with skills in finance, marketing and operations, but also of people with experience of growth in the past. Leaders of rapidly growing science-based companies successfully straddle the worlds of business and science, and are comfortable in both the boardroom and the laboratory. Universities can furthermore assist in bringing greater diversity to the leadership of such companies, which are typically male dominated.

For start-ups to scale they commonly need to address different markets from the ones originally envisaged, and these are often international. Leading universities and academics have global links and as well as their scientific connections they can help provide access to international manufacturing, sales and distribution networks. Market recognition can also be assisted with the reputational effect of being associated with a major university. Successful scale-up commonly results from good strategies and business models, and universities with business schools with deep expertise in these matters can provide valuable sources of advice.

Rapidly growing science and technology-based firms are crucial for national competitiveness, productivity and employment. Widely recognized for their role in encouraging start-ups, universities also make important contributions in assisting scale-ups. The policy debate, which has for so long focussed on the creation of new firms, needs to rebalance towards the smaller number of start-ups and spin-outs that deliver the greatest economic and social benefit, and universities need to recognise and further develop the role they play in scaling-up businesses.

Notes

[1] William B. Bonvillian (2017), “Advanced Manufacturing: A New Policy Challenge”, Annals of Science and Technology Policy: Vol. 1, No. 1, pp 1–131. DOI: 10.1561/110.00000001.