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SPIE Professional July 2006

Charting New Terrain

University of Strathclyde's Brian Culshaw explores the notion of the academic entrepreneur.

By Brian Culshaw

The somewhat abstract concept that academics should "take their ideas to market" has been with us for a very long time. Historically, though, mutterings in the common room have disparaged the (usually) senior academic trotting the world to his planning consultancies in Tokyo, London, Cape Town, and New York. How can such philandering possibly benefit the academic credibility of our august institution? Indeed, why are such miscreants never discreetly asked to resign from their positions?
Similar gossip survives to this day. However, in the UK at least, the encouragement to do the deed as well as publish the paper has never been stronger. Universities gain local credibility through reporting that members of their staff have successfully made this or that high-technology concept into a marketable product. The university "contracts office" has evolved from a quirky curiosity into a (usually) professional support body linking academia to sources of finance and industrial exploitation opportunities.

Institutional philosophy may have changed but the academics themselves retain many of their stereotypical attributes: dreamy and unmanageable -- herding cats is the phrase often used -- they are anathema to conventional business. Spin-offs, indeed the whole SME (small- and medium-sized enterprise) culture, though, shouldn't be confused with the conventional business infrastructure embraced by the corporate multinational.

A Different Breed
Why should academics get involved with industry? The vast majority enjoy tenure; the prospects of a reasonably secure pension; the freedom within very broad limits to do as they please especially in the research context; and an idealistic, genteel lifestyle, intruded upon only by the frenetic excesses of research assessment exercises and quality assurance agencies. The motivation then is certainly not basic survival. Neither is it the desire to accumulate a fortune. Academics are notoriously disinterested in large sums of cash, provided of course that the wine cellar is well stocked.
Engineering academics, though, are a somewhat different breed -- scientists who when young tinkered with construction sets and so like to see ideas turned into reality. After all, in academia the definition of reality is the published paper. The grown-up construction kid often wishes to see more.
I, personally, started all this to see things happen. We would find things out in the lab, publish the paper, and be left with this lingering thought that really this might be useful somewhere.
Taking this precious thought to the corporate multinational is almost certainly doomed to failure. The staid corporate servants will convincingly argue that they have already had a magical product on the market for the last 15 years doing exactly what you claim your nebulous thought might be able to do. Though we did discover that the users of this magical product may well beg to differ.
In time, the inevitable conclusion is the only way to push your baby is to push the pram yourself. Consequently, the thought of a company vehicle through which to make things happen eventually consolidates into some form or other of actual entity.
There are other motivations as well, though these tend to appear in hindsight. The spin-off can, and often does, offer a different type of opportunity for the right type of emerging graduate student and that in itself can be exciting and rewarding. Furthermore, the direct experience of actually making things happen is splendidly effective at bringing the dreamy and unmanageable academic rapidly down to earth. The apparently simple step of putting the lab demonstration into a box and shipping it out of the door raises a whole raft of absolutely essential and frequently very demanding technical issues which are all too rapidly trivialized by those who have but observed the process from afar.
Birth of a Spin-off
In the late 1980s a few of us at Strathclyde, in collaboration with a local company and our regional development agency, set up Gallex with essentially these ends in view. We got investment, hired a managing director, and took management advice (after all, we are academics and don't know how to manage). Two years later, Gallex was bankrupt. In the UK there is a government enquiry into corporate bankruptcies. The result was that our professional managing director was banned from being a company director for several years. For us, the trouble with Gallex was that it never felt right. But the experience of bankruptcy is frowned upon in European cultures far more than the U.S. Lots of musing later and along came the conclusion that we should trust our instincts. Perhaps intuition is really quite a good thing after all.
We regrouped, and early in 1994, two of the academics from the original Gallex team, another academic from a neighboring university, and the former chairman of a company with whom we at Strathclyde had done some successful technology transfer, got together and out came OptoSci Limited. OptoSci was founded with the same objective, namely to take things from the lab into reality.
We had by this time learnt that there are two basic models for a spin-off company. The first is to take an initial modest investment, including that from the founders, and earn your keep. Remember too that in Europe there is no equivalent of the rather splendid U.S.-based SBIR scheme (that is, the Small Business Innovation Research program). This simply contravenes the EU equivalent of anti-trust legislation, so earning and simultaneously developing new products within an SME presents a challenge.
Of course this challenge can be met by persuading the venture capitalists or possibly the business angels (many of whom respond to the name "Lucifer") into the fold. This gives up control, though, and intuitively -- based on the Gallex experience -- control of one's own destiny is, at least in the early stages, a critical prerequisite. Consequently we went for the modest investment-and-earn model for OptoSci. A direct result of this is that growth is probably more modest but total collapse is less likely.
The key to earning your keep is a readily developed, at reasonable cost, easily marketed product which can earn sufficient profit to be able to plough useful amounts with matching government funding into development programs. In our case we opted initially toward laboratory instrumentation for the undergraduate teaching market. OptoSci's resulting range of photonic educator kits is unique in addressing highly technical concepts within a reasonable cost envelope, with the benefit of both excellent supporting documentation and significant student exposure prior to market release.
Additionally, the founders are predominantly academics, so they know how academics tick and how the funding cycles in academic institutions work so that we can time offers to potential customers with the tantalizing prospect of money to spend. This, we later learned, is called "marketing." Of course the market is limited and also needs very much to be multinational to become viable. We then had to learn about foreign agents, letters of credits, and the whims of exchange rates.
The model has served us well, and in effect, the education market has helped us to provide matching funding for government initiatives, targeting more speculative product. In particular we have begun to address gas sensing using fiber-optic systems and have now installed systems, some of which have been operating for several years, in very challenging environments, particularly for the detection and accurate measurement of methane gas concentrations.
We have continued along the modest investment and earn model, though, despite the temptations at the beginning of the millennium when photonic technology was the venture capitalist's ideal. Thankfully we resisted the temptation and have survived. The model has its frustrations, however, of which the demands on company staff are undoubtedly the greatest. The need to survive is paramount. This is true of any company, large or small, so longer term prospects often incur frustrating delays. We do retain that ever-precious control, and with the company being consistently profitable for several years, we strengthen our position should investment be required in the future.
What of the future? Educational equipment is a stable product and has been augmented in recent years by a range of instrumentation products and OEM units. The large systems for safety monitoring initially focusing on methane appear particularly promising and we are currently working on expanding the market address. However, we really don't know how things will actually turn out, so flexibility and agility coupled to sound, even parsimonious financial control and carefully considered forecasting, are always on the agenda.
Lessons Learnt
And what have we learnt? Taking ideas from the academic paper to a real product has far more to it than we at first thought. In particular we found the need to devote far more effort to persuading people to buy our product than we did to developing it. The illusion that "it is technically excellent" so it would sell itself soon vaporized. For many high-technology companies, certification of product (administration and form filling -- another anathema to academics) is absolutely essential, and the whole issue of putting the idea into the right kind of box which survives in the right kind of environment, under demanding conditions, is extremely important. The glue that holds together that critical assembly is probably the most closely guarded secret of the entire process.
People too are critical. The SME community is small. Everyone interacts daily. Staff motivation and staff selection are therefore vital elements. Thus far we have largely employed people whom we have known, either personally or through reliable reputation. There is a need for the more nebulous benefits too. Share options for key staff (even though we may never sell the company) give an essential sense of belonging. Most of all, though, all concerned need to trust these nebulous feelings and instincts and have faith in intuitive reactions. We may need to justify logically later, but if it doesn't feel right, don't do it till it does. The SME, though, can very productively employ eccentrics and unusual characters, making the best of technical excellence and working with the non-conformism. Paradoxically perhaps the SME can have overtones of the academic environment which often stimulate it, so perhaps it isn't so alien after all.
Instinct and Persistence
None of us involved with OptoSci has made a fortune and it is unlikely that we will. Would we go through the same exercise again? I am sure the answer would be most definitely in the affirmative. Indeed, in my own case, a little while ago Solus Sensors appeared, this time based in Wales and so hardly a campus company. But again this is targeted at taking a particular sensing system, well proven in the laboratory, and turning it into a useful product. We have already done some preliminary assessments in collaboration with a potential customer. I have no doubt the story will continue.
So is the academic entrepreneur an oxymoron? We know for sure that our business has survived over a decade, in itself a tangible measure of success. We have had the satisfaction of really turning our eccentric research into quality product. We have learnt of the intangibles which never appear in the books, courses, and consultants' reports. We have valued, and will continue to value, the immense contribution from energetic, capable, and dedicated staff.
Perhaps most of all, we've learnt that instinct and persistence is a powerful combination. All the academics involved would, I'm sure, repeat the exercise with the added benefit of a more mature judgment on the process. And, we also know that our institutions perceive sufficient value in such initiatives to be willing partners.

University Ups and Downs
Naturally, there are tensions at university-often the academic employer and the spin-off company can pull in opposite directions. At one extreme, in my Head of Department Era, one senior member of staff announced his successful acquisition of venture capital funding and that, by the way, he would be leaving in two weeks on an extended leave of absence. Incidentally it was all fine since the university centrally had approved this, but for commercial confidentiality reasons the department couldn't be informed. But it was then up to the department to sort out all the teaching, administration, and research duties associated with this particular staff member. No further comment needed!
Spin-offs often intrude in other ways. Yes, unfortunately, there are cases where the spin-off dominates and departmental resentment festers. Fortunately, though, such cases are relatively rare since academics have learnt the dangers.
There are benefits too. OptoSci has supported graduate students, loaned equipment, indeed even built the occasional special piece of kit at cost or less. The academic staff concerned have gained immensely in experience and bring an authority to undergraduate teaching and research which cannot be achieved through other routes. When a university spin-off is handled carefully, these and other benefits far outweigh the frustrations.

Brian Culshaw
Brian Culshaw is a professor in the Optoelectronic Sensors and Systems Group at the University of Strathclyde in Glasgow, UK. In 1994 Culshaw and university colleagues created the spin-off OptoSci Ltd., which produces optoelectronic systems, components, and instrumentation for education, research, industrial, and environmental markets. An SPIE Fellow, Culshaw is very active with the Society and will be the SPIE President in 2007. He is also a member of the Institution of Electrical Engineers (IEE), the Institute of Electrical and Electronics Engineers (IEEE), and the Optical Society of America. In addition, Culshaw is an editor of an upcoming book from SPIE Press on the high-tech entrepreneur due out in 2007.

DOI: 10.1117/2.4200607.07