Having a stake in a Pounds 150 million firm might sound pretty appealing to the average academic, but the path to the successful spin-out can be strewn with obstacles. Martin Ince reports

Academics are paid to have ideas. Last week The THES, in collaboration with the Royal Institution and the Department of Trade and Industry, held a novel conference on ways of making the ideas pay.

Delegates to the Making Money from Ideas conference heard that there are several levels at which they can get involved. Science minister Lord Sainsbury (see right) said that the government wants more academics to start their own companies, and is looking at ways of making the process simpler.

Several speakers addressed the issue of start-up companies. But in another strand, others focused on the potential of providing consultancy services while remaining in full-time academia, a potentially lucrative option that might suit many individuals better.

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At one extreme, the rewards of a successful business start-up can be huge. Tim Cook, managing director of Isis Innovation, the Oxford University technology transfer company, said that one Oxford spin-out, Oxford Asymmetry, is now worth more than Pounds 150 million.

Cook said that spinning out a company has many advantages for universities. It can be very profitable; it allows know-how as well as formal patents to be valued; and it can be a career path for some academic staff. But it needs careful thought too. It can eat up time that could have been used for teaching and research; it can make research funders uneasy; and staff who are not involved in a spin-out can resent those who are.

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Most importantly, the university is not in complete control once a spin-out starts and must accept a long wait for uncertain returns. "Firms can go under," he said, "and when they do there is a risk to the institution's reputation." It is essential, therefore, that the head of the institution support such spin-out activities.

Cook also stressed a point made by many contributors to the day's proceedings - the need for commercial-academic activity to be run seriously. Academics lack time and skills to run businesses, and rarely realise in advance the amount of mundane work involved in managing a company. It is rare for them to know much about company law, and they can all too often risk losing their houses and other assets as a result of unintentional illegal trading.

Richard Jennings, director of industrial liaison at Cambridge University, emphasised the point by referring to Cambridge Display Technology, which aims to commercialise research into light-emitting plastics. The end result could be flat plastic TV screens. He said: "The umbrella patent for this technology was filed in April 1989 and ten years later there is no product on the market." Funders brought in along the way have ranged from the university and some Cambridge colleges to Cambridge phenomenon figure Hermann Hauser, internet guru Esther Dyson and members of rock band Genesis. The company has made numerous changes to its strategy. Under a new chief executive, who arrived in 1996, the aim now is to be a technology-transfer operation selling licences to other firms rather than a prime manufacturer in its own right.

He says that the firm has been lucky in its chairman, Lord Young, who has brought in substantial amounts of cash from property investors. Intel, the world's best-known chip-maker, also invested, which has meant both cash and credibility.

Jonathan Gee, chief executive of Imperial College Innovations, said that the skilled management needed for the long and complex process of commercialising innovation needs to be rewarded appropriately. Both the venture capitalists who fund the work and the academics who have the ideas can make significant sums, but the technology transfer specialists should also be rewarded. Among their tasks are finding out whether the inventor really owns the rights to the invention that are claimed - one minor consultancy contract carried out years earlier with an intellectual property clause in the small print can endanger everything.

He added that for the university and the academic, a vital part of the process is to determine the value of the inputs they are making. The earlier this is done, the better. Cook added that past and future effort has to be taken into account in a way that ensures everyone concerned is content that the rewards are reasonable.

David Auckland, professor of business innovation at the University of Manchester, placed the current enthusiasm for spin-outs in the wider context of the rise of the small firm. In the past, universities were geared to produce graduates for jobs in government or big firms, but in the future, more will work in small businesses. In the same way, small firms have become the natural mechanism for technology transfer.

Auckland said that university-based business incubators are one way of adding enterprise to research and teaching without damaging them, imitating the way medical schools and teaching hospitals work together to make use of new research.

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Ian Dalton, managing director of Edinburgh Technopole, an incubation organisation set up by the University of Edinburgh, stressed that universities do not produce technology. They do research. Even firms, he added, do not innovate unless they really have to, partly because new concepts have a high failure rate.

Dalton's own experience is that the spin-outs that work best are those where the academic does not go full-time but instead gets real managers to run the business properly. In his previous post at Heriot-Watt University, he was responsible for setting up technology-transfer institutes to commercialise research from different areas of the university's expertise, starting with computing and microelectronics. The emphasis, he said, is on having experts to identify market needs, not the classic spin-out approach of thinking how to commercialise something once it has been discovered.

Despite this, the transfer institutes generate a new firm every 18 months on average and he is sure that it is preferable to the science park route as an approach to helping spin-out firms grow.

Having a stake in a Pounds 150 million firm might sound attractive. But for academics who want to retain their university status instead of becoming entrepreneurs, how would a doubled salary do instead?

Speakers at the conference said that the consultancy route provides a way for some academics to do this - and not only scientists and engineers. John Ashworth, now chairman of the British Library and former director of the London School of Economics, pointed out that advice on economics and social science is also worth money.

But he added that this too is an activity where management effort is needed, for example to ensure that there is adequate professional indemnity insurance should anything go wrong.

"Academics," Ashworth said, "endanger their houses and reputations all the time without realising it." But done properly, consultancy can enrich academics and universities as well as the local economy. For example, at Salford, where he was vice-chancellor, consultancy has made the university a major source of technical advice within the local business community.

Peter Hirst, chief executive of Enterprise LSE, said that this firm acts as an agent for academics but also goes beyond this by assembling teams to bid for bigger business. The firm has also generated internal LSE "business units", a method of selling research findings that is less dramatic than spinning out a firm.

Hirst said that one, Financial Market Information, has put more than Pounds 1 million into the pockets of LSE academics. But he was quick to add that a lot of people are involved and that they provide a rapid-fire service of daily-updated information.

In case this might seem threatening to the commercial consultancy industry, Bill Wicksteed, founder of Cambridge consultancy SQW, was quick to assure the conference that he regards well-run academic-based firms as fair competition. His bete noire is the academic who does not place a rational value on his or her time and skill. "Bad consultancy by anyone will make firms cautious about using any external expertise," he said.

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Wicksteed pointed out that big firms are sophisticated buyers of services. But universities, which play a public service role, especially in their local areas, are well placed to help smaller firms by helping them feel comfortable buying consultancy perhaps for the first time.