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Proof of the theoretical pudding

To an increasing number of academics, success lies in products as well as publications. The mix of skills available within Interdisciplinary Research Centres (IRCs) has helped cook up some spin-off companies with the potential to become world-beaters. Charles Butcher investigates some of the success stories.

“We started up in June 2000 with investment capital of £37 million, and we have already launched our first two product lines, with a third to follow early in 2001,” says Don Spalinger, President of Southampton Photonics. “We have a plant in Southampton and offices in California,” he continues, “and within the next two or three years we intend to be making products in several other locations around the world.”

Such rapid growth is not unusual in the new wired economy. Southampton Photonics makes optical-fibre components for communications networks, and with internet traffic doubling every hundred days or so, that’s a good line of business to be in. What is less usual, at least in the UK, is that Southampton Photonics was “spun off” from an academic institution, in this case the Optoelectronics Research Centre (ORC) at the University of Southampton. Yet by their nature, Interdisciplinary Research Centres (IRCs) like the ORC bring together many of the elements that high-tech companies need. Southampton Photonics is the most striking example to date of an IRC spin-off, but there are plenty of other success stories.

There’s no simple route to starting a company, says Carey Adams, Financial Administrator at the IRC in Biomedical Materials at Queen Mary, University of London. Adams is company secretary of Abonetics, a spin-off to exploit materials for clinical use developed at the IRC. A second spin-off, ApaTech, will concentrate on artificial bone. “In setting up Abonetics we had excellent advice from the business people on our IRC steering committee,” she says, “but because there were four separate institutions in the IRC involved, each with different levels of interest, the process took around three years.” It helps if the parent research organisation takes a rigorous approach to intellectual property, she adds.

Commercialisation is not simply a chance for researchers to get rich; it can also be essential to research, explains Adams. “The ethos of our IRC has always been to take biomaterials from concept to patient. Developing a new bone substitute only works if you can get it into patients, and that means going through clinical trials,” she says. “But the costs of this are so great that you simply have to go commercial.”

Fibres light the way

Southampton Photonics estimates that the world market for its first three product ranges is around £13 billion. These are the components behind the next generation of optical-fibre communications networks: optical amplifiers, filters and fibre lasers that the company claims are ten times better than existing products. Using the technology known as dense wave division multiplexing (DWDM), the new devices squeeze ever-increasing amounts of data down each optical fibre.

The Southampton ORC has a 30-year history of excellence in optical communications. “What really made the ORC famous was the discovery in 1986 of the optical amplifier, which eliminated the need to convert optical signals to electronic form and then back into light,” says Spalinger. Leading the team that made this breakthrough was Professor David Payne, the current ORC Director and Chairman of Southampton Photonics. The invention was the erbium-doped fibre amplifier (EDFA), a key technology in modern long-distance cables.

By 1998 Payne and a handful of fellow academics had decided to commercialise their research themselves, instead of letting others cash in on their discoveries. Their first task was to negotiate with the IRC over intellectual property rights, a process that took over a year. The fledgling company acquired the rights to all the research relevant to its planned products, in return for licence fees and a stake in the company.

Believing that losing the “university” tag would be essential to gaining customer confidence, Payne and his team assembled a new group of industry-centred managers and engineers. “We now have nearly 50 people,” says Spalinger, “and only five or six of them came from the university; the rest we recruited from industry.” The company’s equipment and premises are also completely separate from those of the university.

Spalinger himself came from US consultancy Gartner Group, where he managed the company’s 300 telecoms analysts. “At first I didn’t want to hire any PhDs,” he says. “I was persuaded to change my mind on that one, but I still insist that PhD stands for “Product has been delivered”. In an industry as fast-moving as this one there’s no time to learn — you have to bring in people who have already been successful.” The company’s Silicon Valley ethos extends to stock options for every employee, says Spalinger.

Between January and May 2000 the management team raised £37 million of initial funding from venture capitalists — a record both in the photonics sector and for a university spin-off. “This is a market that’s moving very rapidly,” says Spalinger, “and with that much money you can get the company up and moving at a speed that matches the market.”

Southampton Photonics opened for business in June 2000 and now has two products on the market: EDFA optical amplifiers and sophisticated Bragg-grating filters. The third product range, fibre lasers that are cheaper and more versatile than laser diodes, is scheduled for launch early in 2001. “Such a wide product range is not unique for a start-up company, but it’s pretty unusual,” Spalinger says.

“We acquired a broad spread of technology from the ORC,” he continues, “but we are not neglecting our future. From the ORC we are commissioning research that should lead to our next generation of products.” As a result, Southampton Photonics is one of the ORC’s largest funding sources, to the tune of more than half-a-million pounds a year.

And the key message? Professionalism in defining and following the company’s objectives. “Many companies started by academics either fail or end up doing niche research in someone’s garage,” says Spalinger. “Generally, the mentality that makes a good academic doesn’t make a good business manager. Everyone we hire comes from industry, and we insist they have a record of successful product development.”

Process industries in control

An equally successful, if lower-key, example of an IRC spin-off comes from Process Systems Enterprise (PSE), which arose from the Centre for Process Systems Engineering (CPSE) at Imperial College, London. CPSE Director Professor Sandro Macchietto was PSE’s first managing director, before handing over to the current MD, Mark Matzopoulos, in 1999.

The strengths of both PSE and the CPSE lie in software that helps the process industries — chemicals, plastics, food and drink, water, power generation, and so on — design and operate their plants better. “Our specialities are dynamic simulation, optimisation and scheduling,” explains Matzopoulos. By squeezing an extra few per cent of product out of a plant, he continues, such technology can pay for itself in a matter of months.

Until very recently, most mathematical modelling of process plants has been confined to “steady-state” conditions, which rarely occur in the real world. Dynamic simulation, which models continuously-changing conditions, is a much more difficult problem, explains Matzopoulos. In the 1980s he worked on one of the original dynamic simulators, a program called SPEEDUP, which was developed at the CPSE in the 1980s. SPEEDUP was commercialised elsewhere and is still used today, but it has important limitations.

Using a combination of cutting-edge mathematics with modern programming techniques and drawing on their extensive experience in process modelling and control, the CPSE team developed a dynamic simulator known as gPROMS which, says Matzopoulos, outperforms anything else on the market. “We have developed innovative and intuitive ways of describing dynamic processes, and packaged these techniques in software that is faster and more robust than our competitors,” he says.

PSE was launched in 1997 to develop gPROMS into a commercial product. “There was such interest in the technology that the start-up was effectively funded by its initial customers, notably Mitsubishi, Du Pont, Dow Chemical and ICI,” says Matzopoulos. PSE’s turnover is now approaching £2 million, and customers include Bayer, BASF, Shell Chemicals and most of the other chemical majors. Matzopoulos says some of these companies now use gPROMS for all their dynamic simulation needs.

At the end of last year PSE signed a global licensing deal with the industrial automation division of engineering giant ABB. Now that control systems use mostly standard PCs and “open standards” software, Matzopoulos explains, automation companies are looking for new ways to add value: “ABB wanted to launch a set of advanced automation products, and as the base for these they chose gPROMS.”

Other pieces of intellectual property that the fledgling PSE licensed from its parent IRC include the planning and scheduling applications gBSS and SUPERBATCH. These were originally developed to help production managers in batch-based process industries such as food and pharmaceuticals decide how to run their plants at maximum productivity when customers’ demands are changing rapidly. “We took a conscious decision to focus on the gPROMS simulation and optimisation technology at first, to establish the business,” Matzopoulos says. “Now we are focusing our attention on the other technology in our stable, namely the scheduling products. These have potential application in business-to-business internet trading, so for us they could result in a much bigger business than the simulation side.”

A fresh look at composites

Leeds-based Vantage Polymers also needed the help of powerful industrial allies to develop its product — a new plastic composite that is light, strong and cost-effective. After five years, though, the company found the challenge of breaking into the automotive sector too great. In December the technology was transferred to BP, and Vantage Polymers was wound up at the end of the year.

“I think the whole project has been a great success,” says Managing Director Professor Ian Ward. “We may perhaps not benefit as much as we might have done if we had been able to raise the millions of pounds needed to commercialise the material ourselves. But I”m also interested in new research opportunities and in commercialising my other inventions. The product will reach the market, and that’s the main thing.”

The technology that BP is getting excited about is hot compaction, which makes high-strength, low-cost materials from plastics such as polypropylene. Like glass-reinforced composites, the new materials use a mixture of fibres with a “binder”. Unlike traditional composites, however, in Ward’s materials both the fibre and the binder are made from polypropylene or other thermoplastic. It’s an elegant idea that is more cost-effective than conventional composites and much easier to recycle.

Ward and his co-workers discovered hot compaction in 1991 as part of a project at the IRC in Polymer Science and Technology, based at the University of Leeds, which Ward headed until 1994. “The virtue of the IRC was that we didn’t have to justify our research in detail, so we could do very speculative things. The result was some truly innovative research,” he says.

The British Technology Group covered the cost of patenting the discovery, and in 1995 the university set up Vantage Polymers through its commercial arm, Leeds Innovations (formerly ULIS), in return for a 60% stake in the company. US manufacturer Hoechst Celanese, for whom Ward worked as a consultant, agreed to provide financial support to develop the technology further.

Soon the researchers had discovered that polypropylene geotextile fabric gained the most from the hot compaction process. They decided to focus on the automotive market, where low cost, strength and light weight are essential, and recyclability is increasingly important.

By mid-1999 the researchers had shown that the material would be suitable for automotive use. But they also knew that to be economic in this fiercely competitive market, the new composite would have to be made on a scale of thousands of tonnes a year and marketed worldwide. Lacking sources of investment to make this possible, Vantage Polymers decided to let BP commercialise the process instead. “Academics like myself, with commitments in research and teaching, don’t have the time to run companies,” says Ward. “It sounds a simple story, but right from the start we had to work very hard to get people interested.”

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