Loans & Finances Today

Spinouts, because of the nature of their assets, the make up of their shareholders and the academic (rather than business) background of their managers, face particular problems in becoming successful enterprises. Some would say that their track record in overcoming these problems has not been good.

The problems we have identified in this article centre on capital-raising and achieving a successful exit, and the reasons we have suggested for the problems are lack of management expertise, confusion over the value of IP, inability to attract funding from investor institutions and inability to maintain sound relations with their investors.

Some universities, notably Oxford, Cambridge and Imperial College, appear to have been more successful with their spinouts than others in both capital raising and successful exits (and, probably, by other measures also, such as income and employment generation), but even they appear to lag behind the more successful American universities.

The Lambert Review Of Business-University Collaboration, published in December 2003 looked at the relationship between industry and academia in scientific research and commercialisation of that research. It broadly supports the Government’s approach to ‘third stream funding’ which promotes knowledge transfer. The amount of money spent by UK companies on research and  development (R & D) is low compared with other industrialised nations: about $410 per person compared with $700 per person in France and $1300 in the USA.

There are barriers to commercialising university IP, including lack of clarity on ownership in research collaboration and in the variable quality of university technology transfer offices. Universities perform well by international standards in science and technology. There has been a marked change of culture, with many universities casting off their ivory tower image and playing a much more active role in their regional and national economy. But, there had been too much emphasis on spinouts over the last decade compared with licensing fend other forms of commercialisation).

In simple terms, your portfolio should reflect your personality as a saver, investor, and speculator. Pure savers will want all their money in savings instruments, pure investors will want it all in investments, and pure speculators will want it all in speculations. Most of you, however, will want to have some money in two or all three types of investments. The only way to determine amounts is to watch how different ratios affect your emotions.

For example, retirees are sometimes advised to have five years of living expenses in savings instruments. They can then place the rest of their money in investments and speculations. However, many retirees are unhappy with the low returns from savings instruments. Being more investors than savers, they will cut down to one year or even a few months of savings instruments and put the rest in investments. This will increase both their returns and happiness.

Other retirees will not want anything in investments. They will only be comfortable with everything in savings. While they may start retirement with five years of savings, eventually they will have twice their life expectancy in savings.

Undeveloped land is for optimists. The idea is to buy the land, do absolutely nothing, and then cash out at a huge profit.

Overconfidence is an issue. The factors that will increase or decrease the value of your land are not predictable. Raw land has many uses or none.

The person who sold it to you knew more about the prospects than you do and he wanted out. The Realtor wanted you in as she collected a nice commission.

Laziness is another issue. Extensive research is required to prevent a huge loss. Land in a flood zone or on a fault line may be worthless. Welllocated land that cannot be subdivided into marketable lots has no value.

Environmental contamination has ruined millions of acres. Even if your land has none of these problems, you are powerless over the factors that will increase the value of your dirt. Cities grow in unpredictable directions and fall into recessions, depressions, even ghost towns. Vacation spots are hot and cold. Farm uses are not predictable. Meanwhile, taxes must be paid and assessments can come without warning. In addition, you have to keep the mortgage current, if you were able to find one.