CFI-funded research infrastructure helps to increase the number of university spin-offs

Enhances accountability measures

A new study indicates that Canada Foundation for Innovation (CFI) investments in research infrastructure are helping to increase the number of university spin-offs and attract a higher-than-average proportion of venture capital. The exploratory study adds a new element to a growing body of evidence detailing the impact of the CFI on economic and social advancements.

The study shows that 94 university spin-offs can demonstrate links to CFI infrastructure, representing 7.3% of total university spin-offs since 1962. Between 2000 and 2006, 61 spin-offs were CFI-linked, accounting for 19.4% of all university spin-offs during that period. In addition, they attracted $1.1 billion in private sector investment or 16% of the $6.7 billion invested in 1,288 spin-offs since 1997.

"These spin-off companies with the largest amounts of venture capital are also companies that worked with professors that had CFI funding. It's a really good leverage process," says Dr Denys Cooper, an expert in the financing of technology-based firms and a guest worker at the National Research Council's Industrial Research Assistance Program.

Cooper has assembled data on universities spin-off firms going back to 1962. This unique data set was combined with the CFI data culled from annual progress reports that universities receiving CFI funds are required to submit for five years after a project is complete. Cooper's data show that spin-offs typically occur in niche areas within biotechnology, medical devices, information and communication technology and advanced materials — areas "where there are few existing firms in a position to license and develop the intellectual property".

"This was really an opportunity … that was too tempting and important to be missed ... It's an important study and shows that we are committed to following up to determine the impact of our investments," says CFI president Dr Eliot Phillipson. "This is the sort of information that all (research) funders are attempting to demonstrate to the government and the public but it takes some time. The CFI is only 11 years old and the bulk of our projects are six or seven years old. It's still quite early to try and demonstrate economic and social impact."

Phillipson notes that in the year since the data in the report was generated, the CFI has identified another 19 spin-offs, bringing the total number since 2000 linked to CFI research infrastructure to 80.

The Cooper database contains detailed information on nearly 1,300 spin-offs and is considered one of the largest of its type in the world. Information is obtained from a wide variety of sources including tech transfer offices, web searches and the Top 100 ranking published annually by Research Info-source. Statistics Canada has a similar database based on surveys of universities and hospitals with 968 firms as of 2004.

The range of schemes to support knowledge translation in Canada, including support to spin-off companies from publicly-funded research organizations, is consistent with the overall importance that Canada assigns to spin-off companies. However, it is also indicative of pluralistic traditions, federalism, and a certain confidence in the market to provide the key financing. Disputes, debate and dialogue are a continuing feature of the innovation policy areas in Canada that attempt to address these areas. –— Research Infrastructure and the Economy by Meg Barker & Dr Denys Cooper

But Cooper, Phillipson and study co-author Meg Barker caution against reading too much into the linkage between university spin-offs and CFI infrastructure support.

"At the moment, we can't prove the correlation between the professor and the VC. We don't yet know much about the nature of the linkage. It needs more research," says Cooper, adding that he has worked out a methodology for making the correlation. "The number of spin-offs could be even higher except that there were some instances where the professor declined to name the company or they named the company but it couldn't be independently confirmed."

There is also an acknowledgement that, as important as CFI infrastructure is to research, it is only one of many players that contribute to company formation and spin-off.

"CFI research infrastructure investments are one component in a larger whole so it may be useful if CFI were part of a larger initiative," says Barker, CFI's special advisor on research and strategy. "Such an initiative could include groups like the research hospitals or ACCT Canada but no one is spearheading this yet."

strong emphasis on accountability

Since becoming CFI president, Phillipson has placed considerable emphasis on improving accountability metrics for the organization, moving beyond traditional indicators such as patents, licenses and research papers. While he considers spin-off data to be a valuable short- to mid-term indicator, he says there is much more that could be captured beyond the strict definition of a spin-off. A company can only be classified as a spin-off if the researchers who hold the intellectual property are "employees of, or hold full-time appointments in the institution when the company is formed".

"What about spin-outs — companies that come into existence by researchers who went out into the private sector and created companies?.... In terms of tech transfer this is a much larger exercise and much more difficult," says Phillipson. "Some institutions have a listing of graduates but how long do you still claim them? We need a new method to take on the spin-outs."

The report can be viewed at www.innovation.ca/en/accountability/reports-2008

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