Finding the formula

In his short tenure as industry secretary, Peter Mandelson’s admiration for the US’s Silicon Valley, as a centre for establishing high-tech spin-off companies based on research for California’s universities, became well known. Encouraging high-tech clusters was a theme of his Competitiveness White Paper. The so-called Cambridge phenomenon is the closest the UK has come to […]

In his short tenure as industry secretary, Peter Mandelson’s admiration for the US’s Silicon Valley, as a centre for establishing high-tech spin-off companies based on research for California’s universities, became well known. Encouraging high-tech clusters was a theme of his Competitiveness White Paper.

The so-called Cambridge phenomenon is the closest the UK has come to emulating Silicon Valley. This cluster of high-tech businesses in and around Cambridge Science Park boasts the highest concentration of knowledge-based companies in the UK and probably Europe (see panel).

Spurred by the Cambridge phenomenon, more than 54 UKscience parks have been set up, employing about 27,000. Another 15 are under development. None has been able to copy the Cambridge pattern, let alone the Silicon Valley model, but Oxford is catching up and strong centres of excellence can be found at Guildford-based Surrey Research Park and Warwick, Manchester and Stirling science parks. So what are the factors behind the success of Silicon Valley and Cambridge and can they be replicated?

Jeremy Fairbrother, director of Cambridge Science Park, says: ‘The primary driver is the presence of a top research university. People like the environment in Cambridge and can tap into the University’s knowledge base very easily without feeling inhibited. Getting to critical mass took about 10 years.’

But the model does not just depend on academics coming out of the laboratories. ‘It’s as least as important for new companies to spin out of existing companies,’ says Fairbrother.

According to the UK Science Park Association’s definition, science parks must encourage technology transfer, with formal and operational links with a university or major research centre. They must also encourage the growth of knowledge-based businesses, often by offering incubator units with easy-in/easy-out leases for new companies, and should provide management and technology transfer skills to organisations on site.

But proximity to an outstanding university or research centre is not sufficient. Walter Herriot, managing director of Cambridge’s St John’s Innovation Centre, believes human role models also played a vital part in Cambridge’s success, and encouraged entrepreneurs. ‘Twenty years ago we had to invent role models by getting profiles of Acorn computer creator Herman Hauser and Clive Sinclair into the Cambridge Evening News and beyond,’ he says.

He believes there are similarly talented people in other parts of the UK ‘but they’re too modest, or the development agencies don’t recognise the value of promoting these people as examples’.

Herriot also stresses the need for dedicated seed funds for early stages of development. ‘Venture capital isn’t a problem for established high-tech companies, but we need seed funds for new enterprises where the market hasn’t been proven. Often you have a product that needs developing, a market which doesn’t exist, and a person who’s never run a business before. That’s where the problem lies.’

Business angels may be part of the answer. In Cambridge, the Great Eastern Business Investment Forum brings together about 250 business angels offering knowledge-based venture expertise and potential backing for bright ideas.

‘Networking plays a crucial part in encouraging entrepreneurs,’ says Herriot. Here again, Cambridge has a unique environment with close business and social links between town and gown. That, and the presence of four computer-related research labs, encouraged Microsoft to base its new European lab in the city, after examining several European locations.

Professor Andy Hopper, co-founder of Acorn Computers and vice-president of research at the Olivetti-Oracle Research Laboratory, says: ‘You need a good automatic hose-pipe of talent going through the university.’ The Oracle lab has spun out three companies fabricationless chip firm Virata, Telemedia Systems for network video, and Adaptive Broadband for high-speed internet access.

Oxford, meanwhile, now has 730 high-tech companies employing 26,400. The university operates a strong intellectual property department, called Isis Innovation, which identifies intellectual property ripe for commercialisation.

Powerful networking organisation the Oxford Trust and its subsidiary Oxford Innovation has helped establish nearly 200 new knowledge-based companies since 1985. Chief executive Peter Bradstock says trust helps to build networks between researchers, businesses and venture angels ‘who have already shown an ability to build business successfully and enjoy investing in new companies’.

The Oxfordshire Investment Opportunity Network organises several meetings a year for people with bright ideas to make presentations to venture angels.

Government chief scientific adviser Sir Robert May wants connections between industry and universities, especially with programmes like Foresight ‘which are great opportunities for getting unusual groups of people together’, and incentives such as the Foresight Challenge awards.

‘Instead of trying to pick winners, the Government should provide seedcorn for generic development, motivating connections from which new products may spring,’ he says.

Dr David Smith, chairman of the DTI’s Link initiative and chief executive of laboratory separation systems company Whatman, says it makes sense to develop clusters of similar firms in the same area.

‘You must have a multi-disciplinary approach to new technology developments, including a science base with core competence and the skills to develop the project, such as engineering, manufacturing or design. But you are only going to win if these become best-in-class activities. It is important for these to be clustered together where small start-up companies can brainstorm and seek advice quickly.’

Dr Tom Webster, Warwick Science Park’s deputy director, says only two of its 85 companies are true university spin-offs, but it is now spinning off companies from older residents. ‘I want to create clusters within industrial sectors like telecommunications and metal finishing across the West Midlands,’ he says.

Dr John Allen, chief executive of Manchester Science Park, complains: ‘Venture capitalists tend to concentrate on investments in the south. At least two biotech companies would have come here, but venture capital companies wanted them to locate in Cambridge. It’s all very well creating an infrastructure so people can talk to each other easily. But if they can’t borrow any money or get any equity, talking isn’t going to do much good.’

But in the end, success may hinge on creating a new breed of entrepreneurs with the right skills. Generics Group chairman Gordon Edge sees the ability to take risks as vital. ‘Risk is not a ready commodity. People have to be technologists and business-minded to replicate Silicon Valley, and there are still very few people in this mould. Cambridge became a sort of self-training ground for a new breed of technologists, whereas in the US it is much more part of the culture.’

May endorses this: ‘We need a culture change to a more adventurous, risk-taking approach. This means making failure less stigmatising, as in the US, while developing a more flexible tax regime and relaxed regulatory picture.’

Dr Gavin Wonnacott, manager of Cranfield Innovation Centre, Britain’s latest high-tech incubator complex which opened last month, says: ‘The problem is, the technology entrepreneur wants to retain 100% of everything. What differentiates those who make it from the many who don’t is understanding that they lack a full skill set. New high-tech entrepreneurs must have a broader vision, understanding risk taking and being growth oriented rather than control orientated. The technologist needs to be excited by business opportunities as well as technological potential.’

The Government’s proposals to set up Institutes for Enterprise to equip graduates with entrepreneurial and business skills will be examined in the final article in this series in two weeks’ time.

Building the Cambridge phenomenon

Professor Gordon Edge, executive chairman of the Generics Group, founder of Cambridge Consultants in the 1960s and one of the pioneers of the Cambridge Science Park, says: ‘The Cambridge phenomenon was a cultural phenomenon, when a few scientists and engineers in telecommunications, micro-electronics, biological sciences, instrumentation and allied areas left the university to set up workshops and labs, renting garages and sheds on the city’s fringes.’

At first there was little support from the university and the idea of technology transfer was frowned on by most companies. He and friends had to take out second mortgages to fund their businesses, and to learn the ropes of management for themselves.

Trinity College financed the first science park in the early 1970s, along the lines of California’s Stanford University. By 1984, it was the largest high-tech cluster outside the US. Today, Cambridge Science Park has 75 companies employing about 4,400 people, and has spun off over 1,000 firms employing 35,000.

St John’s Innovation Park, launched nearby in 1987, has 64 firms and a turnover of more than £50m. A new Bioscience Innovation Centre is being built there. Cambridge Research Park and Granta Park followed, and further Link innovation centres are planned nearby.