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From the lab to the stock market? The characteristics and impact of university-oriented seed funds in Europe

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Abstract

This work investigates the role of university and PRO-oriented seed funds (USFs)—VC funds with an explicit mission to make investments in academic spin-offs and support technology transfer—as instruments for addressing funding gaps and facilitating the commercialization of academic technologies. We first offer an overview of USFs in Europe, highlighting their heterogeneity and principal characteristics. Second, we exploit a unique data set of 1,497 start-ups (including 733 USF-backed start-ups and another 764 start-ups backed by other VC funds) to analyze how USF-backed companies perform in terms of exit rates, staging, and syndication levels when compared with non-USF-backed companies. Empirical evidence suggests that USF-backed companies perform better in staging and syndication but worse in exit rates. Moreover, our analyses show that, within the group of USF-backed companies, the ones that can attract more follow-on funding and investors are those financed by USFs that are internally managed by a universities/PROs and are linked to universities with high scientific rankings.

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Notes

  1. In our web searches, we used key words such as “university seed fund,” “university challenge fund,” “university accelerator fund,” “seed funds and academic spin-offs,” and “seed fund and university.” We also used Google Translate to translate the key words and conduct the web searches in the different European languages.

  2. We did not include these additional analyses in the paper. They are available from the Authors upon request.

  3. Concerning this point, the results of a recent survey administered to managers of 145 university TTOs in 28 European countries (Munari et al. 2013) shows that a large share of the sources of capital for the establishment of university-managed seed funds and proof-of-concept programmes come from public institutions, at the national or regional level. The financial support received by private actors, such as VC firms, banks or private corporations, is instead very limited. The strong involvement of investors from the public sector can push USFs to likely subordinate the achievement of financial objectives (that can be obtained through IPO or trade sale) to a wider set of developmental and political goals (Munari and Toschi 2014a).

  4. Lerner et al. (2008) report that between 1987 and 1997, the School, through its venture capital subsidiary investing alongside university officials and trustees, provided at least $ 107 million dollars to the private biotech company Seragen. While the company succeeded in completing an IPO, it later encountered a series of difficulties with its products. By the end of 1997, the University’s equity stake in Seragen was worth only about $4 million.

  5. A few recent policy measures illustrate this trend. The Horizon 2020 Agenda of the European Commission envisages the creation of a pilot facility—the Technology Transfer Facility—that will co-finance investments made by existing technology transfer (TT) funds and vehicles in Europe. It will focus on technology transfer undertaken via the creation of new companies and the licensing of intellectual property (IP), and concentrate on the proof-of-concept, development and early commercialisation stages of the TT process, through both equity and non-equity investments. In France, the “Investissements d’Avenir” or “Investments for the Future” program was launched at the end of 2009, with a budget of 21.9 billion euros. The programme aims to establish large-scale initiatives (including university-oriented seed funds) to strengthen France’s capacities for innovation. Finally, the Start Up America Initiative launched in 2011 in the United States was aimed at accelerating high-growth entrepreneurship throughout the nation. It also included a set of financial instruments for accelerating innovation from “lab to market”, such as university proof-of-concept centres.

  6. In their paper, building on a sample of academic spin-offs in the micro and nanotechnology sector in the UK Munari and Toschi (2011) show that the scientific quality and reputation of the parent university have a positive impact on the ASOs’ chances of attracting the attention of VC investors.

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Acknowledgments

The authors thank the editor Simon Mosey and the two anonymous reviewers for their precious help and suggestions. They are gratefully indebted to participants at the first FinKT Workshop (University of Bologna), Triple Helix International Conference 2013, Technology Transfer T2 Conference 2013 and the Academy of Management 2014. All remaining errors are the authors’. Financial support from the EIBURS programme of the European Investment Bank (FinKT project) and the Italian Ministry of University and Research [CUP B41J12000160008] are gratefully acknowledged.

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Authors and Affiliations

  1. Department of Management, University of Bologna, Via Capo di Lucca, 34, 40126, Bologna, Italy

    Federico Munari & Laura Toschi

  2. IE Business School, IE University, Calle María de Molina, 31 bis, 28006, Madrid, Spain

    Martina Pasquini

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  1. Federico Munari
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  2. Martina Pasquini
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  3. Laura Toschi
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Correspondence to Martina Pasquini.

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Table 8 Descriptive statistics and correlation matrix
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Munari, F., Pasquini, M. & Toschi, L. From the lab to the stock market? The characteristics and impact of university-oriented seed funds in Europe. J Technol Transf 40, 948–975 (2015). https://doi.org/10.1007/s10961-014-9385-4

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