|
|
|
|
| Home >
news | ||
| News
|
US HI-TECH START UPS RECEIVE UP TO TEN TIMES AS MUCH GOVERNMENT FINANCIAL SUPPORT AS UK FIRMS, FINDS CENTRE FOR BUSINESS RESEARCH STUDY A new report, from Cambridge University's Centre for Business Research entitled "Secrets" of the World's Largest Seed Capital Fund, argues that the UK should urgently introduce a US scheme that has successfully converted billions of dollars of taxpayer-funded research into highly valuable products and helped build hundreds of successful companies. The report provides detailed insights into the way the United States government uses its Small Business Innovation Research (SBIR) programme and procurement budgets to build successful science and technology industries by supporting small, high-technology firms. Report author David Connell says, "Through such mechanisms early stage US businesses get access to government funding for R&D which is at a level significantly larger per company than UK firms receive, probably by an order of magnitude". Unlike UK government grant schemes and R&D tax credits the SBIR programme provides 100% funding right from the very start of a business's life, and is therefore much more effective at getting new businesses under way. Founded in 1982, the SBIR programme provides over 4000 research and development contracts and awards, worth over $2 billion every year to small US companies, including start-ups and university spin-outs. SBIR has also helped thousands of these businesses onto the first rung of the lucrative US government procurement ladder. It is just one of a panoply of policies designed to favour small US firms. Other US "set-aside" legislation steers a hefty 40 per cent of US government procurement budgets, both directly and indirectly, towards US small companies. Report author David Connell says: "The SBIR programme probably plays a more important role in the US than venture capital in the funding of early stage science and technology companies. And the lack of a similar programme in the UK puts our hi-tech firms at a significant competitive disadvantage ". David Connell is a businessman, former venture capitalist, and now a Senior Research Associate of Cambridge University's Centre for Business Research. He is leading the campaign to bring such an initiative to the UK, working with Kitty Ussher MP on a Private Members' Bill that is scheduled to receive its second reading this autumn. They believe it could play a major role in filling the funding gap for early stage UK companies throughout the UK, irrespective of whether they are located in areas with good access to local venture capital funds. "Despite government efforts, we still do not have effective policies in the UK to ensure that public sector procurement plays its full role in the innovation economy we need to build to remain competitive," argues David Connell. "The SBIR programme is one of the most successful and best regarded of such policies and it comes from the nation that is probably the most successful of all in building science and technology industries. We would do well to study and imitate it." The report aims to show the UK policy, business and academic communities exactly how the US scheme works, and why it is so successful. It examines how the SBIR programme is operated by a range of different US government agencies, including the Department of Defense, National Institutes of Health and National Science Foundation. It also examines the evidence on the scheme's economic impact and makes detailed proposals on how a similar programme could be introduced in the UK. CASE STUDIES AND ENTREPRENEURS' COMMENTS
The report includes case studies of a number of SBIR award recipients that have used the funding to help get new products to market and build successful companies, including one Cambridge research scientist who has started a firm in the US to access SBIR funding:- Cor Drost was a researcher at Cornell University's College of Veterinary Medicine when he invented a new meter for measuring blood flow. Twenty years ago he set up a company called Transonic Systems Inc which has used many SBIR awards to develop its technology. It now sells and distributes products around the world that are used to monitor patients during surgery, and kidney patients during dialysis. Dr Drost says: "The SBIR program supports potential 800-pound gorillas like Microsoft and Dell when they are still in the diaper stage: it is seed money for half of a country's GNP, 30 years from now." - Photobit Technology Corporation was founded in the 1990s by serial entrepreneur Dr Eric Fossum. Using SBIR funding, it developed image sensor technology initially for use by the US Army. But as costs fell the same technology became used for cameras in mobile phones. Other developments have led to a camera that can be swallowed like a pill, enabling non-invasive imaging of the gastrointestinal system. Dr Fossum says, "SBIR awards help companies that wouldn't otherwise attract venture capital funding because they have a slow growth profile or niche market appeal. But they are also helpful to the government, seeding businesses that are developing technologies useful to government agencies - and, often, to us all." - Embrex Inc is a profitable company manufacturing equipment for use in the poultry industry. Twenty years ago, at the very start of its life, it received $229,000 of SBIR funding to develop a patented technology for vaccinating chicks against diseases while they are still in the egg. Don Seaquist, VP for Finance and Administration at Embrex, says: "Obviously, the US government needs to accept a fair degree of risk in funding small, high-tech firms but in our case, they and the US tax payer got a very good deal. Between 1993 and 2002, we paid royalties back to the US government of $3.5 million." Entrepreneurial academic Dr Helen Lee set up the Diagnostic Development Unit at Cambridge University's Department of Haematology with the aim of developing innovative, simple, rapid and inexpensive diagnostic tests, particularly for use in developing countries. But she and her colleagues established the company that is now developing this technology, Diagnostics for the Real World Ltd, in the US. So far it has received $5.5 million of SBIR funding from the National Institutes of Health. She says: "We would all have preferred to establish the company in Cambridge, rather than California, because Cambridge is where the research and development has taken place. But the funding gap for start-up biotech companies in the UK is such that we did not have a choice."  Download Outline Report (8 pages)
Download Full Report (54 pages)
|
| © 2010 Centre for Business Research, University of Cambridge |
|