Science and research is just the job for boosting employment (From The Northern Echo)

Science and research is just the job for boosting employment

4:09pm Tuesday 9th November 2010 in North-East Business Features By Owen McAteer

Knowledge-based business has been highlighted as vital to the North-East’s future success. Business Editor Owen McAteer looks at funding that has been put in place to ensure the sector grows.

ALTHOUGH he is no longer a practising scientist, Duncan Lowery is expected to play a major part in turning the world-class science and research developed in this region into jobs.

Former biotechnologist Mr Lowery is the senior investment manager in the North-East office of the IP Group, which was appointed by One North East in January to manage the £25m North- East Technology Fund.

The fund, one of six under the banner of the £125m Finance for Business North- East super fund, formerly called Jeremie, is designed to take hi-tech research or science, such as that developed in the region’s universities, and turn it into real businesses – intellectual property commercialisation to give it its proper name.

The super fund, a mixture of private and public money and the first of its kind in England, will provide investments to 850 smaller firms in the region during a five-year period.

The technology fund will invest in companies such as those working in life sciences or IT, primarily with equity investments up to a maximum of £1.25m.

"If I was buying property I would go to someone who does property, there are not that many generic funders now"

Neil Stephenson

One North East has long seen taking research out of the laboratory and turning it into a business as vital for creating jobs in the North- East, investing significant sums in projects such as NETPark, near Sedgefield, and the Centre for Process Innovation (CPI) at Wilton, Teesside.

And like One North East, Mr Lowery believes developing such businesses in the North-East is not only important but “absolutely critical” to the region’s future prosperity.

He said: “This is the only way we can build a sustainable economy. The gauntlet has been thrown down for the private sector to pick up the slack and the only way you can do that is to build solid, good-quality businesses that have sustainable, competitive advantages, and we would like to build more businesses like that in this part of the world.”

Mr Lowery said that having specialist, knowledge-based businesses in the region would then attract other connected firms.

He said: “It brings a hub of activity in that sector, because other businesses want to be near it.

“We are in a global economy so we have to compete globally. We can’t compete on price, because the low-cost economies such as China and India do that very effectively, so we have to compete in some other way, through the knowledge-based businesses, and that creates opportunities for the rest of the economy around it.”

Where funding such as that being offered by the IP Group comes in is that, unlike a standard bank loan, the firm is not looking for instant repayments, but is investing in technology it believes will grow and become a success in the future.

Mr Lowery said: “Our aim is to grow world-class businesses and then, at some point, exit.

“We are not looking for a quick return, we know it takes time.

“We drive them pretty hard, but in a good way.”

It also offers more than money to scientists and technologists who may be experts in their fields, but know next to nothing about the business world.

Mr Lowery said: “We are not seeking to be a better technical person than the technologists we are backing, but we do understand how a business works.”

Having said that, Mr Lowery stressed that the IP Group’s staff did have a high degree of technical knowledge, or contacts that would understand a subject they didn’t.

He said: “We have sector specialists in life sciences, renewables, chemicals and IT, and a fairly good global view of where the opportunities lie in industry for various products. Accessing that network is key to the businesses we work with.

“We also apply a successful funding model to the businesses and get them to the point where they can raise further capital.”

They will also search for and place experts in the field into a business to provide advice and support, should a firm require it.

Mr Lowery said: “The reason we do that is because it adds credibility to a company and adds expertise that is often difficult for these firms to find as they don’t have the networks, we bring that to them. It not only brings expertise, but also makes it easier to raise funding from third party investors.”

One of the companies supported by IP Group is technology firm Onyx Group, in Stockton, which received a £250,000 investment for its service that allows companies to order computer skills and programmes across the internet on a pay-as-they-go basis.

It means that companies do not have to make capital expenditure on computer infrastructure, instead ordering what they need from internet specialists and providers as and when they need them.

Onyx chief executive Neil Stephenson said it was important now for firms to have different funders for different aspects of a business.

He said: “It is almost a portfolio, certain people specialise in certain areas, it just so happens in this respect IP Group is all around IP.

“It is making sure you have the right investment partners, If I was buying property I would go to someone who does property, there are not that many generic funders now.”

This was because having a specialist in the field delivered more than just cash, Mr Stephenson believed.

He said: “I think where you take on investment of any type you would hope to secure some benefit on top of the funds.

“If there is no added value other than funding, it doesn’t make it as attractive as working with some smart people, there are obvious benefits in finding someone with skills and knowledge.”

Outside of its remit with the Technology Fund, IP Group also runs other investments, including working closely with York and Leeds universities.

Through this four years ago it put seed funding into North Yorkshire company Tissue Regenix, which made international headlines earlier this year for its groundbreaking work taking animal tissue, stripping out its DNA and using it to repair damaged veins and valves in humans.

The company, which started at Leeds University through research by Professor John Fisher and Professor Eileen Ingham, but is now based in York, has gone from two staff to 14 in the past 18 months and joined London’s Aim stock market in June.

Managing director Antony Odell said: “What is very important for these early stage companies is the need to focus on something that they can deliver to market.

“IP Group has people with business experience who have done this before. That is very important because you can waste an awful lot of time focused on some operation no one will invest in, so that early stage guidance, along with cash, is very important in guiding the company and its business development.”

Mr Odell also believed that specialist investors such as IP Group filled a funding gap for new businesses starting out, particularly life sciences, which have to go through a lot of certification before their products could be brought to market.

He said: “There is a gap because private finance is only interested in companies where they can see you have some revenue. It is the funding gap between something in the university and something before it starts earning revenue. It is a problem for life sciences.

“We are lucky because we got our product to market in only two years.”