KUALA LUMPUR, June 30 — Creating very successful university spinouts are difficult and rare. There are many reasons behind this statement and the survival rate of spinout companies created by most universities across the world have been disappointing to date.

Only a very few research organisations have been able to create and run spinouts quite successfully and consistently. This article focuses on one of those stories where we can learn much from.

Oxford University Innovation (formerly known as Isis Innovation Ltd) has been one of those successful organisations that has been consistently creating successful spinout companies.

Oxford University Innovation is a wholly-owned subsidiary company that is entrusted in executing the prestigious university’s technology transfer role.

It is indeed the biggest technology transfer unit in Europe. Oxford has a strong track record in creating spinouts with "staying power” and its most notable success story, the computer games company NaturalMotion, was spun out in 2001, and acquired in 2014 by US company Zynga for US$527 million (RM2.11 billion).

Where did it all start for NaturalMotion?

The very first elements of the technology that later formed the core of NaturalMotion were put together by a Doctorate student by the name of Torsten Reil in the Department of Zoology at Oxford.

Torsten began working on computer simulations of human nervous systems in the department, with the aim of understanding how these systems controlled movement.

His programmes used genetic algorithms which enabled animations to interact with and respond to their virtual environment. As they did so they evolved their own way of moving, resulting in highly realistic simulations of human and animal movement.

Torsten soon realised the potential of the technology to improve animation in films and computer games — two massive and global markets!

Torsten founded NaturalMotion in 2001 with the help of Oxford University Innovation. Initial funding was provided by the Oxford University Challenge Seed Fund.

Oxford University Innovation also supported the filing of a patent application and introduced the company to further investment from business angels.

From 2008 the university became a shareholder in the company through Oxford Spin-out Equity Management (the unit within the university that manages all equity owned by Oxford in it spinout companies) and continued to invest in its development.

The company then created a ground-breaking 3D character simulation engine for computer games. This technology was quickly picked up and used extensively in games for PlayStation and Xbox 360 plus others. In 2007, a significant breakthrough came when NaturalMotion won a large contract with Rockstar Games, makers of one of the most successful games series of all times — Grand Theft Auto.

The company further went on to developing its own smartphone-based games. Its first "free-to-play” game was called My Horse and had a download count of over 11 million times. In 2012 Clumsy Ninja was showcased at Apple’s iPhone 5 launch event; it was the first mobile game driven by a technology developed by the company that until recently would have required a supercomputer.

By 2014, NaturalMotion employed over 260 people in four offices in Oxford, UK and San Francisco, US, and in February 2014 it was bought for over US$527 million by Zynga, the US company behind the hugely popular FarmVille game. Oxford University scooped £30 million (RM161.52 million) from the Zynga deal. This is one of the largest transactions ever involving a spinout from the University of Oxford, and reflects NaturalMotion’s remarkable success in this field.

Lessons to learn

To a curious enquirer, there are many lessons to learn from the NaturalMotion story.

Firstly, it seems as if it was the people behind who really made it. Reil would have been a passionate innovator as well as a creative entrepreneur who didn’t take long to identify the opportunity. And then put his heart and soul into the game over a long period of time with much effort and persistence. Most often successes come from entrepreneurs with these characteristics.

Secondly, creativity seemed to have played an important role. Although the initial project was pure R&D into neural research in identifying how the human nervous system worked, Riel thought outside the box in order to identify a market gap and hence a market opportunity in a field that was entirely different — 3D animation films and games!

Thirdly, it seems that strategy played a key role. The Oxford University Innovation seemed to have provided initial funding and formulating the IP strategy for NaturalMotion to form a good base upon which the company could grow.

It becomes very clear that with the university’s support, the company could do much better. This also demystifies the importance of a well-structured technology transfer function in creating university spinout successes.

Fourthly, this story implicates that big successes do not happen overnight. Technology transfer and commercialisation is a complex, lengthy and a painstaking process. Persistence of the innovators and much hand holding by the university are often needed. And that too, over a long period of time — sometimes over a decade. If the company is able to constantly increase its value, improve its IP assets and demonstrate it to their existing and potential investors could position the company well for a big and a successful exit.

Last but not least, owning IP or technology is a cost as much as it is regarded as an asset. Technology is a liability unless it is monetised. In order to monetise technology, a company must have an exceptional management team, good IP that addresses real-world problems and a sensible business plan or strategy. These are the most salient features of those small spinouts or startups that made it big.

* PlaTCOM Ventures specialises in facilitating innovation commercialisation. We are well-placed to advise and help companies achieve their milestones. Our sense of achievement relies on the successes of the companies that we help to innovate and eventually monetising those innovations. For further information, please contact us via info@platcomventures.com.