03/09/10

By Alex Evans, Editorial Director, National Business Awards

With new research indicating that a third of graduates are planning to start their own business due to a dearth of job opportunities, two university spin-out finalists for this year’s National Business Awards have proved that this might not be a bad idea.

Specialist business insurer Hiscox recently conducted a study of 1,000 Britons graduating in 2010 and 2011 and found that 32% are preparing to launch their own start-up — with retail and IT identified as the most popular sectors.

One pioneering university spin out company that made this year’s shortlist, for the Private Business of the Year, is ioko. Launched in 1996 by two graduates from York University, it builds digital media platforms that allow viewers to watch TV programmes online — a burgeoning market. Working with brands including the BBC, News Corp's BSkyB, AT&T, Channel 4, ITV, Disney and Electronic Arts, it has seen exceptional growth over the last year and is has successfully expanded into the US and Australia.

Comparing today’s economy to the one it launched in 14 years ago, CEO Mark Christie said: “At that time the internet was in its infancy; there was no infrastructure in place and set up costs were extremely high. Nowadays it is easy to set up a business online and with the advent of cloud computing and software services running costs can be kept to a minimum.”

Funding for start-ups is harder to come by though, adds Christie. “Fourteen years ago the market was more receptive to risk taking. Although ioko is self-funded it would have been relatively easy for us to secure investment. At the time there were stories of graduates with business ideas realising fortunes before any business had taken place let alone made a profit. Today the climate for start-ups is tough. Investors and bankers have become risk averse and any idea that has mileage in it will require a robust business model and a business plan that forecasts positive cash flow and profitability to secure investment.”

Entrepreneurial energy

IT isn’t the only sector to have produced spin out success stories. ENER-G, also a finalist for Private Business of the Year, was Manchester’s first university spin-out business. “Twenty six years ago, it was a fledgling business, called Combined Power Systems (CPS), based at UMIST — now The University of Manchester,” explains Group Managing Director Derek Duffill. “Today, ENER-G is a multi-national sustainable energy group employing nearly 800 people in 17 countries and with an annual turnover of £126 million.

“CPS was born from a market opportunity developed by entrepreneurial investors on the back of R&D work by academic staff at UMIST. It is crucial that graduates receive the nurturing support they need to grow businesses from grass roots. Organisations like The University of Manchester Intellectual Property (UMIP) are providing such opportunities and helping to create the successful enterprises of tomorrow."

There are a number of organisations that now exist to encourage student entrepreneurship, including the National Council for Graduate Entrepreneurship (NCGE) and the National Consortium of University Enterprise Societies (NACUE). The National Enterprise Academy was also set up by Dragon Peter Jones to help 16-19 olds to set up their own businesses.

In December last year, The Telegraph began tracking the progress of 50 highly promising university spin outs “to show the breadth of cutting edge technology emerging from Britain's universities”. This Index was created by www.younoodle.com — a start-up specialist which tracks 50,000 emerging businesses.