Harnessing the huge potential of software

23rd January 2024

Approximately half of the spinout companies created in Oxford involve software. In response to a recent government-commissioned review calling for specific terms for ventures exclusively focused on software, OUI's Dr Richard Auburn shares his views.

In the digital age, it should come as no surprise that around half of the spinout companies created at Oxford involve software.

From AI-powered medical diagnostic tools to intelligent battery management systems, software is at the heart of so many impactful innovations from the University.

It was equally unsurprising to see software featuring prominently in the recent government-commissioned review of university spinouts, co-chaired by our own Vice-Chancellor, Professor Irene Tracey. The review recommends that software spinouts be subject to separate guidance around deal terms developed jointly by universities, founders and investors. University equity of up to 10% is viewed as a fair stake for this type of venture, which is often seen as less IP-intensive than areas such as hardware or pharmaceuticals and may require less institutional support before spinning out. The government has welcomed the review – aimed at encouraging academic entrepreneurship and maximising the enormous potential of the UK’s university innovation sector – and has accepted its recommendations.

Life sciences companies are frequently based on years of research within the university, but these opportunities are not risk-free as much technical and commercial development must be undertaken post-company formation. Software development supports faster timelines and is expected to have lower technical risk. The commercial risks remain high as competitors’ barriers to market entry are lower.

While it’s rare that a spinout can genuinely be described as “software-only” – other forms of IP, including patentable material, are typically part of the package – undoubtedly, more and more of Oxford’s entrepreneurial minds are exploring how software can help tackle the pressing issues of the 21st century. This may be partly thanks to the increasing number and range of subject matter experts creating software for others to use.

In my field, the life sciences, there are countless examples of innovative, life-changing ideas with software at their core. Akrivia Health integrates vast, disparate amounts of information into a single dataset, paving the way for researchers to make much-needed breakthroughs for mental health and dementia. Akrivia’s IP is based on over a decade’s painstaking work to turn unstructured, free-text records into a useable resource for academia, the NHS and industry. Billions of anonymised data points will tell us more about illnesses such Alzheimer’s and depression, identify which treatments are working for which patients, and potentially help uncover new therapies to help improve quality of life for millions of patients.

Another Oxford spinout company making waves in the dementia space is Neu Health. A talented team, led by Caroline Cake, are developing a smartphone-based platform that enables remote monitoring of Parkinson’s and dementia patients and optimises condition management and care.

There are plenty of fantastic examples outside the life sciences sector, including Mind Foundry, an Oxford spinout empowering organisations to create, implement and monitor AI and machine learning models. Spun out of Oxford’s Department of Engineering Science, Mind Foundry’s technology has tackled problems as diverse as malaria spread and insurance fraud. The movement towards AI-related software has been growing over the past decade and will only pick up pace as the technology develops and becomes more accessible.

Software spinouts exist on a spectrum, from companies where software is the substantive basis of the company to others where software forms part of the “smart stuff” underpinning, for example, a device’s hardware. Software can be everything from information management platforms to specific AI algorithms – the possibilities are endlessly diverse. That’s one of the reasons venture capital initially grew as an asset class around software companies. Software-only companies tend to require less capital at the outset and can both get to market and scale quickly by avoiding costly and time-consuming tasks such as manufacturing a physical product.

There are plenty of ways to get software to deliver a positive real-world impact. I’d suggest four key approaches:

1. Seek investment to create a fast-growing for profit company
2. Licence software to one or several existing companies
3. Start a purpose-led venture with societal benefit at the new venture’s core
4. Open-source code. Open-source software can be monetised by offering support or services alongside making the software available to others.

For some entrepreneurs, it might be advisable to use a combination of more than one approach. There isn’t a right or wrong way to make software available; nor is there a one-size-fits-all approach. One of our roles as a technology transfer office is to help members of the University community find a way forward that fits their circumstances and ambitions.

My take-home message for the University community is that software has enormous potential, and your options to create impact and, potentially, a financial return are similarly diverse.

 

Dr Richard Auburn
Principal Licensing and Ventures Manager, Oxford University Innovation

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