The Independent – June 2004

British universities are emulating America by supporting their graduates in setting up spin-out companies. The result is a new generation of entrepreneurs. Gareth Rubin investigates

“The university’s very proud of us; they keep shouting about us from the rooftops,” says John Corner. What the university in question – Teesside to be precise – is proud about is Yuzu, the web- design spin-out company that Corner jointly owns and Teesside helped him set up.

“The university’s very proud of us; they keep shouting about us from the rooftops,” says John Corner. What the university in question – Teesside to be precise – is proud about is Yuzu, the web-design spin-out company that Corner jointly owns and Teesside helped him set up.

Spin-outs are commercial firms established and owned by individual graduates or academics with the helping hand of their university, usually in terms of free office space and business advice. When the university itself sets up and owns or part-owns the firm, it is known as a spin-off. While these have been around for decades, spin-outs have only started to appear in the last few years.

It’s no surprise Teesside is proud of Yuzu – as a new university, part of its brief is to offer new prospects to communities and individuals who would otherwise be without them. Corner is a case in point. “I left school with a couple of O-levels, spent 10 years in a series of dead-end jobs, and ended up packing egg boxes. I decided going to university was the only way I was going to change my life and I was right. So I did a foundation year at Teesside in 1996 and that got me on to a course in technology.”

Within two weeks of finishing his course, Corner had a job at a local college teaching tutors how to put lecture notes on to web pages. When his 18-month contract ended he wanted to run his own business, and did the rounds of funding bodies and agencies. He ended up back at Teesside. “They pointed me in the direction of a business adviser and offered me a room and computer equipment rent-free for a year. That was great because I needed the money.”

Just as important was the environment in which he was working. Teesside has a building set aside for its spin-out companies, what it describes as an incubator unit. It provides advisers who can inform the resident companies on everything from tax to filing patent applications. “Plus,” says Corner, “you were in a room next to like-minded people setting up their own businesses, so you could bounce problems off each other. Someone would say: ‘Oh, I had that problem last week, this is who you should see about it.’ If I hadn’t gone to Teesside, I would probably still be putting egg boxes on shelves for a living.”

Corner also met Liam Dawson in the incubator. The latter was setting up his own design business. One year ago they came together to form Yuzu, which has just moved out of its room in Teesside into plusher offices. They now have two employees and intend to take on another two by the end of the year. In May alone, their revenue equalled that of the whole of last year.

At any one time, Teesside has about 20 spin-out companies on the go. They are about to get a new home in the university’s Victoria Building, a former school, which is being refurbished for the purpose. Teesside is spending £1.4m on the refurbishment to create what it calls its Graduate Business Greenhouse; most of the cash is from European and regional redevelopment agencies. Spin-outs are beloved of such agencies because they give highly skilled young graduates a reason to stay in the area, rather than make a bolt for the south-east.

Laura Woods, Teesside’s director of the department of academic enterprise, says: “We’ve known for a long time that our students have good business ideas but aren’t in a position to do anything about them. Many also leave the area for the south-east to take up jobs in industries like computing, even though 50 per cent of them are from the area, so we have a big skills drain from the region. These companies make a direct contribution to creating jobs in the north-east, which is an economically depressed area.”