Profile - David Baynes:Taking academic research into the wider world of business

IN the end it was a relatively easy choice. David Baynes, fresh out of university and clutching a degree in philosophy, needed a profession.

"The demand for philosophers was thin on the ground. I thought I wasn't clever enough to be a doctor, and my dad didn't like it as a lawyer," said the chief executive of Fusion IP.

So Mr Baynes decided to be an accountant. There, he found his niche.

Hide Ad
Hide Ad

"It was perfect because I love corporate finance," he said. "I'm numbers. Give me the good story and I will do the 'How are we going to fund this?'"

Mr Baynes, whose Sheffield-based group turns university research into cash, has more than enough numbers on his plate to keep him busy. Fusion owns the rights to all research generated by the University of Sheffield and Cardiff University.

It has a portfolio of more than 20 companies, spanning sectors from medicine to military engineering.

"I love floating, growing and selling companies. For some reason, it's just something that rings my bell."

Hide Ad
Hide Ad

The ebullient philosopher-turned-accountant spent his early career at Arthur Andersen. After qualifying, he left to become a freelance financial controller. After meeting serial entrepreneur Sir Christopher Evans, he helped to float biotech firm Celsis, raising 20m within a year and a half.

Next came Toad, a car audio firm again backed by Sir Christopher. He co-founded the company, spending seven years building it from start-up to full listing on the London Stock Exchange. That was followed by spells at technology firm Whereonearth and video games company Codemasters.

Then, in 2003, he arrived at Fusion IP, then known as BioFusion, a company established in 2002 to commercialise university research.

At first the company struggled to turn fledgling ideas into business. "I said these are all too early for us. Let's bundle together your portfolio."

Hide Ad
Hide Ad

Along with colleagues Stuart Gall and Peter Grant, Mr Baynes approached the University of Sheffield to float the idea of gaining access to the next 10 years of its research, worth about 1bn in spend.

"It was mildly outrageous," recalled Mr Baynes. "We were three likely lads saying, 'Why don't you give us the next 1bn of your research?' But the university was absolutely great."

The bid was successful and Sheffield handed Fusion 10 years' exclusive access, initially to its life science research, but then extending it to all IP.

Next, after unsuccessfully tapping venture capital funds for cash, the group decided to float, and joined AIM in 2005.

Hide Ad
Hide Ad

In 2007, Fusion signed the deal with Cardiff University, again for 10 years' access to its research. In total, the agreements give the group access to research spend worth about 185m a year.

But Mr Baynes is not stopping there. A possible tie-up with another university, which he will not name, could also be in the offing.

"We have an understanding that we will probably do it when the time is right," he said.

The model is simple: Fusion gains access to the hotbed of ideas that are universities, and sifts through their research. Promising ideas are progressed, and the successful ones make it through to becoming fully-fledged private companies.

Hide Ad
Hide Ad

With more than 150 disclosures emanating from the two universities each year, Fusion has a job to whittle them down to two or three new spin-outs a year.

"You have to have a certain amount of energy and be relatively optimistic," admitted Mr Baynes. "I do really believe that some of these are going to work. The science is good."

Fusion initially owns a new company outright, but then gives 40 per cent to the academics involved.

Its new partner and stock market big brother, IP Group, takes 12 per cent under a new agreement, and Fusion is left with just under half

its equity.

Hide Ad
Hide Ad

IP Group, which has partnerships with 10 universities, including Oxford, parked its tanks on Fusion's lawn when it bought a 20 per cent stake in the group last November. This could prove the stumbling block for Mr Baynes's ambitions for Fusion.

"They call it a strategic stake," said Mr Baynes. "It's a complete win-win. They get two of the best universities; we get cash."

IP Group's intentions remain unclear at this stage, but a takeover could be on the cards.

"All we can do is keep doing great stuff, and make sure if they do take that option, they have to pay a lot for it."

Hide Ad
Hide Ad

IP Group clearly has an eye on some of Fusion's brighter prospects, which include Simcyp, a spin-out company from the University of Sheffield. The firm, which delivered a 26 per cent rise in profits to 1.3m last year, specialises in simulating the way new drugs are absorbed and react within the body.

Simcyp is among the UK's top 15 fastest-growing companies, and received the Queen's Award for Innovation in April.

"You could see somebody wanting to buy that," said Mr Baynes.

And exits, or selling businesses, are what will define the group. "In the short term, we will probably sell stuff. The market wants to see that you can sell stuff. Longer term, we will hold on to stuff.

Hide Ad
Hide Ad

"We've been floated five years. It's quite reasonable that after five years they're saying, 'Show me the money'."

Another, Magnomatics, has designed magnetically-geared motors and generators. The Sheffield company, which is working with the Ministry of Defence, is due to break even this year.

Mr Baynes agrees it takes a flighty mentality to swap from one complex investment to another at the flick of a switch.

"It suits me down to the ground. I like being focused on something for a day or two and saying we will see you in a month or two. I like the diversity."

Hide Ad
Hide Ad

Of course, there are some academics, who after investing years into their projects, recoil at having to give 60 per cent of their equity away.

But Mr Baynes said Fusion's support and business expertise is a compelling offer – from finding a chairman to raising funds. "You can just be a voice in the wilderness. Or you can come with us."

DAVID BAYNES

Title: Chief executive, Fusion IP

Date of birth: July 25, 1964

Education: Aberystwyth University, Philosophy

First job: Steam cleaning pig pens

Favourite song: Bodies, Robbie Williams

Car: MG ZT

Favourite holiday destination: Malaysia

Favourite film: Gandhi

Last book read: Why Does E=mc2? by Brian Cox

Most proud of: My two children, Georgia and India