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Britain's Millionaire Dons (Int'l Edition)


International -- European Cover Story

BRITAIN'S MILLIONAIRE DONS (int'l edition)

Entrepreneurship Is Flourishing in Britain's Academic World

A hush descends over the timbered dining hall of Corpus Christi, one of Cambridge University's 31 colleges. The master, wearing a long black gown, says a prayer in Latin to end the evening meal. Afterward, the dons and dignitaries retreat to a private, wood-paneled room lit by silver candelabra. As port, elderflower cordials, and cigars are passed around, the conversation swings from medieval manuscripts to a less scholarly subject. David J. Greaves, a tenured lecturer, leans across the table and confesses he made a mistake with his first business venture, in high-speed phone and data networks. "Next time, I'll demand equity," declares the 35-year-old computer scientist.

Cambridge's dreaming spires stud the sky just as they have for centuries. The teachers--called dons, from the Latin dominus, or master--still dine at high table and wear scholars' robes. But the buildings bustle with energy from something the old masters would have frowned on: entrepreneurship. Capitalizing on their intellects, Cambridge dons are patenting their discoveries as never before, spinning off startups and moonlighting with the likes of Hitachi, Xerox, and Microsoft. And though they're loath to discuss it, many are also starting to make great pots of money (table, page 21).

These technologically skilled men and women belong to Britain's growing tribe of "millionaire dons." Academics-turned-entrepreneurs, they feel as great an affinity for Intel Corp.'s Andrew S. Grove as for the groves of academe. Cambridge has spawned the most startups. But the same vigor, ambition, and iconoclasm can also be felt in Leeds, Oxford, and Edinburgh. All told, Britain boasts at least 120 millionaire dons, says financial journalist Philip Beresford, who compiles an annual Rich List for the London Sunday Times. That's up from just a few dozen in the early 1990s, he figures.

Britain clearly benefits from their growing presence. By providing the entrepreneurial spark for technology transfer from universities to industry, these academics represent a new means of generating wealth for Britain. They signal a chance for the country to reverse its poor record of turning ideas into businesses. Indeed, with so much talent flowing between the Ivory Tower and high-tech startups, it's only a matter of time before universities produce a homegrown Intel or Microsoft, predicts Christopher T. Evans, one of the richest of Britain's dons. Scientific entrepreneurship, he says, is an "unstoppable beast."

The dons are also adding momentum to a transformation already well under way in Britain's economy. So far, the action has centered on London, which has become a European hot spot not only for financial services but also for media, music, and, increasingly, fashion and design. Now, the technology and life-science businesses mushrooming around universities in London, Oxbridge, and Edinburgh can attract global capital as they go public on the London Stock Exchange, the Alternative Investment Market, or EASDAQ, a European NASDAQ for growth companies. These entrepreneurs, meanwhile, are becoming role models, providing yet another catalyst for Britain's economic resurgence.

Both economic and cultural factors are spurring the dons to go into business. University salaries are low in Britain, especially compared with those in the U.S., so dons almost have to look beyond university walls to supplement their livelihoods. Full professors at the top of a rigid pay scale make only about $67,560 a year. "Whether you're an Einstein or a dunce, you're still paid the same amount," says Shin Ffowcs Williams, master of Cambridge's Emmanuel College. In addition, the universities generously share or hand over patent rights on discoveries to their scholars rather than guarding the rights closely as many U.S. institutions do.

HIGH LIFE. Even more important, a younger generation of academics is moving up the hierarchy, bringing a greater tolerance for materialism and the display of gracious living. Fast cars, yachts, and posh estates--long the emblems of success in Silicon Valley--are potent incentives for turning ideas into products. As cultural stigmas wither, entrepreneurship and the desire for its rewards are becoming infectious. "I didn't want to be an academic dreamer," explains Evans, 40, who has started 15 companies, mostly in biotechnology, and has a net worth of about $115 million. "I wanted to make things happen."

Who are Britain's millionaire dons? They come from all walks of science and engineering. Like their American counterparts, most amass their fortunes by licensing their discoveries to established players or by starting venture-backed businesses and taking them public. Evans, for example, got bitten by the entrepreneurial bug while still a PhD student at Hull University. He sold a half-dozen leather-bound copies of his thesis on bioengineered cocoa butter to Cadbury Schweppes PLC--the company that sponsored his PhD--for around $125 each. With the proceeds, he bought a ticket to the U.S., where he worked for a biotech startup. Returning to Britain, he founded several biotech companies, including Celsis International PLC and Chiroscience PLC, both in Cambridge.

The son of a Welsh steelworker, Evans today is an unapologetic collector of Aston Martins and Ferraris and has homes in London and Cambridge. To top it off, he bought an entire valley in Wales and built a complex of homes, swimming pools, and gardens there. He even created his own private pub, The Barn, where he and his friends can pull a pint of their favorite brews while watching satellite TV and playing snooker.

Then there's high-profile millionaire David E. Potter, a former physics lecturer at Imperial College who quit in 1980 to start a company in the booming microcomputer market. Psion PLC now has a market capitalization of $554 million and is a leading manufacturer of handheld computers. Potter, no longer a don, says his academic colleagues "thought he was nuts" when he quit his tenured post to start Psion. But the gamble paid off. Today, the Potter family's equity in Psion is worth $184 million.

No less successful are J. David Rhodes and Andy Hopper. Rhodes, a 54-year-old professor of electrical engineering at Leeds University, has founded four companies, including high-flying Filtronic Comtec PLC. A mobile-communications venture, Filtronic employs 1,000 people near Leeds and is capitalized at about $336 million. Hopper, 45, directs a research lab in Cambridge that is jointly owned by Olivetti Group and Oracle Corp. He advises six local high-tech companies that he helped found, oversees his sprawling farm outside Cambridge, and pilots his own Cessna 210 between Britain and North America.

With their aura of achievement and glamour, these powerful businessmen have inspired a generation of young scientists and engineers. Like the far wealthier barons of Silicon Valley, many millionaire dons invest time and energy proselytizing, touring the country to make presentations to schools and organizations. The goal: to break down barriers and brainstorm programs that will build entrepreneurial momentum.

Leading the charge is Cambridge-based entrepreneur extraordinaire Hermann M. Hauser, 49. Austrian by birth, he arrived at Cambridge in 1973 and earned a PhD in physics. In 1978, he founded Acorn Computer Group PLC and built it into Britain's most successful PC maker. When Acorn went public in 1984, Hauser's 50% equity stake made him a millionaire. Soon after, Acorn's market cap shot up to more than $100 million.

The company faltered when competing systems running Microsoft's MS-DOS operating system swept Europe. But now, Acorn has another shot at success with a contract to design network computers for Microsoft rival Oracle. These stripped-down machines don't require hard drives or fancy software since they pull the programs they need from a corporate network or the Internet. If the market takes off, Acorn will be well-positioned, having licensed its technology to a new Hauser-backed company called Netproducts, which already has a network computer selling for $500 at Harrods Ltd. and other stores.

Hauser was never a full-time professor. His only formal links to Cambridge are as a fellow at Corpus Christi College and an occasional lecturer at its renowned Cavendish Laboratory. Still, he is Cambridge's biggest booster. In recent years, he has helped finance two dozen startups, many based on the ideas of Cambridge dons. Combined, his companies boast a market capitalization of $750 million. One of his most important functions is as a liaison between Cambridge and California, where he spends two months of every year.

GREEN LIGHT. One of Hauser's high-profile bets is Cambridge Display Technology Ltd., which was born out of a single lucky experiment in 1989. Physicist Richard H. Friend and his postdoctoral student, Jeremy Burroughes, were running electricity through some organic materials when Burroughes noticed a strange green glow. What they had discovered were light-emitting polymers--a promising candidate to replace liquid-crystal displays in compact TVs and handheld electronic devices.

Before publishing their findings in the scientific journal Nature in 1990, the scientists spent $1,650 of their own money to take out a patent. Today, Cambridge Display Technology is attracting some well-known investors. Hauser is one, but there's also Intel, former Apple Computer President John Sculley, Power Computing President Steve Kahng, and American technology maven Esther Dyson. CDT has licensing agreements with Philips Electronics and Hoechst and a joint-development agreement with Seiko-Epson of Japan.

If CDT makes it into the ranks of display giants, it will have the unique milieu of Cambridge--as well as serendipity--to thank. This ancient market town, where punters lazily ferry tourists along the River Cam, has yet to produce a world-class company such as Oracle or Hewlett-Packard Co. Yet it resembles Stanford University in the way that newly minted PhDs and professors comfortably mesh with the high-tech startup community. And though total business activity is just a fraction of Silicon Valley's, Cambridge-grown technology is starting to generate some impressive returns.

The area now boasts an estimated 1,200 technology companies that are credited with creating some 35,000 jobs. Unemployment, at 2.3%, is among the lowest in Britain, while average weekly wages are 8% higher than the national average. The area's two big science parks are nearly full, and commercial real estate values are soaring. W. Brian Arthur, an economist at the Santa Fe Institute who has studied Silicon Valley, thinks Cambridge, or cities like it, could see a multiplier effect once millionaire dons reach critical mass. The effect gets rolling "when individual academics have really good ideas and are free to set things up," Arthur says.

Entrepreneurship isn't entirely new to Cambridge. It dates back to 1881, when Charles Darwin's son, Horace, co-founded an engineering concern now known as Cambridge Instruments. High tech began to blossom in the 1970s, when individual colleges started developing surrounding farmland into American-style science parks. Soon, the area attracted venture-capital firms, patent lawyers, and other specialists to support the growing cluster of tech companies. Even officials from Montpelier, France, have spent time in Cambridge, absorbing its lessons in tech-company development.

NEW FRIEND. Close ties to America's high-tech communities also enriched the brew. Last summer, the Cambridge area's collective brainpower drew none other than Microsoft Chairman William H. Gates III, who announced plans to spend $80 million there for the software giant's first non-U.S. research lab. Gates committed $16 million more to back local startups. And the university got a $20 million donation for a new computer lab from Gates's private foundation.

According to Gates, Microsoft was lured to Cambridge by people such as Roger M. Needham, the former head of Cambridge's famous computer lab and an expert in computer security systems. Needham also was one of the first directors of Cambridge Consultants Ltd., the granddaddy of the area's technical consulting firms. Later bought by Arthur D. Little Inc., Cambridge Consultants spun off at least two dozen companies, including Domino Printing Sciences PLC, an LSE-traded company with $200 million in revenue last year and 1,250 employees worldwide.

Microsoft came to Cambridge because Needham refused to move to Microsoft's headquarters in rainy Redmond, Wash. So with a nod from the university--especially Vice-Chancellor Alec Broers, who helped broker the deal--Needham now wears three hats. He's a computer-science professor, pro vice-chancellor, and a salaried Microsoft employee. As managing director of Microsoft Research in Cambridge, he recruits scientists to work at the software giant's new lab, which is temporarily lodged above a local nightclub.

Needham's dual roles as a top university administrator and Microsoft recruiter have raised eyebrows. Some feel it gives Microsoft an advantage over the university's other industrial partners, such as Xerox, Glaxo Wellcome, Hitachi, SRI, and Toshiba. "The people at Microsoft aren't Boy Scouts," mutters one Cambridge academic. "The university must be cautious about not being seen as partisan."

MORE, PLEASE. Others question if the Cambridge region--or any other British hot spot--can ever achieve the critical mass of Silicon Valley or the Seattle (Wash.) area, where Microsoft is based. For one thing, all of its entrepreneurial energy springs from a relatively small group of people. "Hermann is great, but [Cambridge] needs 10 more of him," says PC industry evangelist Dyson. And in the past, British scientists have been slow to jump on discoveries. Britain's researchers and their government backers failed to patent key discoveries in monoclonal antibodies, used in pharmaceuticals, and liquid crystals, used in flat-panel displays.

But today's British scientists aren't likely to miss such opportunities. Micro Focus Group PLC, the British software company that first put the programming language COBOL onto a microchip, didn't just patent its breakthrough. "Early on, we decided we had to export or die," recalls Stewart Lang, a Cambridge computer researcher who co-founded the company. Micro Focus won a contract with Intel and immediately opened a Palo Alto (Calif.) office. Its shares recently soared, thanks to the announcement of a now worth more than $8 million.

Success stories such as these could be a flash in the pan. But optimists see dynamics that call to mind Silicon Valley in its early days. Mainly, entrepreneurs demonstrate strong loyalty to the institutions that nurtured them, and the feeling is mutual. One symbol of this synergy is Alan J. Munro, a Cambridge biochemistry professor who quit in 1989 to co-found Cantab Pharmaceuticals PLC. Four years later, Cantab became one of the first biotech companies to go public on the LSE. With a current market capitalization of $193 million, Cantab could join the big leagues if its promising cancer and herpes drugs pan out.

Munro, 61, has since returned to the university as master of Cambridge's Christ's College. In the quiet elegance of the master's lodge, surrounded by antiques and books, Munro acknowledges the risks and tensions of Cantab's early days. Still, he says, he'd "do it all again" if he were 10 years younger. For enterprising academics such as Munro, the Ivory Tower is no longer enough--but in many of the best ways, it's home.By Julia Flynn in CambridgeReturn to top


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