I HAVE a special shorthand symbol I reserve for conversations with Peter Arnold. It’s made up of a vertical dash, a mound, a small step and a horizontal line. It’s a squiggle I use for the phrase “unmet need”, which pops up every few minutes like a plastic whac-a-mole.
Arnold argues that some businesses make the mistake of taking a cool technology and seeing what they can do with it rather than digging up an “unmet need” that no one has thought of before and finding something that can deal with it effectively.
It was the principle on which the Innovation Machine was built ... a project which took promising entrepreneurs and encouraged them to identify such needs. The thinking was that – if you discovered that need and had the necessary dedication – you were well on the way to putting together a business that could reach for the stars.
“When you look at the 100 or 200 companies that have gone from zero to £10m in revenue in five years, those with a technology solution only account for about 1% of them,” said Arnold, in an interview back in 2010. “But they all identify an unmet need. We tell our managers that you have to start there.”
This was something he preached at Newcastle Science City, when he ran an operation that aimed to turn the city into an international centre of excellence for science. Of course, a big clue as to whether something is as good as advertised is whether the chef’s willing to swallow it himself.
In April last year, Peter Arnold left Science City to “explore some really interesting new ideas” in the science sector. According to Newcastle Science City chair Paul Walker, Arnold had put together a range of options as to how the organisation could develop after One North East funding dried up.
One of those was a stripped-down organisation and it didn’t include him.
In a conversation with nebusiness last month, he admitted it was time to move on as the “focus was changing away from creating new businesses with public funding”.
The former group director of technology at Smith and Nephew had run Science City since 2008, developing and supporting new businesses and striving for the creation of the ambitious and expensive Science Central building. So what went through his head when all of that drifted into the rear view mirror?
“I knew I needed a portfolio of ventures,” he says. “If I’d backed one project, it was highly likely that it might not have been successful.
“I needed to take a number of things on and evaluate how they were going to work. Even if one or two failed, I’d be improving the odds of bringing in something that would be successful.”
Arnold is keen to stress that his ventures are all at a relatively early stage. However, he’s already set up a company called Vaxinia in Hexham, through which he’s developing his idea for a new method of creating vaccines.
He’s lodged a patent for the process and is largely self-funding studies into how well it might work against diseases such as malaria.
“I’ve been working with groups around the world and we’ve been working to create new anti-malaria vaccines”, he says. “I’ve invented a new method and I’ve patented it.
“I’ve had some research done and the first set of results that came out at the end of last year look very positive. So we’re looking to raise finance to get it to the next stage.
“If it does work, the method could possibly be applied to creating vaccines for things such as flu or HIV. As I say, it’s a long way away, but it looks very promising.”
While he has a certain amount of angel investment for Vaxinia, he is largely putting in the money for the studies himself. The next batch of studies will cost around £500,000. Development will cost many millions, but he is confident that once he’s proven the product’s effectiveness, a pharmaceutical backer will step in.
“One of the benefits of meeting a lot of these people in Newcastle Science City is that you get a feel for the challenges. It’s always a challenge to find enough capital if you’re going to do something quite technical.
“Angel investors and funds and supporters who really understand the technology will invest at a very early stage, and at a late stage when you’re are showing the success, but in the middle it’s quite difficult. I’m still at the stage where I can raise finance for the idea.
“At the right time, the big companies will be very interested. When I get through the next stage of testing, a number of vaccine manufacturers will be very interested in this approach. I’m not looking for public sector funding for most of these ideas. Most of the portfolio can be funded fairly economically.”
He’s also working on a company called Mozaicom that’s developing tracking technology using the UK’s personal router network. On top of that, he’s offering informal advice to people looking to start businesses through his Elmgrove Incubator, running a med-tech consultancy organisation called Compliant Sales and developing a number of social networking ideas including an “eBay for gardeners”.
“I’m very interested in all the very different ideas I’m working on. They do require some expertise, so on every project I’m partnering with someone who has experience and passion to deliver in that line of work.
“It takes up a lot of time and I do a lot of consultancy work as well. But I’m brutal in cutting things off quickly if they don’t appear to be working. Last year I created 10 online business and I’m now down to two. But I did it very cheaply to see what the reaction would be to those business models. If I’d been doing it in a more institutional set-up it would have been more expensive.”
So would he say that all of these businesses faithfully follow the model that was developed for start-ups coming through the Innovation Machine?
“I wanted to have Vaxinia and Mozaicom in the portfolio. I wanted to explore them even though I knew it would take many years to get there. Those longer-term ones are really about understanding a traditional unmet need and coming up with a technology that deals with it.
“They address quite well-characterised unmet needs and I’m being very open in how I resource them, so I suppose I’m sticking to the Science City approach in that sense at least.
“The others are social networking ideas that deal with an unidentified unmet need. They’re entirely congruent with the model.”
At Science City, part of Arnold’s day job meant guiding a programme in which entrepreneurs threw around ideas and explored opportunities.
But, of course, it’s one thing to be a big cheese in the pit lane and quite another to be the person behind the wheel.
“I found I couldn’t really do this work myself when I was at Science City,” he says. “The company was very complex. It was a small group of people trying to cover five very disparate areas and I found I couldn’t really participate in some of the inventive entrepreneurial projects.
“Of course, now I’m doing the innovation manager role, albeit on a different scale. It’s core to my interests to do that. But at Science City I was managing a group of people and I was much more distant.
“I was very busy, dealing with a lot of the building work and helping with other challenges. The agenda was very much the public sector agenda in Newcastle, whereas this is quite focused.”
A few of the Innovation Machine participants have maintained their businesses since they left its base at Time Central in Newcastle. For example, stem cell scientist Carolyn Horrocks created a company called MyGenomics, which offers customers a chance to generate a weight-loss programme tailored to their DNA make-up.
Another example is Helen Floyd, who recently received Northstar Ventures funding to develop products for injured pets and horses through her company Curar Animal Therapeutics.
However, other businesses announced as part of the scheme have not been so visible. There is no public money now to continue the Innovation Machine programme as developed, although its model for high business growth is being used to give advice to companies who come to Science City looking for guidance.
So what are Arnold’s thoughts on the Innovation Machine scheme and what did he learn from it? “It taught me that a lot depends on the passion of the founders,” he says. “The individuals need to be tenacious in taking their project forward. It’s relatively easy to bolt on the other aspects of what they need.
“If you can’t find someone really desperate to succeed with their idea, it can be difficult. Even if you bring in people, coach them and mentor them, if they’re only half-wanting to be entrepreneurs, they often fail.
“However, we did accelerate ideas to create new businesses and that acceleration means you’ve got to expect a high rate of attrition. We expected about one in 10 to succeed and we’ve got a higher rate than that still going.
“The big thing to bear in mind with projects like this is that you learn things that you then apply over decades. The levels of investment were quite low in the scheme of things.
“The proportion of firms in the country that get high-growth status is something like one in 50,000, and we’re expecting more than that. If we get one or two, that’ll more than pay back the investment that’s been made.”
Through his Elmgrove Incubator, Arnold still offers a bit of support to new businesses. He says it’s neither a consultancy firm or an investment provider, but a more casual set-up where he discusses how the businesses might develop.
“It’s about working with people to address the needs of their nascent businesses”, he says. “Usually they find me, based on the exposure I got at Science City. They’re people who want to develop something.
“It’s mostly mentoring and I can help them find finance where appropriate. It’s very small scale at the moment.”
Arnold is still based in the region, but travels around the world looking at the best markets and skills for his new businesses. However, he recently turned up at Newcastle University Business School in the line-up of an event encouraging people to identify business opportunities. Other guests included Tom Maxfield, Prof Dimo Dimov and Shell LIVEwire director Stu Anderson.
“They wanted me to come in and appear at that event, but I’m hoping they’ll ask me to keep in touch. I felt like it was time for me to move on from Science City last year, but I still want to retain my links to the North East.
“The business school has a great resource there of expertise on entrepreneurship. I know if I talk to Ian Clarke and James Hayton they’ll keep me up to date on the latest trends. They’re very interested in the psychometrics of how you get the right people into your management team. If I wanted to pull a team together, I would talk to them about the things I needed to look for to make the team better.”
Arnold acknowledges it can be tricky to start a business, pointing out that public funding cuts have forced a lot of entrepreneurs to rely on funding their idea with their own money.
He said: “There are a lot of obstructions which make starting a business uncomfortable. There’s a lot of bureaucracy and a lot of issues that make it pretty arduous for an individual. Once you’ve been through it, it gets easier. But it’s not an easy thing to do.”
While the public sector cuts are hitting all sorts of organisations and businesses hard, he believes the North East still has ample potential to succeed, particularly in sectors such as technology.
“In Newcastle, there’s a great group that has been resourced very well in previous years to develop their technology.
“They’re now at the stage where they’re adept and able to develop their ideas, and provide mentoring to others. They’re also quite hungry at this point because some of the funding has been withdrawn.
“There are examples around the world of organisations reaching a certain critical mass and imploding, and the individuals have subsequently gone off, created new businesses and added even more value. They were top entrepreneurial people and they just needed that little push to start new businesses.
“Maybe we’ll get some benefits like that from changes in public sector funding. I know a number of people from the public sector who were made redundant from the regional development agency who are creating their own businesses.
“You’ve got to hope that moves like that will create a lot of private sector growth in the region.”