Britain's Millionaire Dons

Entrepreneurial vigor is flourishing in British academe

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," says 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. Although they're loath to discuss it, many are also starting to make great pots of money (table, page 101).

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 start-ups. But the same vigor, ambition, and iconoclasm can 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 '90s, he figures.

Britain clearly benefits from their growing presence. By providing the spark for technology transfer from universities to industry, these academics represent a new means of generating wealth for Britain. 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 Corp., says Christopher T. Evans, one of Britain's richest dons. Scientific entrepreneurship, he adds, is an "unstoppable beast."

NEW TOLERANCE. 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 for ways to supplement their livelihoods. Full professors at the top of a rigid pay scale make only $67,560 a year. In addition, the universities share or hand over patent rights to their scholars rather than guarding them closely as many U.S. institutions do.

Even more important, a younger generation of academics is moving up, bringing a tolerance for materialism. Fast cars, yachts, and estates--the emblems of success in Silicon Valley--are potent incentives for turning ideas into products. "I didn't want to be an academic dreamer," explains Evans, 40, who has started 15 companies and has a net worth of $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 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.

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 cap of $554 million and is a leading manufacturer of handheld computers. No less successful is J. David Rhodes. A 54-year-old professor of electrical engineering at Leeds University, he has founded four companies, including Filtronic Comtec PLC. A mobile-communications venture, Filtronic employs 1,000 people near Leeds and is capitalized at about $336 million.

With their aura of achievement, these powerful businessmen have inspired a generation of young scientists. Like the wealthier barons of Silicon Valley, many millionaire dons invest time proselytizing and coming up with programs aimed at building 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% 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 Corp. 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 this market takes off, Acorn will be well-positioned, having licensed its technology to a new Hauser-backed company called Netproducts that 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. 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.

LUCKY BREAK. One of Hauser's high-profile bets is Cambridge Display Technology Ltd., which was spawned by a lucky experiment in 1989. Physicist Richard H. Friend and his postdoctoral student, Jeremy Burroughes, were running electricity through 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 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 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 Japan's Seiko-Epson.

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 impressive returns: The area now boasts an estimated 1,200 technology companies. Unemployment is just 2.3%, while average weekly wages are 8% higher than the national average.

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

THREE HATS. 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.

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.

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. Others question if the Cambridge region can ever achieve the critical mass of Silicon Valley or the Seattle (Wash.) area, where Microsoft is based.

Still, optimists see dynamics that call to mind Silicon Valley in its early days. Entrepreneurs demonstrate 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 was 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 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.