How do universities persuade benefactors to part with their cash? Phil Baty reports on the arts of fundraising and the newcomers to the game.

Mike Smithson has been poached by Oxford University - from Cambridge - on an undisclosed salary. The hope is that he will give the city of dreaming spires the kind of 21st-century reputation "Silicon Fen" enjoys. Smithson, a former BBC journalist, has been one of those leading the professionalisation of university fundraising in Britain. He saw record amounts of money pour into Cambridge, where, as development director, he attracted research funding from IT giants such as Microsoft.

Last year Cambridge received Pounds 32.9 million in endowment income out of a total of Pounds 293 million. At Oxford, a concerted fundraising campaign generated a total of Pounds 340 million in the six years to 1998. Benefactions now make up as much as 10 per cent of the universities' total income. But this is still "minuscule" compared with the US, where Harvard has just exceeded a target of $3.2 billion from benefactions. "For many leading institutions, fundraising has become critical," says Smithson. "In the US, the difference between a good and a great institution is its ability to extract significant philanthropic sums. British universities are not going to receive enough state funding to operate at the level of excellence they need to compete internationally."

It is easy for Oxbridge, says Aston University's head of marketing Peter Allen. Both universities enjoy huge advantages over others - almost 1,000 years of top-level networking and a reputation for excellence that people are willing to pay to be associated with. "A benefaction to Oxbridge is likely to be high profile, it allows the philanthropist to be associated with a high-quality institution," says Allen. "Some may be happy with an anonymous Pounds 10 donation to charity, others might want to be taken to dinner, or have a building named after them. I will not denigrate any type of philanthropy, but Oxbridge can offer these options while others cannot.

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"On the other hand," he says, "Oxbridge has had teams of people employed in fundraising for years. That is something the rest of the sector is waking up to."

Aston has never made direct appeals to alumni for money, but it intends to do so from next year. Others have already tentatively started. Leicester University - founded on postwar philanthropy - last year made Pounds 1 million from a jubilee anniversary ring-round. "Different universities are at different stages," says Allen, "but it is only a matter of time before all universities do it."

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So how do universities persuade people to part with their cash? Behind most great philanthropic gestures there is invariably a hint of cynicism. Oxford and Cambridge are particularly open to claims that rich benefactors want something for something. Some commonly accepted practices at Oxford blatantly acknowledge that big benefactors can often expect an ego-boosting pay-back. It operates a system in which its large benefactors are eligible for election to a chancellor's court of benefactors. And some Oxford colleges elect a select few of their largest donors as foundation fellows.

Smithson accepts donors' egos can play a role. "People want to be linked with excellence," he says. "But that link can be overstated. It is often much more than the donor wanting a name on a building - it is what's going on inside the building."

Acts of pure altruism do happen. An anonymous graduate of St John's gave more than Pounds 600,000 last year to launch Eagle, a joint project between St John's and Lambeth Council to help Lambeth comprehensive school youngsters further their academic horizons.

But what if donors bring an agenda? How far should an institution with academic freedom at its heart meet donors' requirements? "The reputations of universities such as Oxbridge are based on academic integrity and you cannot undermine it by having donors make you pursue a path you do not wish to," says Smithson. "You are selling the university's vision to potential donors, not vice versa."

Sponsored chairs create perhaps the biggest headaches. Cambridge dons almost threw out plans for a Margaret Thatcher chair in enterprise studies for fear the research would be tainted by suspicions that the incumbent would proselytise for Thatcherism. And some Oxford dons were unhappy about a Rupert Murdoch chair in communication.

An increasingly popular way of getting around attached strings, or perceptions that freedom is compromised, is to target small donors. "One vice-chancellor told me that every unearmarked pound is worth ten earmarked pounds," says Smithson. "The bigger the donation, the more likely that how it is spent will be specified. But we all want money with the freedom to do what we want with it."

For universities with fewer selling points, the lower-level contributions are all that can be hoped for. But if you cannot offer a building, research centre or chair to someone for a Pounds 5 donation, how do you attract them?

Some universities resort to emotional appeals: "You alone can assess the value of your university education and your time in Liverpool," says a recent begging letter to alumni of Liverpool John Moores University. "If you reflect upon the role that this education has played in your life, I feel sure you will see the importance of your support for the present and future generations of students."

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But how much was the experience worth? In case the former students cannot put a value on it, LJMU has a go: "I am asking you to consider a covenant of Pounds 10 per month, over the next four years, for a total gift of Pounds 480..."

One thing is clear: universities' techniques are becoming more ingenious. Legacies have become a massive part of The Open University's alumni relations schemes. Many graduates will have been approached in cold calls by current students of their universities.

"It's a very, very creative business," says Smithson. "Simple begging bowls really don't work. You can't go round saying you need this and that. That's like going to the bank manager for a loan on the basis that you are poor. You have to excite people."

At The Open University, director of development Kitty Chisholm says it is like making friends. "This is not about the quick fix," says Lady Chisholm. "It is about making friends for a lifetime and beyond. You will make an effort to carve out time for your friends because they matter."

* Pounds 1.2 MILLION: Ted Pridgeon. Benefaction to:Warwick University for a research professorship in neuroscience.

Ted Pridgeon left school in Lincolnshire at 15, found fame after the second world war as an international rifle shooter, and made his fortune as a pedigree cattle breeder.

So his Pounds 1.2 million gift endowment to establish a neuroscience research professorship in perpetuity at Warwick University (he lives in nearby Leamington Spa)does not seem like an obvious choice.

"What first made me think about this endowment was knowing so many people suffering from diseases relating to the brain and the nervous system," he says.

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"To find a cure must be the ultimate aim, but also to improve the quality of life of sufferers."

Several of Mr Pridgeon's close friends suffer from Alzheimer's and Parkinson's disease.

"A friend of mine from my schooldays has a wife with multiple sclerosis," he says. "I supported cancer research for many years, but felt that neurological research was not adequately supported.

"Medical research is for everyone, rich and poor, regardless of race, colour or creed."

* Pounds 8 MILLION Sir Paul Judge. Benefaction to: The Judge Institute of Management Studies, Cambridge University.

When Paul Judge sold his company Premier Brands for Pounds 310 million in 1989 he did "very well" out of the deal. "The directors had all the issued share capital," he says. As a millionaire, he thought he would make a contribution to society.

"The director of development at Cambridge had just read about the Premier Brands sale," he says, "and I was invited to Buckingham Palace for a reception with Prince Philip, who is chancellor at Cambridge."

Cambridge's growing acceptance through the late 1980s that business studies was a real academic discipline, and Sir Paul's experience of an MBA in the US in the early 1970s, made the foundation of the Judge Institute of Management Studies almost inevitable.

Judge, a Cambridge graduate, won a scholarship in 1971 to do an MBA at Pennsylvania University's business school.

"I wanted to help business education in Britain. I had this money and thought it would be nice to go back to my roots.

"In Britain at the time, people did not look at business as a profession. We do not let brain surgeons out without rigorous training, but business people had no professional training."

* Patricia Campbell: Benefaction to: The Open University to help disabled students.

At 5am sometime in 1980, Patricia Campbell, then a network assistant for the BBC, was helping with the broadcast of an Open University lecture. "And I thought, while I'm putting the programmes out, I might as well get myself a degree," she says.

She has never looked back. This is why, almost 20 years later, she has decided to leave the OU an undisclosed sum in her will.

Ms Campbell's arts and social sciences degee, completed in 1986, enabled her to fulfil her main ambition: to move into news and current affairs. It led to a leading role at the BBC in special features for programmes such as Panorama.

The job in turn involved her meeting some of the political figures she had been studying at university. "I was in Berlin when the wall came down," she says, "and was part of the team that interviewed Gorbachev. I was handling budgets of Pounds 8 million."

It is a long way from her schooldays, when she failed her 11-plus because of problems with her sight. Ms Campbell suffers from Stephens Johnson syndrome, a condition that shrinks human membrane and meant that as a child she could barely open her eyes.

She has insisted her legacy be spent on helping disabled students.

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"The Open University has about 6,000 disabled students - much more than any other," she says.