Since 2000, 61 graduate start-up companies have started operating in the area, most of them in digital media, including computer games design and web development.

To help some of the students develop their ideas, the university runs an awards scheme that helps fund their development.

Aimed at animation and multi-media art projects, Teesside's Digital City Fellowship scheme was created to encourage graduates to stay in the area.

The scheme awards grants to commission innovative pieces of art, computer games and animated films and the money can be used to help digital artists buy equipment, software, fund research or help with living costs. Up to £6,000 a fellowship is available for each project.

Among those to benefit were two friends from Canada, who used it to develop their plans for a computer games company based in Middlesbrough.

Doug Wolff and Paul Dolhai, both 26, from Hamilton, set up the computer game design company Onisoft with the help of a £5,000 Digital City Fellowship.

They arrived in Middlesbrough in 2001 to study on the MSc course in computer-aided graphical technology applications.

The men, who decided on the name Onisoft because it derives from the Japanese word for demon, a common enemy in computer games, are directors of the company, which employs five people, four full-time, one part-time, and who are all students.

Since setting up, they have been developing the fantasy game Fate of Ages, with which they are now approaching major publishers. Last month, the company was represented at the electronic entertainment fair E3, in Los Angeles, US, where it made useful contacts.

Mark South, 25, the business development manager who came from Hamilton to work for Onisoft a year ago, said the development of a digital technology cluster on Teesside was exciting.

He said: "It really does have potential. The thing about businesses like ours is resources, and it is very important to be close to other business, either to contract or for advice. That is critical and a cluster is important. We have been able to employ students and also make use of other students as contractors."

Mr Wolff said: "In the longer term, we would like to take on more staff. Ideally, we would like to reach a position where we have at least three teams of 20 helping develop different platforms. With the time it takes to develop a product, which can take up to two years, it is important to be able to release new products on a more regular basis, say every six months."

And the ideas keep coming from students and ex-students. Another good example is Adam Stops, a PhD sports biomechanics student and part-time lecturer in the subject, who has developed a computer programme that uses digital technology to analyse the way the ankle joint, ligaments and soft tissue work.

Based on scans, the programme allows Mr Stops to show an ankle on screen and move it in realistic ways to assess the stresses imposed during sport.

The 24-year-old, from Essex, received £7,500 from the University's Digital City awards to develop the idea further. The fund encourages innovative applications of digital technology.

He hopes to interest shoemakers and companies that manufacture ankle replacements in his invention. The programme can also help educate sportspeople to help them avoid injuries in the first place.

He said: "I was aware that a lot of sports people have a susceptibility to ankle injuries and although the technology has been around for years, it has really improved over the past eight to ten years.

"I hope I can market the idea commercially and also that I can help prevent similar injuries in the future."