0:00
We can look at the bios of our people on the panel. Phil Morle is partner of
0:05
Main Sequence Ventures. He's been a fixture in the start-up community over
0:12
some time, he's previously a co-founder of Spreets and Pollenizer which I'm sure many of you will know. Silvia Pfeiffer, CEO of Coviu, which is a
0:21
Data 61 spin-out. She'll be known to many of the people in this room. She's obviously been a NICTA and Data 61 researcher and is considered a world
0:32
expert in video compression. Dr. Kate Brooks is the WA Director at MPT
0:38
Connect, the Growth Center for medical pharmaceutical technologies. She's an
0:45
astrophysicist and has previously worked as a long time researcher at the CSIRO and
0:51
worked on the the Square Kilometre Array program. Professor Michael Biercuk, I just
1:00
asked you about my that, my apologies, is the CEO of Q Control and is a Professor of
1:06
Quantum computing? Quantum physics and quantum technology. Quantum physics and quantum technology at the University of Sydney and has been
1:15
obviously very high-profile, in what is an increasingly high-profile area of
1:21
research in quantum, certainly something that Australia is getting quite
1:27
excited about right now. I've also been asked by the panelists to find out where
1:33
the audience is from, so we can get a bit of an idea of what you know, how to
1:40
direct this conversation. So I mean between University researchers, the
1:48
business, and the private sector or government and policymakers, can we do a show of hands for people who are from research community or universities?
1:57
And from the business community, private sector? And government policymakers? Oh
2:05
that's a great mix. Yeah that's fantastic. In fact that's, I'm guessing, I wouldn't want to speak for the organizers, but I think that is
2:13
exactly the crowd they wanted to get in the room. Okay, so by way of introduction, Is research commercialization broken? This is not a
2:25
new question to anyone who has lived in Australia for any period of time. I think
2:31
it's fair to say, and numerous reports, literally dozens of reports, have told us
2:37
that we do terrific research, we haven't extracted the maximum kind of, we haven't
2:43
captured that economic value from that research in the way that perhaps our OECD
2:49
peers have. A year ago at this event, Adrian Turner, the just retired, the
3:00
just resigned, CEO of Data 61 released a report done by Alpha-Beta that contained
3:06
one of the great statistics, or the great numbers of the many reports that
3:12
have come out, it found that if Australia can just be average, if we can just meet
3:17
the OECD average on four key metrics of output, there's 315 billion dollars in it for us. So it's kind of a measure of the value
3:29
that we're leaving on the table with some of our research. Not to bore you,
3:35
I'll finish with this, but the innovation in Science Australia, the Commonwealth body that also produced a report, on a sort of
3:49
a 2030 fore-sighting report - Bill Ferris said in his introduction, just at a time when
3:54
Australia needs to accelerate its innovation performance, we are falling behind our global peers. He pointed out STEM, kind of STEM education, but also
4:03
business investment in R&D, as two areas that we perform exceedingly badly. And he
4:09
says this is more than a canary chirp in our economic mine-shaft, it is a clarion call for national action. So I'm going to start, and I am going to ask Michael
4:19
to start, simply by asking is research commercialization broken, and
4:24
can you see any evidence that our business, academic and political leaders are heeding this clarion call for national action? I think the short answer is yes,
4:34
it's totally broken, but if the aim for blame is not where all the policy
4:40
levers are currently pointing, or the current policy guns I guess, everybody is pointing at the researchers as the point of failure, and I think that's
4:49
fundamentally flawed. I don't think the issue has anything to do with the quality of the researchers, or even their desire to potentially do things
4:58
that are commercially focused, I think the problem, and I should say very clearly, I span both academia and the private sector, I run a company,
5:08
it's private sector. The issue is largely on the industry side, and the interface
5:16
of industry with other parts of the economy. So the first thing to say is,
5:22
that there's no surprise in this, although I'm sure I'm gonna make some of you angry, the third of you who put up your hands from industry, that incumbent
5:30
industry in Australia is largely rent-seeking. It's largely property. It's largely big banks, and it's horribly risk-averse. And in fact it's not just industry, it's industry responding to incentives,
5:41
because just like Sydney ten years ago only had giant pubs with sticky carpets,
5:47
because that's what the regulatory framework was like, there were no small bars, all the regulatory frameworks incentivize very big companies that
5:55
have a business model that is risk-averse. Start-ups are a real way to change that, and deep tech start-ups in particular, that I think
6:04
we'll talk about a lot, are a great way to bridge this gap. But when it comes to
6:09
the interface of say the startup community with university sector, there
6:15
are kind of policy issues that come from both government and the universities themselves that make this really difficult. And the biggest one is the
6:24
name technology translation, or even research translation, because what it fundamentally leaves out is the role of the founder, of the
6:33
inventor. Many of the incentives and the policy
6:39
structures in place that come from government etc, push universities to
6:44
build an IP portfolio that they can then sell as an object in itself without integrating the experts who actually are motivated to build that
6:54
information into a commercial success story. So I think you know to wrap it up,
7:01
fundamentally we have policy issues that come from the fact that universities keep getting their budgets cut, so they have to seek capital somewhere, and they
7:10
see extracting money from selling their IP portfolio as a way to do this, which screws up everything in terms of sponsoring start-ups. It comes from the
7:19
lack of R&D investment from larger established industries, and it comes from of course, the government policies that set all those things in place. I do think
7:27
it is totally broken, but I also think that it's not actually that hard to fix and we can talk about that more in the next few minutes. Okay, I'm
7:35
going to ask Phil Morle, because he as a Director of Main Sequence Ventures,
7:40
obviously a venture capital arm, I suppose, for want of a better term, of the CSIRO, I won't say he came to the rescue, but got involved
7:50
with Michael, understood his business, and have put some money in. So I mean that
7:56
looks like a good outcome, that's surely points to a system that's
8:02
working? Yeah, I mean, my view is that research commercialization is broken, but
8:09
it's getting much, much better, and it's changing at a rapid rate, and those of you that are in universities will sort of see, I hope, lots of changes happening,
8:17
obviously different in different universities. But you know in the case of
8:22
Mike's company, Q Control, is a sort of classic example of what we
8:28
do at Main Sequence, which was we invest in science-driven companies across the whole system of Australia that have some connection with publicly funded research.
8:38
So Mike was running a lab in the University of Sydney,
8:44
and we found a valuable opportunity for venture capital getting involved in what is
8:50
a rapidly emerging quantum computing industry, and found the sweet spot where
8:56
actually the commercialization opportunity was was ready for us to get
9:01
going, and I think Sydney University did a brilliant job with this in the end, because we were, I think from decision to
9:07
being out, three months? Something like that. Which those of you that have
9:13
tried, Sylvia will tell you a horror story, you know it can take years.
9:20
But you know things are changing very quickly, and in our fun we have to get good at it, and we have to learn about the mechanics of what's working and
9:29
what isn't working. To give you another example, we have, I think this is
9:35
an interesting example because it's going to point to exactly the same group of people in the CSIRO. One of our earliest deals with Food and
9:48
Agriculture in CSIRO took two years to get out of CSIRO, the whole discussion
9:55
took a phenomenally long amount of time. You know you may have heard the phrase,
10:01
time kills deals. It absolutely does. It just becomes a little bit less valuable, a little bit less urgent, people become a little bit more cross, and not really
10:10
wanting to do what was exciting them two years ago, but that same team
10:16
recently, we've just done a deal with CSIRO, and I should say most of our deals
10:23
are not with CSIRO, these are just two examples, we did a deal, we basically
10:29
decided to found a company, out of food and agriculture around October last year,
10:35
we founded the company in January, funded the company in January, company operationalized, there's now quite a large next-generation food company
10:45
called V2 Food. Which was only possible because of research and the private
10:51
sector working together, so in this case it's the Hungry Jack's Empire and CSIROs Food Science coming together.
10:59
Neither one of those organizations could have done it, no one could have done that, and equally no individual founder could
11:06
have done it without those two, the benefits of those two organizations, but that has literally created millions of dollars worth of value for everyone
11:15
involved in eight months. And the difference between the two is actually what Mike said, which is people centricity. Focus on the
11:25
opportunity, not chipping away at all the clauses in a contract. Focus on what's
11:31
possible in ten years, not what we have in front of us today, as this kind of little slice of IP. What I find is the more people do that, the more
11:43
interesting the deals are, the more quickly people get the deals done, the more everybody's focused on making that deal a terrific outcome, and I'm seeing
11:51
more and more of that across the research community. I should've said at
11:57
the beginning, obviously there'll be a Q&A at the end of this, you'll get chance to ask the panelists directly, and I'm sure the panelist will also stick around
12:05
afterwards. Silvia Pfeiffer, so Coviu is a spin-out from NICTA/Data61, so
12:17
I mean I have heard that you have a horror story - we don't have to focus on the horror, but maybe we can get some insight from that experience, and maybe a way forward. I'm thinking about a way just to explain
12:31
the progress we've made, despite my horror story, so I'll start 13 years ago. 13 years ago I created a first company called Vequence back in the day, maybe
12:42
some people here still remember that, and that was in video technology,
12:48
actually video search, back before we had Google doing video search, and I tried to
12:54
create that out of CSIRO as well, it was impossible. I basically just went away and started from scratch, built everything from scratch, and tried to
13:03
build it that way. And then commercialization was impossible because at that time we had no money in the VC industry.
13:10
Seriously, there was I think, one fund that had ten million dollars and that was all there was. If we compare that to today, we've got probably close to a billion dollars in
13:18
the VC space right now in Australia. I mean I was thinking the other day when I founded Pollenizer ten years ago, the entire venture capital
13:26
pool was smaller than our fund. Exactly. Exactly. Smaller than your fund today, and so while I'm just gonna tell you my horror story in a minute, but the
13:37
environment has changed fundamentally. The environment for creating start-ups has changed fundamentally, and I'm talking to all of you entrepreneurs that
13:44
have a research background, to encourage you to actually try it, and not just
13:51
listen to my horror story, because the environment has really changed and has improved heaps. I wouldn't be here, sitting here, without the investment that
13:59
we got from Main Sequence Ventures last year, and I wouldn't be having a business that's close to revenue positive without having done that step, because last year
14:11
when we were in CSIRO it was minuscule, like we had built something but it was miniscule revenue, so there was a big trust being put into us by
14:21
Main Sequence, and I think it was all around the team, as much as the idea, and
14:29
knowing that the kind of grit we put through, just getting out of CSIRO, and I'm getting to the horror story. When I joined CSIRO or NICTA back in 2012, we
14:46
were working on a new technology called WebRTC, which is now just part of the
14:51
browser api's, and nothing as exciting anymore. In America there was one company
14:56
after the other created that got lots and lots of investment into this space, and I was trying to build something like that in Australia.
15:03
It took me from 2012 to 2018 to build enough of a profile, and to build enough
15:11
interest in the Australian market to get this investment. So part of that was a
15:16
transition between NICTA was actually merged into CSIRO, that slowed us down, probably about a year, and part of that was also the
15:25
negotiations around how to do the spin-out. My goal was to actually create an Australian company, not just to license the technology to somebody,
15:34
because there's different pathways of commercializing IP. Licensing is one that
15:40
is more traditionally used because it bears less risk, the person who licenses the technology takes the risk, not the Research Institute, not the inventor. It
15:49
is easier on the R&D organization, but it is really the easy way out. When I'm
15:57
asked to choose between two ways, the easy way and the hard way, I'll usually take the hard way, which is what I've done in this space. So it took me about
16:05
four years just to get everything in place, to have a team, the commercialization route, the negotiations in place with CSIRO, the decisions on
16:15
shareholding etc and a investor lined up. It's not easy, but if there's a person
16:22
that wants to do it in the team, getting back to what Michael said, it really takes an individual to pull it through, or a team. We should build on these teams.
16:33
It's more often than not we do not look at the individuals. We have tall poppy syndrome in Australia. We don't really pay enough attention to the power that
16:42
stands behind an individual and an individual team I'll bring Kate
16:48
Brooks into this now. I wanted to ask you a couple of things. Firstly, on the growth networks policy. You know government has identified a
17:00
series of specific industries where they've funded these growth
17:05
network organizations that Kate's involved in. The medical tech and
17:10
pharmaceuticals one. So how do you in that organization, engage with research
17:16
and deep tech? So that's question one. Question two is something that Mike said
17:23
earlier around effectively saying that business has been a bit asleep at the wheel in terms of
17:28
what Australian research has to offer. So what if you kind of address both of
17:33
those. I know you've come out of the kind of corporate sector as well. So yeah I can talk to that. I mean I was at Wesfarmers for the past two
17:43
years up until six weeks ago, so the role in Wesfarmers was one of their
17:49
Innovation managers for their businesses in the chemicals, energy and
17:55
fertilizers conglomerate. So certainly can share that corporate view. It's week six now in the med-tech space, learning that. So MTP
18:07
Connect as you said is one of the growth centres, and what one of our metrics
18:12
really, and what the government supports us to do, is to work with researchers, and more broadly the innovation ecosystem, to create new, to
18:23
create economic growth and jobs, so that includes commercializing and creating start-ups and helping them scale. One thing we do is connect these new
18:33
ventures to global markets. I'm just returning from Boston where we took a delegation of 30 SMEs to Boston for the global med-tech annual
18:44
conference, and we set them up with investors with other I guess
18:52
contacts, to help them take their product to market. With med-tech and pharma it's a global market, so you have to be global from day one. So we
19:01
also work with running workshops and other educational activities as
19:06
well, and the MTP Connect also works closely with government to help identify policies and other legislation, things that might need to
19:15
change. So I think just coming back to the question, is research
19:20
commercialization broken? I don't think it's broken, I think it's just really hard, and all commercialization is really hard. Research as well. And I think
19:32
there's a whole different skill set required from research, to take a
19:38
product to market. And you know we've had a lot of dialogue of late about why researchers need to translate their stuff out
19:48
of the lab, and get it into the market, and I think we're now grappling with, we get the why, the researchers get the why, but now their grappling with
19:58
the how, and this is the bit that's hard. Research is very much focused
20:05
on being judged on scientific merit, and when you're moving to the commercialization space, you're being judged on market and
20:13
profitability merit, very different, and it's not obvious to me that the skills
20:18
of a researcher are what it takes to get, you know match the skills of a
20:23
commercialization venture. On that, a couple of you have mentioned the need to focus on the founder, the need to focus on the individual who might drive some of these
20:33
outcomes. I mean it seems in Australia in recent years we've kind of solved the the dearth of venture capital through various incentive measures, that
20:43
we're not awash with money, but there is money around, so what kind of policy positions do you think might be taken that would improve that focus on
20:51
founders, or is it simply the institutions have to focus themselves.
20:56
I think that it is happening, you know it was never gonna happen overnight, it was never gonna happen like someone sends out an edict to all the
21:04
universities and magic happens and they all changed. You know if I look back, you
21:10
know someone has been doing this for many, many years, even five years ago walking into a room of researchers saying tell me you
21:19
tell me what you do, and just hearing blah blah blah blah blah. I don't really
21:25
understand what you're saying, they were speaking in their own language, they were speaking in the the language of the research, and to Kate's point it
21:34
was very much about the nature of the research and the technology of the invention, not the market, its purpose who's going to consume it, what are the
21:42
other opportunities for it. That has dramatically changed now, and I'm not just talking about small pockets of researchers that you'll find in the
21:52
corners of special universities. Actually it's happening en masse, and I think there's been a very decisive approach towards doing that,
22:05
which is actually having results. What's emerging out of that, again we have this sort of dialogue of are our researchers entrepreneurial? Well some
22:15
are, and some aren't, and actually just as you know some firemen are entrepreneurial,
22:20
and some aren't, you know there's different, they're different people have different skills, so that the art is finding the combination of people and
22:29
sharing with the broader group, the value and benefit of market, of customer, so
22:36
that when the research is happening at the right time, it starts to get directed
22:41
towards something which is more likely to be commercializable, and again not in a transitional stage gate sort of way, but a sort of general approach. So I
22:51
think it's getting much better, and we're starting to see this. I'm sorry I have to interject at this point. This is where I feel like I differ
22:59
a little bit in view from from both Phil and Kate. I think it is unreasonable to assume that researchers should bear responsibility for commercialization in
23:08
all cases, and this is where the the narrative usually focuses. Researchers need to be better at understanding markets. I don't
23:17
think that's what we're saying. I'm not saying that. Well you did talk about how researchers need to understand product and things like that, and I say there are some of us
23:24
who do, and those of us who do and are interested should be encouraged, and the most important thing is getting the policy levers right to allow us to
23:34
succeed. Instead of demanding change in the research community, which has been the dominant narrative. Researchers need to focus more on impact. Researchers need
23:42
to focus more on commercialization. Researchers think too much about what they like. Well, researchers give up huge amounts of money in exchange for the
23:51
freedom to pursue deep scientific or technical questions that can advance humanity overall. And if we say well that's not really valuable, what's
23:59
valuable is the commercialization aspect, that messes up everything. So I want to focus on the areas where we can change
24:07
policy to allow those researchers who are interested, who feel the internal
24:13
drive, not the extrinsic you know gun to the head if you if you don't move in the commercialization sector you're not gonna have any research funding,
24:21
that's not the right approach. We've done all stick and no carrot, and the carrot needs to be about incentives, and everything right now dis-incentivizes
24:30
researchers from pursuing this. Because there are limits on how much equity you can have as a researcher spinning something out. There are tremendous
24:38
bureaucratic hurdles. We heard all about this from from Sylvia and from Phil about what it's like to get something out of a public sector research
24:45
organization. Everything is currently policy-wise stacked against the people who want to do this. So instead of focusing on the people who don't want to,
24:54
which is quite fair, why don't we focus on helping the people who want to. That's my general idea. That's super important. I was
25:02
was just gonna mention. My point that I wanted to make is that
25:07
commercialization requires different skill sets. I'm not I'm not suggesting researchers need to learn those skill sets, it can be
25:18
a different team that takes it through the commercialization process, but it requires different skill sets, and I think the team is very important coming
25:29
back to everyone's point. If you're investing, or you're a corporate wanting to engage in a new venture, an A team with a B product, is better than a B team with
25:40
an A product, so the team is everything. Okay, I'm gonna go, we're going to questions in about
25:46
30 seconds, but I just very quickly wanted to try and open up Sylvia and and Mike. So you're two researchers who are now
25:55
founder CEOs, so I have no doubt that you had plenty of opportunity to do other
26:02
things, like join a corporate, join an IBM or join a a Microsoft for you Mike.
26:07
I did work at Google at one stage. So why do a start-up, and why
26:12
do it in Australia? Why do that start-up in Australia, you were talking about how much easier it would have been in the US and
26:21
Mike obviously a lot of the work being done in your area is the US, so why? I
26:26
want to make a difference in Australia. So I came to Australia in
26:32
1999 to work for CSIRO, and CSIRO, looking at it from it from Germany, had this
26:37
awesome opportunity because it was doing research and commercialization, and you
26:44
know commercialization for me was this magic thing of taking something out of the lab and getting it into people's hands. So actually, my understanding of
26:53
commercialization was more around productization and getting it into people's hands. But the reality when I came here was actually very different.
27:01
The reality was, it was all around research, which was measured based on number of publications, and commercialization was measured based on
27:10
how much money you could get into the organization. So how is that delivering value to Australia, if it's all about just getting money into CSIRO. That's
27:19
not thinking about the big picture of making change for Australia, and worse though, it actually puts a mindset into everybody's mind, into
27:30
everybody's head, around how can we get more money for what we're doing, rather than how can we get this technology that we're doing outside, out of the lab, and
27:39
part of the consequence of that is that when I started the request was, if you
27:45
don't do a spin-out, first you have to either pay for these, the IP that you're taking out, or you give us 50% of your company. Who's gonna do that? That's never
27:54
gonna happen. To Mike's point, sounds like you've been swimming against the tide. Mike, very briefly and then we'll get to the questions. Sure. I guess
28:03
my answer is a little bit less altruistic, it was a combination of
28:08
wanting to have impact, and recognizing that for good or for ill, no matter how
28:13
senior I became as a professor there were certain doors that were closed to me, and magically they have all opened up as
28:19
soon as I put CEO after my name, instead of PhD. I think it's kind of sad, but it's
28:25
reality. And then the other part is, I wanted to have what I found to be an enjoyable existence, and I worked at a big three management consulting
28:35
firm before, one of the largest, and it was probably the most miserable three years of my life. I have never been more unhappy than dealing with
28:44
bureaucratic meetings about geographic expansion strategies for a giant organization. The idea of building something new, and trying to
28:55
deliver value to a much broader sector of the market, steer narrative, shape the
29:00
field, because quantum is such a new field and Q Control is a very early player in it, that was what was exciting to me. Okay,
29:08
we're going to go to to the floor for questions. I guess if you raise your hand there is a microphone that will go around. There's a question right there. Hi thanks everyone.
29:27
So Michael, my question is sort of following on from what you were drawing out in terms of getting the policy levers right, to incentivize researchers
29:36
with skills capacity and the drive to take their work out of the lab. What do
29:42
you think some of those policy levers would be? Is there a case study internationally that you think we could gear towards? And just to add another
29:51
question if we've got time, how do you see big industry in Australia playing a
29:57
role in that lever? Great, that's is a great question. I would say the first thing is, everything right now is set up to incentivize
30:10
universities to collect IP, and then sell that IP via licensing or whatever
30:16
arrangements, to some large third party. But as any researcher in the room knows,
30:21
the least effective way to actually accomplish some outcome, is to give somebody a PDF of your paper. The most effective way is to work
30:30
directly with them. And that's the founder driven part of it that is
30:35
completely absent. There are no incentives right now for founders to proceed in building a company. The university will either take some equity
30:42
or you'll enter an IP negotiation that will take 30 years. What I think
30:49
works well by case study, is something called creator owned content. This is, it's not something I invented. This is widely used in other places. The
30:58
best example is the University of Waterloo in Canada, which is, it's near Toronto, it has this enormous ecosystem of small start-ups that are
31:06
coming out. There's the Creative Destruction Lab there, which is funded by a lot of Silicon Valley VC's. Toronto is not in Silicon Valley, but the
31:13
Silicon Valley VC's all get deeply involved. The whole idea is that if you as a public sector researcher, you're a university professor, develop something
31:22
new, first of all you publish, you share your scientific knowledge, but
31:27
then any commercial activity that goes from there and royalties and etc, you own it. The university does not own it. Because the role of the university is
31:34
not to generate revenue on the backs of commercial sales, it's to educate and you
31:39
know generate and disseminate knowledge. Fortunately, the university's sufficiently well-funded that they can take this general view, and it has led to
31:49
a real blooming of the start-up ecosystem around the University of Waterloo because people have no problems starting companies with IP that they generated
31:58
while they were academics. Here it's very, very difficult. There is a university that shall remain nameless, it is not mine, University of Sydney is not
32:05
this University, but it has a rule on the books that a founder who wants to do a
32:12
spin-off based on research that may have had a grant for, can hold no more than either 2 or 5 percent equity in the company. Well who's gonna
32:20
go through all the hell of starting a company, and finding venture capital, and the sleepless nights and all this for 2 percent equity? No-one in any VC will
32:29
tell you that if a founder is diluted too much, it becomes un-investable because there's very limited motivation. So I think some of these policy
32:38
perspectives that can drive people towards having an actual incentive to taking on these life-changing, high-risk, very
32:47
difficult enterprises, is very valuable. I think the role for a large industry, to your second question, is either through kind of corporate VC in
32:59
some cases, or being customers. I think being customers of high quality
33:05
products is a better way to go. I know in FinTech there's a
33:11
big move that the banks kind of build these FinTech companies together. I think
33:16
it would be better if the FinTech companies were independent and selling high quality products to the banks. Sorry FinTech people. Does anyone else want to have a crack at that question? A couple of things. One
33:29
things.. As an investor, one of the most powerful heuristics about
33:37
something being investable, is a person saying I want to do this. And so any sort
33:43
of research system which kind of dis-incentivizes that, to your point Mike, you kind of basically remove sort of a powerful force towards an opportunity
33:53
happening. One of the best organizations I've seen at fixing this is actually in
33:58
London. The Imperial College has a program called Founders Choice, and I
34:06
remember speaking to them and saying, you know but how does it work, like when when you want to actually get something out who makes the decision? And
34:14
they said, well the founder does, it's the founders choice. That's why we've called it Founders Choice. So basically, what often happens in Australia is, a
34:23
researcher will say, I think there's a commercial opportunity here, and then it's kind of, they're pushed aside whilst the organisation goes and figures out
34:31
what the most appropriate commercialization strategy is. And that's the separation that Mike and all of us have been talking about which
34:40
is kind of dangerous. I agree with you on what you're saying about the businesses
34:46
being customers, look for more start-ups to work with, but I also do feel
34:51
that there is a very big missed opportunity for companies to look inside
34:57
research to discover deep opportunities for their products, and to actually make
35:05
those products come to life. So again this business that we've just launched that I was talking about , V2 Food, could not have happened, so Hungry
35:14
Jacks could not have done that without, you know on their own, they don't know the molecular science of proteins, so they can't make a
35:23
plant-based meat patty. But because the research team and the company had access
35:29
to them, that company is international making millions of dollars within months, and that's just not possible to do without the interaction with a big company.
35:41
So I think there's lots of opportunities, and you know I hope more big companies will start looking for them.
35:47
Can I just kind of give that big company perspective, because I think we are seeing a shift in the way corporates especially, are engaging with researchers
35:56
and start-ups, but I think we have to be very clear here that a corporate, it's
36:03
principal driver is to return profit to its shareholders. It
36:09
actually doesn't care about research, it doesn't care about your research, or your research, it cares about making money. And there are aspects of social citizenship,
36:18
and you know investing in an ecosystem, and boosting economic growth, that will come from a fraction of that corporate to do good for the ecosystem,
36:27
but its primary incentive is to make money. Now the reason it's starting to engage more with research and start-ups, is because with this whole new global
36:37
market, and we heard yesterday about industry 4.0, everything is fast. So corporates
36:44
traditionally would have done stuff themselves, they would have figured it out in-house. And we've got some, in WA we've got some amazing
36:52
innovation and research in sort of robotics and remote operations, all done
36:58
in-house. Now there is no time to do that in-house and learn those new skills, so
37:03
corporates are incentivized to partner with start-ups, with researchers to get knowledge fast, to beat the competitors globally. So that's the
37:13
opportunity for start-ups and researchers to engage with corporates, and it comes back to, you know, this point earlier, about find out what the
37:21
corporates challenge is, find out what they're trying to solve fast, and that's the opportunity to engage. It's not, the corporate is not looking to fund your
37:30
research unless it's going to drive their bottom dollar. You could call that short-termism, because 26% of all economic output in Australia comes from
37:41
scientific discoveries in the last 30 years. And so if corporates that are not very, very new and kind of in a fragile place, took a strategic perspective about
37:50
their life-cycle, instead of just ASX returns then we'd have a different narrative... Well Wesfarmers is the oldest company in
37:56
Australia, sort of hundred-year, so that attitude has served them very well, and they're very keen, they were very keen to engage with researchers and start-ups but
38:05
it has to be solving their challenges and solving this, you know they've got to return value to their stakeholders. So I think that's the mind-set that has
38:14
to shift, and that's part of this food, you know, it's starting with the challenge, start with a challenge. That's the opportunity for the start-up. Because you've
38:23
got a market there immediately, you can go to market. if you know there's a challenge there that needs an answer. Alright, we're going to go to another question if we've got one out there. The gentleman down the front there.
38:39
Thank you all. Fred Chilton, and I certainly endorse what Phil has said about the change in the ecosystem that I've certainly seen in my lifetime.
38:49
My question is, yesterday we heard from Cisco that one of the problems faced by
38:55
major international corporates dealing with research, is that the researchers
39:00
had an over-inflated view of how much of the value of the end product came
39:08
from their research. And they said, the professor's thought it was 90%, and that
39:16
10% was the rest. Whereas, they said it's $1 to do the research,
39:23
$10 to get a product that's viable, and $100 to get into a market leading
39:29
position. And so it would be interesting to get the panel's views on that, and how do we
39:34
get that realistic balance, being fair to the researchers, the professor's, that
39:39
they get a decent chunk that's enough to incent them, and yet that the deal
39:45
happens, still happens, and doesn't get held up because of unrealistic expectations.
39:50
I actually want to take this one step further. You said 1% the researchers are the ones that don't understand the value of
39:58
their product. I actually think it's the research institutions that they think they own the IP, and they think that because the research
40:05
institutions have this idea that's 90 percent of the market value, therefore they deserve to own 90% of the company, when in fact 90% of it is in execution.
40:13
If you don't execute in the market right, the best technology is worth nothing, and
40:20
we know these stories. We know it beta cam max worth, you know, beta technology for then VCR, and I know this is an old story, probably shows my age, but you know
40:31
the best product aren't usually the ones that make it, it's it's all about execution, and that's what the research institutions have to start understanding.
40:39
And they are. I've seen a huge move in at least at universities, where universities
40:44
are now saying, okay, we can leave the IP with PhD student and just see what's
40:49
happening, watch from the outside. I haven't seen it as much at CSIRO, I think
40:55
there's still over-inflated expectations when a researcher, or research group out of the CSIRO tries to spin-out, as to what the value of that
41:04
organization and the CSIRO contribution should be. I think we need to let go of IP a lot more, and then let it flower and become something in the
41:17
market before we ask for all this return. We imagine that it's worth this much, and we want to own this much out of it, but in fact by letting go, we're probably
41:27
going to get bigger rewards from it than by holding on to it. I think we need to
41:32
teach people what NPV is right? Yes. That's kind of the answer to your question. You take today's value and you discount based on
41:40
likelihood of transition to some commercial opportunity. I personally like to shy away from the narrative of one side gets it, and the other side doesn't,
41:47
because both sides are probably wrong to some degree. There's no question that the internet would not exist if we didn't have basic research, and you know quantum
41:56
physics from the 1920s that led to the transistor etc. All the same, running a
42:01
company it's quite obvious that a lot of the cost incurred is associated with developing a product, and product market fit, and you know distribution and all
42:10
these things. I think if we just have a more engaged discussion about some of
42:16
these financial terms, like net present value, we can overcome some of these things, instead of turning it into a one side versus the other.
42:23
I think Cisco was spot-on. I think what Kevin said yesterday is absolutely
42:28
spot-on , and that taking a product to market is really hard, and it requires a
42:36
lot of effort, and I think from corporates and you know investors looking at a product,
42:42
we heard in Boston last week exactly to that point, the investment, the product's
42:50
a given, just assume the product works. What the investors and corporates are interested in is the team. That's first. Who's on the team that's
42:58
got the skills to take this to market, and who's had the experience before doing this, and what's the market, where are you selling it, what's the
43:07
profitability? The product itself is a given, and you just assume it works, and
43:13
the two discussion points are on the team and the market value. Which does of course lead to therenos. Sorry that's really loud. There's an
43:25
excellent book, Maryana Moscato, which has a very spirited defense of public sector
43:31
research and its contribution to the end value of products. There's an entire chapter, I can't remember the name of the book,
43:37
if anyone can... I'll come back to you anyway. She has an entire chapter that takes apart an iphone effectively, and traces
43:46
back where each of the pieces of technology come from, and it's all government-funded, public tech. I guess the learning from
43:55
that story I suppose, is that those companies including the VC companies, but large corporates and small companies that were acquired by those large
44:03
companies in the making of those technologies and products, had a very, in the US, had a very sharp eye on the research that was taking place, and got
44:12
amongst it early, and extracted value from it. I think I want to just emphasize how important this role of public sector research is, even in supporting VC backed
44:22
start-ups. My favorite example is Palantir. Anybody heard of Palantir? A giant data analytics company worth billions and billions of dollars. Peter
44:30
Thiel was involved in founding it. The only reason it exists in any form at the scale it does, is because their first contract was 1.5 billion dollars with
44:38
the CIA. Yes. That is effectively public sector research investment. Yes. And I think we should not discount how important the
44:46
government can be, as both an early supporter of research, and then a supporter as a commercial customer. I think that's an incredibly important
44:56
point, and it's something you know, when we talk about, I think you were being a little bit critical of corporate Australia in not really taking risks or
45:04
being short term. It's not just Australia to be fair. Sure, but in
45:09
Australia we seem to have a cultural cringe around locally developed tech. Local research. This is particularly the case I
45:19
see in the stuff I do in in government procurement, there's all sorts of industry development programs around trying to help entrepreneurs and small
45:29
businesses and innovative companies, but they would probably be better off just buying from them, providing them with
45:35
some kind of, some kind of contract to get them going. This would be the same in corporate. Yes. I disagree with that actually with start-ups who,
45:41
and I'm just being part of a
45:46
LinkedIn article on this recently, check it out, I wrote together with one of my Cisco colleagues. With both Cisco and Wesfarmers, our experiences we
45:55
drew from, and we saw that when a start-up gets to pitch with a corporate, as an innovation manager I could get everyone in the room, and where
46:02
they're all engaged, ready to to work with this start-up that has no track record. We're really investing in a couple of the team members. On tech, we
46:11
know nothing about, and we're not really sure what the value is, so already the corporates up against, like we've already got cold feet.
46:19
And there's a conversation, and then the start-up sends
46:24
us a bill to get going, and it immediately makes it a client vendor
46:29
relationship. It's not a partnership anymore, it's not a collaboration, it's not co-innovation, we're immediately judging them on vendor criteria - value
46:39
for money, risk, all of that procurement stuff kicks in, and it doesn't get up. So
46:46
you know I would love to see a lot more where the start-up works with the corporate in partnership, like what you've mentioned, both take the product
46:55
to market. So the start-up uses the corporate. So there is an issue with a smaller company, that certainly the smaller companies engaging with
47:02
government, I mean, maybe there are companies that engage too early, but you know engaging, like trying to sell the government, you can sell
47:10
yourself out of business fairly quickly, Just trying to talk to government about how you should work with them, as opposed to the other way around. The investment, like people who've got to put
47:20
food on the table, will go out of business if they can't send a bill. So we saw a lot more success with start-ups that came in and
47:28
said, you know what, give us access to your site, we'll set it up, we'll show you how it works, yes, they would have taken a hit, you know lost lead to get
47:37
that, but once they're in the door and there was a relationship built, and their demonstrating their product they were in, they
47:45
were scaling, and you know they were looked after. It was just breaking that initial, shifting away from a vendor to actually let's work together
47:55
and scale this. I might disagree with the categorization. I mean that to me, sounds like sales process. The best way to get a sale is you start
48:04
doing initial demos, and you take the hit of how much it's gonna cost you et cetera. I don't see a future in which any VC-backed start-up goes to its
48:14
first client and has a collaboration of co-invention, because then they don't own anything. Those partnerships may not necessarily involve it, you know equity,
48:25
or there's a whole bunch of stuff you could do to sort of set that, in some cases we got a lot free license. If the start-up went well, we
48:35
could use their stuff beyond our involvement. There's a whole bunch of stuff to do, and it is about sales. I mean what else is it about, it's about sales?
48:45
Yeah, but then it's still a customer client vendor relationship, it's just they're doing good pre-sales. Yeah, but if ultimately the startup gets sales
48:53
from this, track record, backing, sales, that's a sales funnel. I mean, I
48:59
would argue that the risk is being taken by the start-up as opposed to the corporate. If it works out for the corporate all good, but for the start-up if it good but for the for the startup if it
49:10
doesn't work out, well they've just been working for free. Can I just jump in here
49:18
with something that can untie that knot, and we've seen that work in the past? So New South Wales government until recently, had this thing called
49:26
partnership grants. And that's a way for a start-up to work with
49:33
a large organization, and get some funding that would sort of cover the expenses of the start-up while working with the corporate on something new, that
49:42
the corporate wasn't quite sure yet whether it was going to be commercially valid. So the idea is to give the start-up an ability to
49:53
work on this technology without having to worry about putting food on the table, while also giving the corporate an ability to
50:02
not having to worry about a vendor relationship. And I thought that was a brilliant idea, it worked really well for us, we're working with huge American
50:11
company, Pearson Clinical, on a product there, where we can that we can bring in
50:17
to Coviu. It works really well for us, unfortunately I think they've closed
50:22
this down, so I'm really unhappy about this. Is anyone out of the New South Wales government here? This is a message to you. I think that's a good point. I
50:30
think that's where policy can can make a difference, and we're not talking much. It's like not a lot to get in the door and do a proof of concept. Ten,
50:40
twenty, thirty thousand that sometimes all these invoices were. It's really
50:45
not about the money, it's not about the money. For this partnership grant that we
50:51
got, we got a lot of in-kind contribution from the from the corporate, and I think
50:58
that's much easier to get than paying money. Yes it is. At least for the first entry. Alright,
51:04
another question? Anyone? I think there's someone up the back.
51:14
Need to project James. It's working now. Yell. Just shout mate. We should give more. Because the whole issues are incentives.
51:56
The universities are incentivized to take IP and go like this,
52:02
because they're desperate for capital, because the government keeps cutting funding. So I think you want to do the opposite, you want to support the
52:10
research such that the university doesn't feel the need to find, to look at
52:15
research as a cost center, and then find revenue streams that they can derive from it. I think you want to separate those things in order to
52:23
facilitate the translation. No give more money to support basic research, such
52:30
that the whole question of commercialization is separate. Rght now it's finding revenue that is driving University behavior
52:40
around commercial translation, as opposed to viewing their role as like social impact or which is what I think they should do, or just supporting the people
52:48
within the institution that want to do this. I think we incentivize the wrong way. Another question over here, we've got about three minutes left.
53:05
Which investment? No. Any strings attached? No. I mean
53:12
Australia is so tiny. That's an interesting point. Because I know in WA especially, you know the government wants to grow jobs
53:22
for the state. That's ultimately why they're investing in these start-up initiatives, so they are kind of conflicted when the start-up
53:32
becomes successful and follows the market, and possibly leaves the state to go global. So there's this conflict of celebrating them, leaving and
53:42
being global, but actually they've left the state, so I think this is about the
53:47
metrics of success in why you invest in this ecosystem. Need to
53:53
reflect that it can't just be jobs and growth for Australia, for the state, it has to be somehow celebrating the success
54:04
of those startups when they leave. Yes, and hope that they come back with bags of capital I suppose. Another, we've got one here.
54:34
I think Sylvia's point was probably the best on it if you want to echo
54:44
it, the one about the grants? Yeah the grants to support these, like the initial NRE kind of stuff. Yes. I'm not sure I agree with you, pour more money into
54:55
fundamental research, but I think we need to think about diversifying where we place our money. So there is money, they need to go into fundamental
55:04
research, there's money that needs to go into applied research, but there also is money that needs to go into into supporting start-ups and action, who
55:14
actually help translate that research into products, because productization is a whole challenge by itself. I don't think we've actually really understood
55:22
the amount of effort and work that goes into productization. We talk about R&D,
55:28
that's research and development, that usually takes us to an MVP which is a great demonstrator, everybody gets excited about it, and thinks the problem is
55:36
solved. Well that's the 1% of the problem, the 99% still needs to get done, and we
55:41
do not appreciate the amount of effort and money that goes into doing those 99%. That's the productization and putting it into people's hands, and there needs
55:49
to be money going towards that. So CRC-P grants go towards that, the
55:55
commercialization partnership grant goes towards that, there's a couple of grants in that space, it's just completely out of whack from a balance point of view
56:03
the amount of money we put into there. I would also say there's a gap right now in kind of the middle, so there there are these grants that support
56:11
early stage start start-ups, there's lots of money for really, really little start-ups, very, very young 10k, 20k, 30k and then there's like this infinite
56:19
bottomless pit of money if you're a giant industry that wants to get Aus industry money. It's just like unlimited funding through Center for
56:28
Defense and Industry capability all these things, but if you're in the middle if you're at this like successful stage, but still pretty small, maybe you just
56:36
have a little bit of revenue, but you got VC funding, the current view is you're
56:42
too successfu, l and you should be in-eligible for a lot of these grants. They want to support the really little, tiny
56:47
ones, so it's again the value of money. Growth needs money. Yes scale ups. Yes I think we have done a pretty good job in defining the problems. a pretty good job in defining the
56:59
Have we got one more question? Hi, sorry been waiting patiently. There's been lots
57:04
of discussion about diversity on boards. And I wonder your opinions on how
57:11
corporates could perhaps change or have different sorts of skill sets on both
57:16
their executive teams and on boards to help this process along. What sort of skill sets would you call out would be required? On the boards of the start-ups? In corporates, in private sector.
57:30
And we're talking diversity in the broadest possible sense. So all kinds of different skills,
57:37
different backgrounds? Yeah. I mean I find this quite interesting because I'm a start-up guy, I'm a founder, I've made small companies, and I now
57:48
found myself on boards and some big boards, government boards even, and yeah I
57:55
find their conversations peculiar quite often because, I think it as we've
58:01
all heard, quite often boards are put into a situation of managing risk, and so
58:07
a lot of the conversation is about risk. A lot of the skills on the board are
58:12
about, are coming from a risk perspective. I think to Mike's earlier point, when you
58:17
look at the commercial side you're looking at the short-term, you know is this how we should spend our money to get this, this sort of next outcome?
58:25
And so I think we massively don't have enough people who have come from
58:30
different backgrounds, we don't have researchers on boards, we don't have entrepreneurs on boards, because they what do they know about risk, how
58:38
are they going to help us not get sued? But actually the
58:43
conversation that happens in the board room is super powerful when you've got
58:49
send in the oyster, and that's what I want to see, just more send in the oyster, from these different perspectives, so that interesting things happen.
58:57
I think just extending that whole argument of diversity, it's also I think just extending that whole argument for diversity, I think it is
59:03
of merit to have a corporate on your grant, so broaden that
59:10
diversity two ways, so researchers engaging with the strategic strategic direction
59:16
of a corporate, and having a corporate person help drive the
59:22
strategic direction of your research. That it works two ways. Please don't do that. I
59:27
mean, I'm very sorry this is, you've hit like my my sorest, sore point. I think the worst possible thing we can do is start taking long term
59:38
research, and turning it into short term research, by having corporates determine what problems we should work on. I think I think you need a diversity of
59:47
timescales. I think you need some people who work on 50-year timescales, some people who do 20 year research, some people who do short-term stuff and some
59:58
people who like our product today, six month time arrives into delivery. Corporates do do that they have horizon one, two three principles and you'll find many corporates have you
1:00:08
know five year, ten year, fifty year plans, so they are thinking about the future
1:00:14
beyond the next financial year. On that note, I think we found the sand in
1:00:21
the oyster. Thank you for that. Yeah I'll draw this to a close . I did remember the name of this book as we were going I looked it up in google.
1:00:32
Professor Mariana Mizzou Cato. The book is called The Entrepreneurial State. It is superb probably for each of the three cohorts
1:00:41
of people in the room. The value of public sector research to the economy
1:00:46
and to business and to society. Very, very well put together. Thank you to our
1:00:51
panelists, Kate Brooks, Mike Biercuik Phil Morle and Silvia Pfeiffer. I hope you
1:00:58
guys are going to stay around for a few minutes to let people have a chat and
1:01:04
delve in a bit further. Thank you all very much for coming. I hope you all go out and shake the tree and make some noise.
