A new innovation fund is investing in start-up and spin-off companies born out of the public research sector that have potentially life-changing, high-yielding ideas. There are already four in the bank. DAVID SIMPSON reports
Investing in the next game-changing innovation
You've heard of them. The transistor, steam engine, antibiotics, even CSIRO's own WiFi – these are ideas that have changed civilisation.
According to Bill Bartee, director of Main Sequence Ventures and manager of the CSIRO Innovation Fund, there are going to be more. Their founders may be out there now, just waiting to be discovered and nurtured to success.
"We're looking for the next Microsoft, Oracle or Apple – people with concepts that have the potential to become products or processes that will significantly change the way we live. We think there's a good chance that we'll find one or more in the Australian public research sector," Mr Bartee says.
Discovering the next big idea is not an easy task. For every project in which they invest, the team at Main Sequence Ventures look at and assess approximately one hundred. Then, following the rule of thumb of venture capital investments, they hope that one or two out of ten companies will be successful, while three or four will have some degree of success and the remainder will fail. Crunch those numbers and you'll discover that to get those one or two successful projects requires examining one to two thousand investment candidates.
What's the secret to identifying a potentially successful project? According to Mr Bartee, the most important factor is the people involved in it.
"A great team can fix a broken technology, a great technology can't fix a broken team. So, people are a vital part of how we assess potential. They are probably an order of magnitude more important than the technology itself when we are considering a start-up investment."
Investments ranging in size and based on company success
Initial investments of the CSIRO Innovation Fund can range from hundreds of thousands to millions of dollars. The investment model also reserves capital to add to the first investment as the project demonstrates success or achieves pre-determined milestones.
"Some of the reserve capital will never get spent, because the companies don't make it. We then apply that unused reserved capital to other companies that are being successful, and we bet heavily on the winners," Mr Bartee says.
"We might end up with five to 10 per cent of the fund in one company, but it will have earned that investment by demonstrating continued success."
Grants and funding are available to help companies start up or get the most out of their R&D expenditure.
The Fund is unique in that it comprises $70 million in federal government funding through the Australian Government's National Innovation and Science Agenda, $30 million revenue from CSIRO's WLAN programme and soon to be raised private funding. The total target value of the fund is $200 million.
Investing in Morse Micro and Q Ctrl
Two of the four investments of the Fund to date include Morse Micro and Q Ctrl.
Morse Micro, founded by experienced semiconductor engineers, are building a next generation WiFi chip, called WiFi HaLow. The aim is to expand the signal footprint of a WiFi chip from 50 to 100 metres, to more than a kilometre, while using far less power. With the ability of a coin-sized battery to power a HaLow chip for two to three years, the 'internet of things' will become a much more useful place.
Q Ctrl, started by a quantum physicist from the University of Sydney, aims to develop a solution to control errors generated by quantum computing. There are currently a range of approaches to building a qubit, which is the basic computing unit of quantum computing. However, they all share the problem of generating large amounts of errors. Q-Ctrl's objective is to become one of the world’s preeminent error control companies.
When asked where he thought the Fund might find investment opportunities in the mining sector, Mr Bartee pointed to unmanned aerial vehicle (UAV or drone) management and interpretation software, artificial intelligence and machine learning as areas in which projects had already demonstrated potential to deliver results on a global scale.