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READER RESPONSE: Negotiating the route to market

WHILE the WA Business News Innovation forum in the January 17 edition provided some interesting debate, opinions expressed in the article ‘Pathway to commercialisation’ on university research commercialisation were well off the mark. As chair of Knowledge Commercialisation Australasia, the peak national body representing university commercialisation practitioners, I feel it necessary to address some of the views expressed by those quoted in the article. It was disappointing that some of your panellists adopted a narrow view of university research commercialisation by focusing exclusively on spin-out companies and promoting venture capital as the preferred model in forming such companies. The article demonstrated that some in business still do not understand or appreciate that a university’s primary goal is not research commercialisation (nor should it be). A university is founded on delivering more fundamental goals for our society, mainly quality teaching and the acquisition and dissemination of knowledge, often through the conduct of research. Out of this research, from time to time, will emerge outcomes with commercial potential. It is the role of the university technology transfer offices to work with their researchers and external parties to extract value from such outcomes for the benefit of the university, its inventors, investors and, more importantly, the community at large. It is naïve to think that such outcomes can be packaged into spin-out companies on a regular basis like a production line. The much more likely route to market is through licensing the developed outcomes or technology to appropriate industry partners so that the licensee can take it to market. Furthermore, KCA members commercialise university research through a variety of arrangements with companies, including through research contracts, options to license, and assignments of the technology. This may indeed involve the formation of joint ventures between the company and the university. As you would expect, the returns from commercialisation through industry research contracts and technology licensing far exceed returns from spin-out companies. In my experience, most venture capitalists are not attracted to the earliest stage of this process, given it is a high-risk area. Contrary to the comments of one of your panelists, Harry Karelis, universities generally, and UWA in particular, have commercialisation teams with extensive commercial backgrounds; they have a great deal of experience in dealing with investors in the business sector. Furthermore, we need sophisticated investors who not only understand the financial risk, but also the technology risk and the risk of taking the idea to market. The two spin-out companies cited in the article are both from UWA and need to be viewed in this context. Firstly, Advanced Nanotechnology Limited was seeded not by venture capitalists but by UWA, followed by a multi-million dollar investment by an industry partner, Samsung Corning. Advanced Nanotechnology then proceeded to an IPO with the help of investors at the start of 2005 after revenues were being returned. In the case of Sensear, UWA’s Office of Industry and Innovation introduced a sophisticated ‘angel investor’ to facilitate the formation of the company. Traditional venture capital funding, through Harry Karelis’s company, did not occur until the second year of Sensear’s operation. At UWA, the Office of Industry and Innovation has just finished its sixth year of operation, having enjoyed year-on-year growth of 30 per cent in commercialisation revenues over those six years. In fact, 2007 was a bumper year, with $7 million of negotiated commercial research contracts with industry. In addition, there was a total of 14 licence, option and/or assignment agreements negotiated for a further $1.3 million in licensing incomes. Since inception, the Office of Industry and Innovation has negotiated more than 50 licences and around $34 million in commercial research contracts with industry. In addition, it also has facilitated the formation of some 13 spin-out companies. It is very important to understand that university research commercialisation activities are many and varied and the formation of spin-out companies is just one of the manifestations of such commercialisation. (Dr Andy Sierakowski, chair, Knowledge Commercialisation Australasia; director, Office of Industry and Innovation, UWA)

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