First sale the hardest for innovators

Bridging the gap from research and development to commercialisation is the biggest hurdle for Australian innovation.

AUSTRALIA is well regarded internationally as an innovative nation, with solar-heated hot water, plastic lenses for glasses, and the bionic ear all included among the list of home-grown inventions.

However creativity is one thing; turning ideas into commercial products is another altogether, and a skill many innovators struggle to master.

It’s this reality, along with ineffective funding models, that is stunting Australia’s research and development market, according to speakers at the Univation conference held in Perth last week.

“It’s a very challenging process and most, whether they be life science researchers, IT or mobile app developers don’t go out and raise cash, instead their ideas get left in the lab,” former Silicon Valley Bank executive and now Perth resident, Larry Lopez, told delegates.

This year’s was the third annual conference, held to build relationships between universities, industry and investors.

It attracted representation from major pharmaceutical company Merck Sharpe & Dohme, BHP Billiton, Alcoa and the federal government’s Commercialisation Australia.

All agreed researchers and scientists lacked the business know-how to capture the attention of investors.

Commercialisation Australia chief executive Doron Ben-Meir said a large chunk of the organisation’s time was spent coaching inventors on ‘business 101’.

“The first thing we want to see is how you are going to make that first sale into the marketplace, because the first sale is always the hardest,” he said. “The next question that we ask is ‘what’s your value proposition; why are people going to buy from you’?

“Those are the things that are going to demonstrate whether you are a professional and are backable rather than someone who just needs money to survive.”

Commercialisation Australia is the major government funder when it comes to home-grown innovation, having awarded a total of $126.5 million in grant support.

But the benefit of such government funding has been questioned by some of Western Australia’s major companies, with both BHP Billiton and Alcoa suggesting it could be put to better use.

BHP senior R&D manager Peter Lilly said less focus should be put on funding specific projects.

“Government money should be spent on building the right capability with the right infrastructure and the right people with the right skill set; then the money will come to those people ... it needs to be spent on that, not necessarily the projects,” he said.

Alcoa R&D director Ian Harrison said the funding ratio between industry and government was unbalanced; he claimed more investment should come from industry.

“I don’t believe that you can underfund R&D, but if you compare us to most nations in the OECD ... ours is really skewed towards publicly funded R&D,” he said.

“About 75 per cent is funded by the government and the rest by industry; in other countries that’s reversed.

“We don’t do enough (R&D) to start with; it’s really skewed away from industry. And we don’t collaborate enough, so it’s no surprise that we don’t make as much as we could when it comes to research and development.”

Industry representatives all agreed collaboration with researchers early on in projects was imperative to gaining trust and subsequent funding - a view also held by venture capitalist Josh Funder from GBS Venture Partners.

“One of the things we really appreciate is being able to talk to the scientists early, before they come to us for money,” Dr Funder said.

“We get about 300 proposals a year, look at about 100 and fund about three. That’s how many people we get coming to us. I just wish we had more money ”

But despite a sense of exasperation with industry issues, Mr Lopez said Australia’s potential could not be ignored.

“One thing that’s really important to understand is that good science and good ideas will get funding,” he said.

However success or failure of innovative spirit depended on collaboration.

“It’s very rare that you will have the networks and skills needed (for commercialisation), so it’s important to try and work within that system to work off the experts and get into that commercial market,” Mr Lopez said.

That collaboration was not only imperative for researcher-investor relationships, according to Merck Sharpe & Dohme director of licensing and external research Phil Kearney.

He said it should start right from the roots, and urged universities to be more collegial.

“Why don’t you act more like companies? You have all the smartest people and I know I can introduce two people from the same campus who are working on the same thing and they don’t even know each other,” Mr Kearney said.