This is the 27th article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.
The Canadian university system costs about $25 billion a year. The total income for all Canadian universities from licensing their intellectual property is around $50 million. Subtract the cost of managing that IP and you’re left with a net income of only $15 million. Getting technology to market is clearly not a big income stream for the typical Canadian university.
Those numbers come from The Way Ahead, Meeting Canada’s Productivity Challenge, by Tom Brzustowski, a professor at the University of Ottawa’s Telfer School of Management. While the book is a few years old, the overall trend illustrated by those numbers hasn’t changed. However, Brzustowski also quotes one of our past contributors, Doyletech’s Denzil Doyle, who puts these numbers in their proper context. According to Doyle, the IP income to universities represents only 2.5 percent of the new sales generated by products based on it. Do that math and you arrive at $2 billion — $2 billion in annual sales for the Canadian economy. That isn’t an insignificant sum.
But this doesn’t mean that the emphasis must be on helping university researchers become better at commercialization to drive more economic activity from the campus. No. What they need is more help to become better researchers. As Brzustowski wrote:
“Commercialization requires expertise of a very different kind, and if we don’t have enough experts in the business of commercialization and managing innovation, than that’s the shortcoming on which to focus … commercialization is the preoccupation of every entrepreneur; it is the essential function of all industry; but it is only an afterthought for the relatively uncommon researcher who is concerned with it at all.”
A few weeks back we touched on some of the essential elements for successful technology transfer from the university lab to the marketplace. That post provoked some enthusiastic response from several readers hip deep in the process, so much so that we thought it worth another look to explore in more depth the issues and challenges we face in commercializing university research.
Granted, the title of today’s post doesn’t get us off on the most positive footing, but we’ll start with the bad and the ugly and finish next week with the good.
When it comes to who retains ownership of IP born on the university campus, Canada is a dog’s breakfast of disparate policies. A few weeks back we spoke with Tim Jackson of Waterloo’s Accelerator Centre about that region’s culture of collaboration. He attributed Waterloo’s growth as a tech hub in part due to the University of Waterloo’s progressive IP policies. Researchers retain ownership of their inventions, which has helped to attract world-class researchers to the area.
This, however, isn’t the norm in Canada. For Scott Valentine, director of marketing and communications at Solium Capital, a key barrier to greater university commercialization is Canada’s lack of an equivalent to the U.S. Bayh–Dole, or Patent and Trademark Law Amendments, Act. In essence, Bayh-Dole allows researchers to maintain control of intellectual property they have created through government-funded research. In a Canadian context, that would obviously include research done under the auspices of a university.
“There’s no national strategy, no will at the federal level,” Valentine said.
Since researchers often struggle to understand what rights they have and must negotiate the terms and conditions for licensing their inventions, “what happens 80 percent of the time is nothing happens.” Researchers, being researchers and not entrepreneurs, don’t know how to develop a business plan, seek market validation or get in front of investors and “peal money out of them.” More often than not, their IP ends up gathering dust.
Wesley Clover’s Andrew Fisher emphasized the need a while back for any government-supported program to back winners and ditch losers.
The challenge, of course, is levering the expertise of private sector individuals who have the requisite business chops. David Mayes, after having experienced firsthand how private industry and universities work to bring technology to market from the likes of Stanford, MIT and Santa Fe, sees crucial gaps in the commercialization chain for Canadian university IP.
“There just isn’t the experience here or the knowledge of how that networking works, to commercialize out of university,” he said.
Mayes is a founding partner of international business development firm Global Internet Group in the San Francisco Bay Area. He has also engaged with the B.C. tech community on several fronts, including founding solar energy company Sola Renewable Energy.
“We just don’t have the capital here to take on a world-scale global opportunity … the smart Canadian VC, if he has an idea, takes it to his larger partner in San Francisco and they invest together. But what unfortunately happens … is that they are obliged to move to California and the advantage to Canada is lost.”
Efforts are underway in B.C. to change that, with a coordinated effort between startup incubators, investors, universities and business schools, which we will talk about in more detail next week. However, such broad-based initiatives do create fresh challenges, which bring us back to the political complexities of actively choosing winners.
If a government agency mindset prevails, Mayes said, it will be counterproductive. There will be an obligation to help anybody who comes along. But if there is instead an emphasis on picking winners, “success will be breed success.”
“It’s about the efficient use of the capital,” he said.
Appetite for risk
We’ve talked before about appetite for risk being a defining characteristic of an entrepreneurial culture. For Mario Kasapi, an aversion to risk is all too common among seed investors when it comes to banking on the commercial potential of university IP.
Kasapi is director at UBC Research Enterprises and associate director of the University of British Columbia’s University-Industry Liaison Office. For him the challenges boil down to access to capital and building that pool of experienced, successful entrepreneurs who are willing to get involved and take university IP to market.
“That’s not to say there isn’t money we can access for young companies,” he said. “In my view there is lots of money, but the difficulty is in getting it.”
U.S. capital is easier for his office to access than Canadian capital because early stage investors on this side of the border are “ultra-conservative.” Many who claim to be seed investors will ask ill-thought questions about revenue when the IP in question is still an idea on paper in the lab.
Compounding this is the challenge of finding those entrepreneurs who can take the IP to market and build a viable business around it. In other words, champions. It’s not just because the U.S. market is 10 times larger, there is also a “greater thrust of activity on a per capita basis.”
“In Vancouver, we’re OK for that, but there’s a big gap in other parts of Canada,” he said.
Next week we’ll take a look at what is being done, what should be done and who needs to do it to address the gaps in Canada’s commercialization ecosystem for university IP.