There are several approaches to boosting funding for entrepreneurs – helping the demand side with better business plans through online training or classes, boosting the supply side by creating state-backed funds, or economic autarky through shutting off international investors from the best companies.
Naturally, these points were all raised in the European Commission-sponsored policy conference, boosting investment readiness in Europe, in April in Brussels.
Or there is an approach to building a borderless or virtual ecosystem around learning and openness, speed, transparency, collaboration globally, connecting innovation hotspots and generating exits that can create opportunities to reinvest capital and skills.
After 20-plus years of the former, this second approach is gaining increasing attention from policymakers, albeit from a low base of awareness. The published list of attendees to the event included no obvious hands-on university, government and corporate venturing investors, which one senior official described as a “mistake” in the original consortium behind the event, although angel investors were present.
This change in the mindset is perhaps the most encouraging outcome from the event as the EU’s €79bn ($94bn) Horizon 2020 programme has only just started – it runs for seven years to 2020. Ignacio Puente, from the European Commission (EC) unit on SMEs, financial instruments and state aid, part of the Directorate General Research & Innovation, set out the plans in a presentation.
While the consensus at the separate Science Business event held in March in Brussels was, with one or two exceptions, that Horizon 2020 had generally lived up to its promise of making things simpler for scientists, the average odds of getting a Horizon 2020 grant in the first 14 months were 14.5%. In comparison, in the predecessor Framework Programme 7, success rates were around 19% to 22%.
Despite the large budget for Horizon 2020, along with national and regional schemes, Europe remains an ecosystem without critical mass, according to Erik Vermeulen, professor of business and financial law at Tilburg University, in his InvestHorizon presentation, Better practices on strategies, indicators, schemes and tools for investment readiness.
As Vermeulen, who is also senior counsel corporate at Netherlands-based conglomerate Philips International, said after the presentation: “Europe lacks [critical mass] and the US has it, so it makes sense to connect Europe to the US.
“Look at Japan – this is what Tokyo University is doing by taking selected entrepreneurs to the US to meet investors three times a year and encouraging exits to US corporations, such as Google. Or Shapeways, a spin-out of the lifestyle incubator of Royal Philips Electronics, that then relocated to the US after Union Square Ventures and then A16Z invested, but is now back in Eindhoven [its former home in the Netherlands] big time and creating jobs.
“Mass is not just about supply of capital and demand from entrepreneurs but how they know what to look for and where – that is investor readiness, which comes from data, news, social media and transparency and connections for who is on what board or invested in whom. Silicon Valley might be a religion but ideas can be transferred to Europe.
“That the EC’s mindset is shifting to understand this latter way is viable is encouraging. Data is not just for researchers but used by investors and entrepreneurs to validate each other.”
Role of government
Early-stage experts from around the world were asked in interviews about governments’ roles in the ecosystem.
In a keynote speech at the Global Government Venturing Summit in Eindhoven, the Netherlands, in February, Low Teck Seng, chief executive of Singapore’s National Research Foundation, summed it up as gross domestic product growth following technology. He said: “It is known that success has to be taken care of properly. That is why research and development spending is so high and education so important to building clusters and an innovation and enterprise ecosystem. That and the rule of law.”
Singapore’s expectation is the future of manufacturing will require the island to have large local corporations as well as foreign multinationals and startups. This is a scale-up challenge it faces, Low said after his speech.
Yi Jiang, general manager of the Xin Centre at Tsinghua University, said: “The government in China is encouraging tech transfer. Policy is being made to encourage the commercialisation of the university research results, such as to suggest the university grant high percentages, as much as 70%, of the licensing income of patents to its inventors personally, and the other 30% go to the university.
“Changes on the technology transfer in universities are under way. In Tsinghua University, the tech transfer office (TTO) has been reformed and has a new structure, and several of university venturing funds have been established. If this model works, other universities in China could follow Tsinghua’s model.
“Changes are being made and the pace is fast. The government will not [be involved] in the details, but it will release the signals and make policies to accelerate the process.
“In China, the intellectual property (IP) developed by the universities is usually recognised as state-owned property [and] the tech transfer and commercialisation processes are highly regulated. Some regulations are quite vague, and you will have difficulties to say it is legal or illegal at some situations. [Therefore] the significant changes we would like to see are on the government policy and regulations side, and [they are] happening now.”
Yi added: “I do not think that the Chinese universities and countries are generally savvy at recognising economic opportunities. But since there are large pools of universities and talents, [and] huge domestic markets, there will be many interesting things to see in China and Chinese universities in the next couple of years.”
Xin is a collaboration between Israel’s Tel Aviv University and China’s Tsinghua, and Yi said the partnership was creating opportunities to learn.
“Israel has created huge amounts of high-tech startups in the global economy, it has a unique model and there are historical and cultural reasons [for this].
“But if you see the countries of a similar size as Israel, like Singapore, South Korea and Finland, they have different cultures and models that enable companies to establish and develop to a different scale and time span. Israel is hot in startups, but it is only one model of research, commercialisation and economic development.”
David Mendlovic, professor at Tel Aviv University and former chief scientist at Israel’s Ministry of Science, added: “The government has an important role for setting expectations. It is helpful to have a clear national policy at least for the public institutes like universities [and] hospitals.”
And while Mendlovic said Israel had an “acceptable” model even if the government did not offer any or suitable assistance to corporations that want to liaise or work with universities’ commercialisation efforts, he said the government “needs to provide better solution for cases when the inventor agrees to take an active role in the commercialisation process.”
He added: “In such cases the inventor should get more. Another difficulty is to examine what is service invention and what is a result of advising action. Also it is important for defining student participation and use of other resources. The rule should be that the inventor’s brain is his asset. Everything else is done due to the university. I encourage [entrepreneurs] to make an IP agreement before [his emphasis] any interaction with the outer world.”
Through the recommendation of another former chief scientist, Yigal Erlich, Israel had set up the Yozma programme in 1993 to encourage the creation of its venture capital industry by setting up 10 drop-down funds, each capitalised with more than $20m.
Other countries are increasing their activity. Evgeniya Fedorova, head of Innovation Infrastructure at Ural Federal University (UrFU) in Russia, said its government used the Russian Venture Company (RVC) as “one key tool of the state in the area of national innovation system development, which actively encourages technologies transfer in Russia.”
He added: “With government support, RVC regularly leads Russian and international business trips, forums, conferences devoted to technologies transfer development and meetings of the All-Russian programme Russian Startup Tour.”
In turn, Fedorova said UrFU “actively collaborates with RVC in the area of startup development, commercialisation and in [any] close co-operation with foreign universities in the US, Europe, India, China, Malaysia and Thailand.”
Beyond education, UrFU in November set up an IT accelerator for 11 projects. After the three-month programme, four project teams showed some sales of their products, with Technovisor and DocWood both gaining R300,000 ($6,000) in grants and Vmeste and WriteUp R100,000 each.
Kendrick White, vice-rector of innovation at Lobachevsky State University of Nizhni Novgorod (UNN), also in Russia, said rapid changes had been made in the past 18 months after the government, RVC and universities recognised there had been a “lack of capacities inside typical Russian universities to engage with business and industry in efforts to commercialise their significant scientific innovations.”
White said RVC had offered “significant support for our efforts, and has also offered great support in helping us to promote our approach to other interested universities as well as the regional innovation ecosystem participants.”
He added: “The next step in this process is to work with the various Russian government ministries. UNN has been able to implement our reforms using the financial support of the 5/100 programme [to get five Russian universities into the top 100 leading world universities].
“The reforms, however, require significant financial commitments on the part of the university budget. Other universities have thus far not allocated funding for such efforts as we have made at UNN, but must begin to do so.
“For example, universities must begin to build their own internal capabilities to conduct international patent searches, international market research, sector-by-sector technology market research capabilities, and capabilities in preparing the basis for provisional patent applications for the US or other global markets.”
He said RVC could also take a lead in developing access to market research reports to help researchers determine themselves the market relevance and uniqueness of their work, which could then be offered to regional Russian universities.
Other governments have also tried new ways to facilitate co-operation between industry and research staff, according to reviews by the Organisation for Economic Development and Co-operation, such as Australia’s knowledge transfer centres, Belgium’s Tetra project to support prototypes by small and medium-sized enterprises (SMEs) and organisations, Czech Republic’s funding of PoC, France’s Satts to reduce fragmentation, Mexico’s Sectoral Innovation Fund (Finnova) to cover some TTO and SME costs, or Turkey’s Tubitak 1513 TTO Support Programme.
They have also looked at ways of improving the legal framework through standardised licence agreements, such as in the UK, Germany, Denmark and across the EU by the Desca model, or making public research freely available, incorporated in Canada, US, Spain and New Zealand.
And governments are often funding stages of development before and after commercialisation, the latter often through venture capital. For the former, Australia’s national science agency Csiro manages the country’s Growth Partnerships as a competitive, merit-based pilot funding programme, Canada is providing $81m over five years under the Accelerator and Incubator Programme to help their expansion as part of its Venture Capital Action Plan, with the state-fund Business Development Bank of Canada offering the same amount again to firms graduating from the accelerators, while China has reduced funding to public universities since the 1990s but offers preferential tax and state loans to academia-university.
China’s example
China, however, has also been more directly funding commercialisation of ideas. The country now runs at least 1,500 incubators under the Ministry of Science and Technology’s 27-year-old Torch Programme, a nationwide initiative that provides policy, financing and consulting services for high-tech firms, according to newswire Bloomberg.
Beijing is expanding that number by 15% every year, according to the ministry in Bloomberg’s article – the ministry also runs an innovation fund that has channelled RMB3.45bn ($555.5m) of investment into more than 3,000 projects in emerging industries, the newswire added.
Last year, almost 80,000 companies received services from government-run incubators, according to the ministry in Bloomberg’s piece, to build up strategic emerging industries that include energy-saving and environmental protection, next-generation information technology, bio-technology, advanced equipment manufacturing, new energy, new materials and new-energy vehicles.
China is also adding a RMB40bn fund to its support for those sectors, the State Council said in January.