Powerhouse Ventures is an investment firm collaborating with universities to commercialise research
Australia has, as of late, come to be known for being quite poor at commercialising innovative research, and collaboration between industry and universities and other research organisations; in fact, recent OECD statistics rank Australia 33rd out of 33 OECD countries for collaboration between industry and research.
Looking to highlight the importance of collaboration, chair of Innovation and Science Australia, Bill Ferris last year said, “Better translation of research into commercial outcomes underpins economic growth and global competitiveness. If we fail to translate research into commercial outcomes, we will sell Australia short on jobs, economic growth and quality of life.”
Dedicated to identifying the most promising pieces of research from universities across New Zealand and Australia, forming a company around it, investing in it, and commercialising it is Powerhouse Ventures.
Launched in Christchurch in 2006, the organisation’s founding was based on models run successfully in the UK and US by the likes of Mercia Technologies and Allied Minds. As managing director Stephen Hampson explained it, the push for Powerhouse’s launch came from the city’s two universities – Lincoln and Canterbury – the city council, and a handful of private investors.
“The council wanted to see new companies get started and the universities wanted to see technology coming out, but everyone recognised that, across New Zealand, that pathway of research to new company hasn’t been too successful, so our job was to try to make sure that that mechanism evolved in Christchurch,” Hampson explained.
The first step was getting staff onto the university campuses, developing relationships with the researchers and uncovering potential opportunities, and working with the tech transfer offices to look at how to create a company out of an opportunity.
“We have a quite different approach to how we look at those businesses, and we can do that because we have patient capital; we don’t run a closed-in venture capital fund where you have to be in and out within five years,” Hampson said.
“We can stay in for 10 to 15 years, which gives you more opportunities in terms of what kind of companies you can create, and of course gives you a lot more opportunities in terms of the business planning and the ways that those businesses go to market.”
From Powerhouse’s founding to its first investment took a few years; it took that long, Hampson said, to get properly across the universities and understand their deal flow – not to mention the process of shaping research into a company and understanding where it can fit in the market.
“That is obviously not a short process, because there are so many different directions of research and you’ve got to try to find the right one that’s suitable for a startup,” Hampson said.
“Startups can’t take on big incumbents and just try to compete with better technology, they have to try and go to market in a different way.”
The Powerhouse process will generally see it help to incorporate a company around research, assemble a board of directions, and often appoint someone from its own management team into the company’s organisational structure into roles such as COO or even CEO, so it can have first-hand knowledge of, and provide assistance around, early business-building activities and administration.
As a company grows, it will gradually phase out Powerhouse’s management team and appoint its own; from here, Powerhouse’s involvement will focus around things such as strategy, capital raising, and potential mergers and acquisitions.
The idea to appoint an external team is an interesting one; the current conversation around growing the startup and entrepreneurship landscape can often feel like it’s pushing everyone to start a company, but Powerhouse acknowledges that not everyone is suited to entrepreneurship or wants to be an entrepreneur.
“You have these fantastic researchers at these universities, and many want to do more research, publish more papers, and get a tenure as a professor; that’s their pathway, and we don’t necessarily want them to change that,” Hampson said.
“We want them to keep developing more research and keep that flow of new technology being created and going to the companies, so we hire people in to run their business as opposed to trying to make an academic into an entrepreneur.”
Powerhouse Ventures now counts over 20 companies from across New Zealand and Australia in its portfolio, among them EdPotential, enabling schools to make more informed decisions and enhance teaching practice through data analytics; Veritide, a real-time bacteria-detection technology looking to improve food safety and quality standards; and CropLogic, which has created decision support software to help crop growers improve yield and recently completed a $2 million raise as it gears up for an IPO.
Having launched with co-investors NZVIF Investments Limited, a subsidiary of New Zealand Venture Investment Fund, and CRIS Limited, a subsidiary of the Canterbury Development Corporation, Powerhouse also raised and was the General Partner of four Annual Funds, via limited partnerships, in New Zealand between 2008 and 2012.
It then acquired and combined the CRIS co-investment portfolio and the assets of the four limited partnerships in 2015 to prepare for an ASX listing last year, with Hampson saying the decision to list was made to ensure Powerhouse had adequate access to capital.
As the appetite for commercialising research out of universities grows, Powerhouse is focused on furthering its work in New Zealand and developing relationships with universities around Australia.
Among other funds working to commercialise research in Australia are the CSIRO Innovation Fund, a $200 million fund that will look to commercialise research generated at the organisation and other publicly-funded bodies, and the Biomedical Translation Fund (BTF), a $500 million fund that will help commercialise biomedical discoveries so they can be accessed by patients.
Image: Stephen Hampson. Source: Supplied.