3 things Australian universities need from the Albanese government to commercialise research and help startups succeed

The recent call for submissions into the Strategic Examination of Australia’s R&D system has revealed ideas and frustrations that have long been articulated on numerous discussion panels.

However, through this recent consultation, it has felt like more practical solutions have surfaced across the ecosystem, and many of the ideas align.

So if we could request the new Albanese government to grant us three wishes, that could be game-changers to decades-long issues in getting industry and science to better align, they would be:

1. Innovative Funding Models

Universities have long been criticised for lack of permeating economic benefits when it comes to translating research into practical applications.

The mentality of “publish or perish” has long been blamed, but it goes far beyond this. Apart from exceptional individuals, one can’t expect a researcher to be naturally commercially minded, and in the same way, one can’t expect a natural born entrepreneur to undertake blue sky research that uncovers a game changing discovery.

Structural and systemic incentives are the real culprit. Not only for academics but equally for industry, university Technology Transfer Offices (TTOs), investors, corporates, Government and all along the supply chain.

Some practical solutions lie in innovative funding models that provide better incentives across these groups.

To tackle just a few:

Seed Funding models to incentivise efficient use of public capital

The establishment of co-investment funds that blend government and private capital such as Breakthrough Victoria, Queensland’s Venture Capital Development Fund and the South Australian Venture Capital Fund are gaining momentum and provide aligned incentives.

TRaCE has launched an early-stage seed fund that uses federal grant funding to co-invest in university-supported startups and spinouts alongside venture capital partners.

TRaCE Research & Commercialisation Director Gabriella Nunes

It has a buyback mechanism whereby the venture capital partner can buy-out the university’s portion of the investment within the first three years with a small amount of interest. This de-risks the investment for the Venture Capital firm (VC) incentivising them to invest earlier (where funding gaps are large) and allows the university to recycle the seed funding into a greater number of startups/spinouts.

The next stage of collaboration across the capital stack ideally is through corporate, philanthropic, catalytic and institutional capital to support deep-tech and industrial innovation as the next stage of development for the Australian ecosystem.

Incentives for universities

An over-reliance on international student revenue has made research vulnerable to market fluctuations.

The current funding model also incentivises universities to focus on contract research which attracts further block grant funding. Once the contract is signed there is little incentive or enough commercially focused R&D capability within most universities to drive the project from ‘lab to market’.

By including an awarding criteria in research block grant funding to create and commercialise market-informed IP between universities and industry partners, it would significantly shift behaviour and drive universities to provide adequate commercialisation expertise and support to these types of collaborations/projects.

That is, changing the criteria for a portion of the Research Block Grant funding so that it is based on reportable commercial outcomes or progress (e.g. patents registered and/or granted, IP commercialised with industry-university contributions, number of products to market, spinouts established, etc.) would broaden the KPIs of TTOs to providing support to academics capable of achieving commercial outcomes.

Funding models for industry-academic R&D projects

New models that provide better leveraged (matched funding) to industry, particularly those in the capital intensive scale up phase would greatly incentivise such ventures. In particular, co-investment models that allow industry partners to contribute equipment and project resources as opposed to pure cash contributions.

This would enable small and medium-sized enterprises (SMEs) and/or scaleups that are often capital constrained (particularly those developing hardware-based technologies) to further leverage expenditure they would need to incur regardless, allowing the business to unlock additional grant and research support, and fast-track commercialisation.

Smarter R&D Tax Incentive Models

It has been widely called for, for the Research & Development Tax Incentive (R&DTI) to be expanded, however there are other R&D tax incentive optimisation models already available.

Companies such as Advanced, providing R&D lending between the period of incurring the R&D expense and receiving the RTDI, are relatively unknown but if used correctly could significantly improve a scale up’s financial and cash flow position.

2. National Translation Hubs

Asking universities to be the primary lead in commercial outputs of research isn’t what they were established for nor are they equipped with the relevant capability in their current form.

A number of successful models around the world pick up this collaboration and place it just outside of the academic structure as technology development centres that are industry-driven, with links to fundamental university research.

The Hubs function as semi-independent operations that provide a pathway for researchers and industry to work together outside of the academic system. This better enables fast-paced, dynamic research to be undertaken with a speed-to-market approach. This approach has been internationally successful in centres such as ARENA 2036 in Stuttgart and Catapult in the UK.

Establishment of these hubs in Australia would fill the mid-TRL scale-up (TRL 4-7) gap if enabled with the funding and infrastructure, to access to pilot scale and modular manufacturing lines and flexible IP models to de-risk industry adoption.

These hubs would also provide a stronger focus on commercialisation and scale-up by evaluating technologies in a standardised, rigorous manner, and allocating additional funding to technologies that can demonstrate evidence of their technical and commercial feasibility.

Ideally the National Hubs would create shared, high-capital innovation centres for strategic industries (e.g., solar, battery, hydrogen, aerospace, defence, minerals, quantum) to optimize resource use and drive deep-tech development.

3. Australia injected into global value chains

The current government has stood up a number of large funding policies to drive the development of industry and sovereign manufacturing in Australia: Future Made in Australia, the National Reconstruction Fund etc.

Sundrive cofounders David Hu & Vince Allen

Whilst this is largely positive, the reality is that the Australian market is too small to have the breadth of skills, or capital for cost-effective manufacturing at scale. In the long run, it is unrealistic for Government funding to be awarded solely based on Australian companies undertaking all aspects of sovereign manufacturing (Sundrive’s partnership with Trina Solar is a case in point).

Some slight adjustments to make this a more balanced model would promote Australia as a strategic R&D and advanced manufacturing partner for global organisations. It would allow us to leverage our strengths in areas where our IP is world-leading and partner with international investors, multinational corporations (MNCs), large manufacturers, and distributors to commercialise and bring solutions to market at scale.

Through this, we play to our strengths as a nation (not missing out on the solar cell or wifi opportunity again) and find our niche in global supply and value chains by using a balanced model that generates jobs, economic benefits, and creates high value add industry in Australia.

What is TRaCE?

The Trailblazer for Recycling & Clean Energy (TRaCE) Program was established through the Australian Department of Education’s Trailblazer Universities program, to fast-track the commercialisation of recycling and clean energy technologies by bringing ‘industry and science’ closer together.

Delivered by UNSW and the University of Newcastle, TRaCE combines world leading IP with industry & market led development to drive commercially viable solutions to market, as part of Australia’s transition toward a net zero economy.

In its first 2 years, TRaCE has generated significant momentum and outcomes to stimulate a commercialisation ecosystem:

$80M+ in industry-led R&D projects have been established.
outcomes including printed solar powering Coldplay concerts, development of light-weight hydrogen tanks for drones and green ceramics made from recycled textile and glass waste deployed within property developments.
New career pathways and funding options have been made available for researchers to spin out new technologies partnered with industry or pursue a startup.
First of a kind programs have been developed to support SMEs access free R&D support to solve immediate challenges.
$2.7M in seed funding has been deployed to Australian climate tech startups and $467,000 to SMEs in R&D funding.
An inaugural Master of Clean Energy has been established at University of Newcastle as part of TRaCE’s remit to develop skilled workers for the net zero economy.
A new advanced manufacturing and prototyping facility will open up at University of Newcastle later this year providing open access to all TRaCE industry partners and the wider eco-system.

TRaCE is progressing well to deliver on its long term KPIs of 180MT in GHG emissions avoided and stimulating over 5000 new jobs; and a legacy of new commercialisation pathways, culture chang programs and R&D collaboration models that de-risks investments to bring IP out of universities into the market faster.