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Opinion

Why Breakthrough Victoria is critical to commercialisation for science startups

- June 4, 2024 7 MIN READ
Tin Alley ventures
University of Melbourne Vice-Chancellor Duncan Maskell; Anna Shave, Head of Capital Partnerships, Tanarra Capital; Grant Dooley, CEO, Breakthrough Victoria, at the launch of Tin Alley Ventures in 2023.
Australia is one of the most creative nations in the world with a research sector that produces innovative and imaginative solutions to difficult global challenges.

We generate 3.4% of the world’s research with just 0.33% of its population. Tragically we have failed to capitalise on this wonderful achievement. We fail to convert this research into complex, highly valued products that are needed to underpin our future prosperity.

Instead, we rely on exporting what we grow or mine, allowing other advanced economies to turn our resources into complex advanced manufactured goods. This has left Australia with a low ranking in economic complexity compared to other leading economies.

At the time of our Federation, Argentina was proud of their prosperity, as were we, and no one at that time would have predicted the parlous condition of the Argentinian economy today.

The divergent paths of our nations are obvious now. Australia’s stable political environment diversified economic policies, and strong institutional frameworks over the past 100 years contrasts sharply with Argentina’s political instability, economic dependence on agriculture, and weaker institutions.

At the University of Melbourne Started@Melbourne Showcase were Jaala Pulford, Vice Chancellor’s Fellow; Justin Spangaro, CEO, Carbon Cybernetics; Prof Jerome Sarris, cofounder, Psychae Therapeutics; Assoc Prof Fiona Brownfoot, cofounder, Kali Healthcare; Jeffrey Ng, CEO, NIRGenie; Assoc Prof Daniel Perkins, cofounder, Psychae Therapeutics.

University of Melbourne mental health startup Pyschae Therapeutics banked $4.5 m 
in 2023 with BV underpinning the funding through backing of the university. 

However, Australia’s prosperous future in the next century is not guaranteed: for that we need to continually respond to emerging challenges to secure our prosperity.

Ensuring our long-term viability as a modern economy will require building products that the rest of the world wants to buy, which will increase our economic complexity as we become globally competitive. Low-level economic activity attracts lower economic rewards, and the price of its products is set by the buyer.

Creating the best products and services in the world is tough and requires our businesses to embrace our best research, attract our best brains and bring together the diversity of skills required to build world class companies.

Shortsightedly comfortable

Our current approach to translating research into market-ready innovations is clearly inadequate as shown by Australia’s tragically low R&D expenditure as a percentage of GDP. This is clear evidence that across-the-board Australia is not performing well.

It is shortsighted to feel comfortable just because we have a few brilliant, world class companies like Atlassian, Canva, CSL and Cochlear. A prosperous Australia requires major sectors of our complex economy to be world ranking.

The Australian Universities Accord – Final Report Chapter 5 highlights the pivotal role that university research could play in driving Australia’s competitiveness and emphasises the under-utilisation of this research by Australian businesses to improve their global competitiveness.

Driving research and business collaboration requires fostering respect and trust across industry and academia that will result in powerful strategic industry connections. Streamlining the startup journey for companies emerging from university research is overdue; the current process is long and arduous.

The commercialisation chasm

There is a chasm that all startups must cross between competitive grant funding and commercial VC investment.  Emerging university funds need to support startups from inception to investment-readiness.

These funds have been created by bringing together private sector expertise and capital, Government policy and university resources.  It requires focus by universities and government to cross this chasm. To expect this to be faultless and plain sailing is foolish. It will be hard, and failures will be many.

Coaching researchers to perceive commercial potential in their work and developing a research mindset among most business leaders is crucial.

This approach involves business leaders leveraging university research for corporate challenges and innovations, moving beyond mere discoveries to finding profitable applications.

Students learn by doing and businesses who provide the doing for students to learn will learn too. Internships for students and university sabbaticals for business leaders builds understanding between sectors by strengthening connections between universities and industries to leverage research for economic gain.

Navi cofounders Assoc Prof Christiane Theda and Alex Newton, with Victorian industry and innovation minister Ben Carroll.

Navi cofounders Christiane Theda and Alex Newton, with Victorian innovation minister Ben Carroll. BV backed the baby-saving medtech in a $2.4 m raise in 2023.

This involves strategic industry partnerships that integrate industry experience with academic research. Internships and sabbaticals integrate industry experience with academic rigour, enriching both educational and business understanding necessary for innovation. By linking university research directly with industry applications, we can significantly boost Australia’s economic complexity.

This integration is essential for advancing our global standing in innovation, necessitating increased investment, improved governance, and robust university-industry collaborations.

These elements form a comprehensive strategy to not only acknowledge the current state of research and science commercialisation in Australia but also to propose actionable steps toward leveraging university research for enhancing Australia’s global competitiveness. The emphasis is on strengthening industry/university collaborations, fostering entrepreneurial mindsets among researchers, and encouraging businesses to tap into academic research to solve difficult problems to build globally competitive products and services.

Collaboration, not competition

In response, Victoria established Breakthrough Victoria (BV) to bridge this chasm by supporting the commercialisation process with improved collaboration with established investors rather than competing with them.

While the formation of BV was a strategic move, it has not been without its challenges. Governance concerns need addressing to ensure transparency and to build public trust. These efforts are essential if BV is to fulfil its mandate effectively and meet the fiduciary standards expected by taxpayers. Scrutiny is not only necessary, but also essential given the complexities of investing in high-risk, early-stage innovations where outcomes are long-term and not immediately visible.

Anyone who has spent time working with research teams and science-based start-up companies will know there is a dangerous chasm to cross in establishing a globally successful company where the science is tantalisingly close to proven but requires investment to build the Minimum Viable Product and to show that the targeted customers will buy. Investors want to see an exciting, talented team that have not just got the science covered but has the experience to build the commercial operations of a global company. BV must excel in meeting the challenge of crossing this chasm.

Achieving this goal is critical to turn around our complexity deficit. The journey will be fraught, the transition from concept to effective operation will always have its challenges, particularly in fostering an entrepreneurial spirit with strong commercial awareness within BV.

Closure not justified

Critics, including experienced professionals from the sector, have expressed reservations about the ability of a government-run organisation to embrace the managed risk-taking essential for commercialisation of research but commercial investors have failed to build a strong science commercialisation sector in Australia. New approaches and learning from our failures are required.

RayGen Resources CEO, Richard Payne

RayGen Resources CEO Richard Payne – BV backed Victorian solar generation and thermal storage company in a $51m Series D.

While criticism of BV’s shortcomings need to be heard they do not justify its closure. Instead, we must focus on making it more effective, recognising that the path from research to commercial success involves high risks. Criticism focusing on the failure of specific investments overlooks the nature of venture capital, which necessarily involves risk-taking, so some may fail.

Those of us who have sat on the boards of significant public and private companies know how difficult decisions are and appreciate that they only look obvious when connecting the dots backwards. It is much easier to referee from the grandstand and even easier when you have watched countless slow-motion replays.

The decisions required of the BV board are difficult as they address where best to invest the State’s finances in the high risk, very early-stage investment space. The media and many in the voting public want quick results, which is just not possible, since the science often takes 10 to 20 years to be completed and commercialising that science a further decade or more. We must resist the temptation to magnify each and every misstep and use it as a political battering ram.

Having said that, it is true that the BV board should be put under closer scrutiny and the principles of good governance and transparency, which do not take decades to be evidenced, should be applied.

If the 50 staff of BV include political staffers and public servants doing political work for the government and not directly and very clearly serving the goals and objectives of BV, then the BV board should rightfully be held to account.

Navigating the dual demands of serving Victoria’s State interests and achieving commercial success presents a particularly difficult challenge for BV.

The organisation must embody the strengths of the best government agencies — demonstrable commitment to good government, to fairness, and impartiality—while also demonstrating sharp commercial acumen and robust risk management typical of successful private sector enterprises. This hybrid nature requires balancing seemingly contradictory qualities, creating a complex operational landscape.

Managing conflict of interest

The primary challenge for organisations like BV is the potential conflict between their public sector and their commercial responsibilities. Government entities typically prioritise public welfare, transparency, and equal opportunity, often under strict regulatory oversight.

On the other hand, commercial enterprises focus on profitability, competitive edge, and innovation, with more flexibility in decision-making. Merging these two sets of priorities requires a sophisticated governance structure that can support dual objectives effectively.

Recruiting great staff is always hard and good candidates are never easy to find. BV require a team possessing knowledge of government, awareness of research, venture capital expertise, and private sector experience, all infused with a strong commercial awareness. Oh, and the remuneration will be front page news if it is anything more than modest.

Establishing rigorous governance standards akin to those expected in publicly listed companies and major government organisations to ensure transparency and accountability requires a board that is representative of business investment, university research and government. Those selected will always attract criticism, but that criticism must be balanced and strongly evidenced.

By addressing these points, we can transform BV into an effective instrument that not only supports but accelerates the commercialisation of Australian research, thus enhancing our national competitiveness and contributing to a prosperous and harmonious society.

In summary, BV must operate with a governance model that accommodates flexibility and commercial discretion while upholding the values of transparency and public accountability. This delicate balance is crucial for leveraging commercial activities to advance the national interest effectively.

Uni research vital

The role of university research in enhancing national competitiveness cannot be overstated.

Dr Amrutha Vijayakumar and Dr Jacinta Bakker

Dr Amrutha Vijayakumar and Dr Jacinta Bakker from agtech Jupiter Ionics at Monash Uni, which BV backed in a $9 million raise to develop carbon-neutral “green” ammonia for agriculture.

Yet, achieving this requires overcoming substantial barriers and fostering a culture of innovation and collaboration. As we navigate these challenges, it is imperative for all stakeholders—policymakers, industry leaders, academics, and the public—to unite in support of science commercialisation.

Our collective effort is crucial to transform Australia into a global innovation leader, securing our future prosperity. Failing to do this will make us a nation of price takers not makers, with a standard of living to match.

As one who, after beginning my career at IBM in the late 1970s, then took an entrepreneurial path, founding my first company in 1985, thus giving me over three decades in multimedia and internet technologies, and subsequently seeing me in governance roles across various science and technology companies, focusing on leveraging research to tackle significant societal challenges, and engaging in extensive collaborations with universities and research institutions which have fostered a robust ecosystem for scientific and technological advancement, I know it can be done.

NOW READ: Breakthrough Victoria pours $43 million into five universities to help turn research into startups