Continuing our regional overview of technology transfer, this month we examine western Europe’s Ireland, France, the Netherlands, Switzerland and Germany.
France
Global innovation ranking: 20
Global competiveness ranking: 23
R&D spend as a percentage of GNP: 1.9%
French technology transfer is in the middle of a major upheaval from many inidividual units to the Société d’Accélération du Transfert de Technologies (Satt) system (see profile).
Implemented in 2011, the initiative has resulted in universities and research institutes funnelling tech transfer efforts to 12 regional Satt offices. The initiative is backed by €3.5bn ($4.6bn) from the Future Investment Programme (Investissements D’Avenir) – a €35bn government investment programme with €22bn specifically for higher education and research.
Fundamentally, Satt aims to scale up the co-operation and bargaining power of French tech transfer through the creation of a more focused, cohesive system. While in its early days, the Satt project bears a certain degree of promise, and the combined efforts of France’s tech transfer offices (TTOs) could prove beneficial for a number of reasons.
France’s university base is mostly generalist and focused on education, with specialities not emerging until students graduate to research institutes. For this reason, management of intellectual property (IP) into significant portfolios could prove useful. A regional overview of IP would allow a top-down perspective on where universities and institutes can funnel their resources into a particular field while eliminating competition over prospective patents.
A thicker portfolio also lends greater weight to negotiations than a tech transfer office. In other countries, you might have a low-profile university strike potential commercialisation gold only for its poorly-funded two-man tech office to fumble and drop the ball. The united Satt front not only reduces the probability of such an opportunity being overlooked, but also invites greater funding from investors and expansion into international markets.
Another benefit can be summed up as gravity. Much as the brand power and critical mass of Cambridge’s tech cluster adds to its own continuing success, a similar rationale can be applied to Satt, if it develops as expected.
Through operation as a single entity with greater clout, each will provide a natural locus around which spin-outs, small and medium-sized enterprises (SMEs) and investors gather, thus improving the potential of generating a thriving tech cluster.
From a staffing perspective, tech transfer professionals in the country can now expect greater support in their endeavours through training, collaboration and additional resources. The Satt initiative also aims to reach a critical mass of professionals from a current headcount of 293, boosting the chances of successful commercialization output.
An additional bonus is separation between TTO and institution. As a Satt represents a region as opposed to a single organisation, it is unlikely to become encumberedin bureaucracy as a shareholder. It also allows definitive revenue-sharing mechanisms to be set up. Currently, Satts will capture 80% to 100% of revenues until IP values reach break-even, falling to 40% to 60% afterwards to be distributed among the Satt, faculty and parent organisation.
To date, some €733m has been funnelled into the Satts, each receiving somewhere between €36m and €78m. Of this, 95% is focused on investment, with each Satt looking to make investments in IP and proof-of-concept funding at an average of €250,000 per project. So far, this has led to 173 proof-of-concept projects launched, 186 patents filed and 39 licence deals closed, of which 15 have led to spinouts being set up, over the timeframe of just over a year, with three of the 12 Satts yet to be incorporated.
The Satt initiative to adjust how IP flows from its base source of academia follows a concerted effort in France to encourage entrepreneurialism and venture capital (VC) from angels, institutions and corporations to flow to the early stage.
Last year, for example, Innovacom, which invests in Europe and the US, spun out from phone operator France Telecom as part of raising the €30m Technocom II fund. Technocom II will invest in about 15 start-ups from French public, academic and industrial research in materials and components, embedded software systems, machine-tomachine and machine-to-user communication, data management and high-speed broadband connectivity.
Aside from Orange, the other industrial partners in the fund are communications equipment maker Alcatel-Lucent, electronics provider Groupe SEB and energy firm Soitec, but the largest investor – called a limited partner (LP) – with a €18.7m commitment is Fonds National d’Amorçage, a state-backed €400m fund of seed funds managed by CDC Entreprises, an affiliate of financial services provider Caisse de Dépôts.
Technocom II’s strategic committee includes representatives from each of its LPs, the research department of Sorbonne Paris Cité, as well as the director of telecom school ParisTech. Its deals would come from three main areas, or circles – first, the industrial LPs, second, universities, such as the Sorbonne and ParisTech, and third, seven incubators around the country, including ones in Rens, Grenoble and Montpelier.
Switzerland
Global innovation ranking: 1
Global competiveness ranking: 1
R&D spend as percentage of GNP: 2.3%
Switzerland is the Muhammad Ali of the innovation world.
Despite its relatively small size, the Swiss consistently come out on top of global innovation and global competitiveness rankings.
Tech transfer in Switzerland tells a similar story. It is predominantly led by federal technology institutes Ecole Polytechnique Fédérale De Lausanne (EPFL) and Eidgenössische Technische Hochschule (ETH) Zurich, both rated among the top 20 universities in the world. The two institutes are joined by a further eight universities represented by five TTOs, and seven universities of applied sciences with limited commercialisation output. Combined, the TTOs had a headcount of 74 up to two years ago.
Even though the size is smaller compared with nearby countries such as France or the UK, Switzerland’s tech transfer professionals still managed to set up 68 spin-outs during 2011, with a total licence income of $8.25m, partially due to more institutions accepting equity transactions in lieu of licence payments so as to avoid a cash drain on new enterprises.
This high spin-out rate comes from a focus over the past 15 years by Swiss institutions to gear more IP towards forming companies. In order to do so, significant resources have been invested in fostering an entrepreneurial atmosphere at EPFL and ETH Zurich, and research centres close by, such as medical training centre Uni-Hospital, as well as stimulating tech transfer into spin-outs.
Switzerland also weathered the financial crisis better than many of its European neighbours. While the EU represents half of Swiss exports, leaving the country’s economic prospects tied to the fate of surrounding nations, it managed to avoid being financially hobbled after returning to growth rapidly after a short recession. The Swiss economy has slowed down since the first three months of 2012, and even experienced one quarter of contraction, but it remains more stable than nearby countries, providing a strong setting in which spin-outs can be established.
Even if Swiss start-ups maintain a three-year survival rate of 80%, one Achilles heel for Switzerland is funding.
Government agency the Commission for Technol
ogy and Innovation notes that VC is hard to come by, especially for early-stage start-ups such as academic spinouts.
Yet there are alternative pools of investment from public organisations, foundations and corporations. Earlier in the summer, local phone operator Swisscom set up a SFr10m ($10m) to its Early Stage Fund to invest in cleantech, media, and information and communications technology start-ups in the country. The Swisscom fund followed equivalent vehicles by local banks, such as Credit Suisse.
Ireland
Global innovation ranking: 10
Global competiveness ranking: 28
R&D spend as percentage of GNP: 1.4%
Irish tech transfer centres on Enterprise Ireland, a government agency that provides support for tech transfer in the country.
Working alongside individual TTOs from Irish universities, Enterprise Ireland provides advice, support, access to international markets and links to industry for academics looking to spin out research, which the organisation actively recommends. Enterprise Ireland also provides funding support through its Commercialisation Fund Programme.
The fund supports innovations at all points of the commercialisation pipeline to assist inventions across the so-called valley of death, and targets research that could be spun out as a new company within two to five years of receiving financial backing.
The fund looks to invest between €80,000 and €350,000 depending on the project, with potential follow-on funding.
In addition to this fund, Enterprise Ireland also manages a state-backed €175m Seed and Venture Capital Scheme, which typically looks to invest in VC funds that invest in Irish innovation, now in its fourth incarnation for 2013 through to 2017 following similar funds between 1994 and 2012 with announcements of newly-backed funds expected in the next couple of months. One example of the scheme’s impact is University of Limerick’s €32m venture fund, set up alongside the Bank of Ireland and managed by VC firm Kernel Capital, which is investing directly in Limerick’s spin-out successes.
From 2007 to 2012, six venture funds and four seed funds backed by the scheme (see table overleaf) made 362 investments totalling €211.7m, with a breakdown of the venture funds’ investments at 29.83% developmental, 39.96% early-stage, and the remaining 30.21% going into start-ups and spin-outs. Of those investments, 44.92% went into software innovations, and the second-biggest chunk, 38.22%, went into life sciences.
VC as a whole in the country is angled towards earlystage investments in innovative companies, and has played a critical role in Ireland’s economic development since the millennium, emerging as a host of innovative start-ups have been forming around the Dublin Web Summit, which this year is expected to host 10,000 start-ups, overshadowing Le Web’s event in France.
Investments in high-tech firms in Ireland account for over 90% of total investment, compared with 31% in Europe, and the country is rated second in Europe for VC support and infrastructure.
VC has soared over the past 15 years, with the number of funds operating in Ireland doubling and the average size of each fund rising from €20m to €90m. The 2008 crash failed to dampen its rise, with levels of investment increasing year on year to pace the number of companies until 2011, when Ireland accepted an EU bailout for its ailing banking industry.
The Irish government also seeks to increase commercialisation capacity through other means besides Enterprise Ireland. Earlier in the year, it made a further €6.9m available to 62 Irish university research projects in order to drive potential commercialisation from promising innovation projects.
Netherlands
Global innovation ranking: 4
Global competiveness ranking: 8
R&D spend as percentage of GNP: 1.7%
Backed by one of the best-ranked higher education systems in the world, the 14 Dutch universities that make up the main thrust of the Netherlands’ tech transfer efforts are in a strong position. This is further supported by a sophisticated and innovative business sector, switched on to the idea of utilising new technology and nestled in an environment that is supportive towards business.
However, in the wake of the damage caused by the 2008 financial crisis, the Netherlands has struggled to maintain its high competiveness rankings, and has slipped, gradually but surely, ever since. This has led to concern within the Netherlands that neighbouring countries may accelerate ahead, leaving the country struggling to compete from both innovation and business standpoints.
Economic worries persist in the country after a mediocre five years. Predictions for recovery over the past two years have all been blown out of the water as the country continues to falter. The Netherlands has endured a year-long recession as the eurozone recovers. Its housing market continues to deflate. The Netherlands has also mirrored neighbouring countries, such as the UK, with its austerity programme, which has delivered similarly tepid results, and it will suffer further austerity as the Dutch coalition government, adamant in its resolve to stick with its policy, announced a budget cut of $8bn for 2014 in an attempt to tackle the deficit.
The country also has socioeconomic issues tthat affect its ability to innovate. Unemployment continues to spike, rising from 5.8% in January 2012 to 8.7% presently, and is forecast to continue its upward trajectory. The workforce also faces the same ageing perils of Italy and Japan, with estimates expecting more than half the population to be over 65 by 2050.
The Dutch ability to innovate is also tied to the economic situation in other ways. In the Netherlands, the Technology Foundation STW, which supports university innovation with government funding and maintains an annual budget of €74m, requires researchers to get industry on board at a very early stage before releasing funding. In an economy where industry is happy to take risk on board for the chance at clear-cut rights to the next big innovation, this could be an effective policy, but with the Netherlands’ current economic jitters affecting industry confidence, basic research hits a funding brick wall before it can be put to good use.
This is not to say that tech transfer cannot be supported in the Netherlands, however. In the past year, VC firm PPM Oost and the European Investment Fund launched the Dutch Venture Initiative, a €150m venture fund of funds to stimulate SME growth with a focus on life sciences, information and communications technologies (ICTs), med-tech and clean-tech. Venture firms investing in tech start-ups can receive 50% co-financing under the government’s Innovationfund SME+ scheme which has an annual budget of €95m.
Other funds, such as the Holland Venture Health Innovation Fund and the Technical University of Eindhoven-partnered Technostars, also exist, and contribute to a pool of resources that university spin-outs could take advantage of should they clear the Technology Foundation STW supported valley of death.
But while the Dutch system has been active for a long time – KU Leuven reached its 100th spin-out earlier this year, more than 40 years after its TTO was founded in 1972 – the overall number of successes has been relatively low.
Overall, the Netherlands has both the infrastructure and the capacity for innovation to produce excellent commercialisation results, but is consistently held back by its economic troubles. Further funding and greater cohesion and co-operation are needed to overcome present barriers, but whether this can be achieved in the current economic climate is far from clear.
Germany
Global innovation ranking: 15
R&D spend as percentage of GNP: 2.3%
German tech transfer faces an interesting dichotomy. On one hand, spin-out rates from German institutions are on the rise. On the other, competition among universities allows industry to play them off against one another, leading to revenues from licensing and patents underperforming.
For example, one of Germany’s most prestigious research institutions, Technical University of Berlin, produces on average 33 companies a year from academics and students – one of the best rates in Europe. Its revenues for licensing hit €1m for the first time only in 2012.
While this is a marked improvement for the university, comparison with institutions in neighbouring countries indicates there is much room for improvement.
There are calls in Germany to create a more united front for tech transfer, more akin to the developing French model than Germany’s current fragmented framework, although this process appears to be occurring naturally, with many regional tech transfer offices springing up.
There is the Technologie Allianz, a network of Germany’s tech transfer officers representing more than 200 institutions, which works to provide a central point of access to Germany’s technological offerings. However, Technologie Allianz has existed in its present form since 1999, yet has seemingly done little to address the imbalance in German tech transfer.
There is also a need to produce more forms of financial support for young start-ups in Germany. 80% of Technical University of Berlin’s start-ups have yet to attract external investment with the majority still owned by their founders. VC for early-stage is scarce, and there is little in the way of funding to help fill the gap.
In addition, entrepreneurship levels are relatively low in Germany, with only 5% to 10% of young people saying they would consider starting a business, mirroring a traditional German cultural aversion to risk compounded by a lack of tax incentives and strategic support from the government for entrepreneurs.
One way Germany tackles this problem is the Fraunhofer Society. A collection of more than 60 research institutes, Fraunhofer brings research and business development together. Students and staff pursue research under the same roof as engineers and marketing teams. It has an annual budget of around €1.65bn, about 30% of which comes from state, and the other 70% from contract work for both government and industry, indicating clear lines for development of successful IP.
Another notable group is the Max Planck Society. It is composed of 80 research centres and transfers research – which has led to 32 Nobel prizes – through its TTO Max Planck Innovation. It has a research budget of €1.4bn, 84% of which comes from state, and is widely regarded as the foremost basic research organisation in Europe.
Overall, Germany’s academic ability is excellent, it fosters an environment that helps get technology out the door into new firms, and it is home to one of the fastest-growing economies in the industrialised world. However, more cohesion and greater VC funding for spin-outs would not go amiss.
To see information on which tech transfer offices operate in which area, get your copy of Global University Venturing, available here.
