What’s AgTech? The AgTech sector is aimed at goals that have existed throughout recorded history – yield and efficiency maximisation, enhancement of desirable traits, dealing with pests and, more recently, minimising externalities such as biodiversity loss, climate change and environmental degradation. Globally, AgTech venture activity climbed to over 750 deals accounting for over €10Bn invested last year. In a sign of sector maturation, exits have rapidly increased over the last few years to a record €23Bn realised in trade sales and IPOs in 2021.
What’s happening here? Ireland is ranked third globally in terms of research excellence in Agricultural Sciences (Science Foundation Ireland 2020 Annual Report). The government calls out Climate, Environment and Sustainability in addition to Agriculture, Food and the Marine as major pillars of research to be supported from the €1.9Bn per annum spend within the Irish university R&D ecosystem in its ‘Impact 2030’ strategy. Recent data shows AgriFood companies attracted over €100M in venture investment in 2021 (TechIreland Annual Report and Irish Venture Capital Association data) and there is a growing cohort of start ups and innovative businesses in the space looking to grow and sell globally.
Who are IFC? The International Finance Corporation is part of the World Bank. IFC’s focus is to develop disruptive technologies by catalyzing entrepreneurship ecosystems via venture capital and growth equity. They operate in developing nations and have great access to local governments and in-country advisors and specialists in addition to capital. IFC is focused on supporting innovative businesses and tech start-ups who are addressing IFC’s development mandates such as climate change, food security, access to health care and education and increasing financial inclusion. See https://www.ifc.org/
What’s the Irish link? The Ireland Strategic Investment Fund (www.isif.ie) have a strategic relationship with IFC. They are working together to generate growth opportunities for Irish AgTech companies in emerging markets. More information on the collaboration can be found here.
Enterprise Ireland (EI) is in the planning stages for a new initiative aimed at catalysing more spinouts from the third level in Ireland. The proposed approach to this is via a ‘Needs-Led Innovation Programme’.
The core insight here is that most spin outs from universities arise as a lucky side effect of the mass of public good and curiosity driven research conducted there. Most of the time, researchers are answering important questions about the nature of things to help understand the world better. The primary output is information and publication. In contrast, needs-led innovation programmes start with ‘what does the market or customer want’ and ‘what is the painful and unsolved problem they are willing to pay for the solution to’. If these questions can be answered properly as part of a structured programme staffed with budding founders and entrepreneurs, it can lead directly to the creation of the technology or service that is the basis of a spin out in almost every case. Needs-led innovation programmes aim to systematise this approach at scale.
The first needs-led innovation programme here, and one that EI is attempting to build on the learning and impact of, is the BioInnovate Ireland programme. It has been in operation since 2011. Over its decade of operation, Bioinnovate has trained some 81 Fellows who have formed 22 new spinouts. Assuming this performance holds through for new needs-led innovation programmes in other sectors, this could translate to 10 new startups per annum if, say, 5 programmes are funded in other industry sectors (eg. AgTech, Fintech, Climate Change, etc). The underlying structure of needs-led innovation programmes is based on the following elements, elements likely to be expected to be developed in successful bids for similar programmes in other sectors:
Sourcing experienced MedTech professionals willing to spend a year immersed in seeking solutions to real world medical problems as research Fellows.
Access to medical professionals willing to work closely with the Fellows to identify key needs
A structured methodology to filter and select between needs and then invent a solution
Develop and commercialise the solution through further funding of it and the Fellows team, eventually as part of a new company that can bring the solution to the market.
Starting with the first point, programme participants or Fellows are selected from the relevant industry sector – in the case of Bioinnovate this is the MedTech industry and includes clinicians. In a study of motivations to join the programme, the single biggest factor for prospective Fellows was an interest in start ups.
In terms of access to professionals who understand the needs to be identified, the Bioinnovate approach was to select a theme (eg cardiovascular) each year and assemble problem owners that would allow Fellows to be immersed in the relevant work space and observe for themselves the needs. This, in turn, allowed Fellows access to important tacit information about lived experience, limitations and requirements a new solution would need if it were to be adopted by the professionals who had these needs.
The third element relates to filtering and selecting among needs and inventing a solution. To enable this, Bioinnovate used a proven structured training methodology, Stanford’s Biodesign programme. Each of the new needs-led innovation programmes will be expected to select a proven methodology appropriate to the industry sector in question to do same. Intriguingly and as an aside, the first 10 years of operation in Stanford of their Biodesign programme led to a similar number of new startups (26) suggesting that 2-ish per annum is an appropriate base rate for each programme.
Finally, armed with a potential solution there is now the need to develop it to market readiness. Product development, trials (with the customer, patients, etc), marketing, intellectual property generation and protection, regulatory approval and eventual manufacturing are all needed before sales can happen. As such, teams of Fellows will be working during their Fellowship on building their business plan and pitching to investors and state agencies for investment and support after the Fellowship year ends.
To date, Bioinnovate spinouts have raised some €30M and launched a number of new MedTech products. Whilst the specifics of the new programme will have await its launch, the underlying ideas and approach show real promise already in creating investable and impactful spin outs.
I know the last thing the world is in desperate need of right now is yet another podcast series. That said and after a fair bit of thought, I felt I’d compromise with a very limited set of them. This was born of a need to let people know the great things happening in DCU whilst largely being prevented from easily meeting anyone over the last 18 months.
The goal in this (very!) limited podcast series is to tell the stories of some of the research centres within Dublin City University, to hear how they make a difference to the lives of people everywhere and how they are managing to keep doing this during the pandemic. I hope to talk to some of our emerging spinout companies to hear about their new products and services and what they are hearing as they engage with customers and investors.
In the coming episodes you will hear from the DCU Water Institute and their work to ensure we have clean water and improve sustainability of supply and from the CEO of the INSIGHT SFI Centre where researchers are using data analytics and internet of things technologies to solve all manner of real world problems.
In each case, the research centres have platform technologies and capabilities and are keen to collaborate with companies with complementary needs and challenges. Contact details for companies interested in learning more will be included for each episode. And a huge thank you to the DCU Invent team and to Mark and Henry in the Green Room, Bea Orpen Building (DCU’s recording facilities) for all their help and support.
The Irish Venture Capital Association released their most recent quarterly overview of venture investments made in Irish companies. This quarter there is publicly available data on some 51 investments compared with the 38 for which there was published further information last quarter.
Again this his quarter, it’s Software and Lifescience plays by number in the lead. A total of €291M was invested in Q3 – down from €392M in Q2 albeit up from Q3 2020 amounts of €193M.
However, what’s important I think is the make up and number of investments made in Q3 this year. There were 75 investments made in total in Q3 – up from Q2’s 58 and Q3 2020’s 61. That’s 20% more investments made in each comparable case.
Furthermore, there is a marked and noteworthy change in the value of the rounds. Last quarter just two deals (Let’s Get Checked with €123M and Wayflyer with €62M) accounted for almost half of all the investment made. This quarter, there are no deals over €30M and a recovery in the seed and early stage (less than €5M) venture investments made. IVCA tentatively suggest that this is a sign of the investment community moving from supporting and scaling existing investments during the pandemic to supporting more entirely new activity in the form of emerging early stage companies. Hopefully this continues! More on the IVCA website.
Last night Knowledge Transfer Ireland published their Annual Knowledge Transfer Survey. The survey provides an overview of Irish third level Research Performing Organisation (RPO) funding, industry collaboration levels and commercialisation activities related to research through spin outs or licensing of IP to existing companies. The survey covers universities, institutes of technology, state research bodies and technological universities.
Some €636M was spent in 2020 on research by RPOs in Ireland. I restrict myself to university performance here.
One of the first challenges that arises in comparing commercialisation performance and industry interaction is that each university naturally has a different amount of funding or research scale. One way to normalise for comparison purposes is therefore to look at performance against key metrics of commercialisation success and industry interaction per €10M research spend.
In the first instance, I chose to look at Invention Disclosure Form (IDFs) levels as these are a measure of how much of the research is of possible commercial interest. They are filled in and submitted to the university Technology Transfer Office when a researcher has some new work they feel is ready to be the basis of some intellectual property protection and subsequent licence to industry or a spin out. As such, IDFs can be though of as being at the start of the commercialisation pipeline in a university. The average is 6.4 IDFs per €10M spent.
At the the other end of the commercialisation funnel, we have a measure of how many of the technologies arising from research that are captured by IDFs are then actually commercialised. This occurs via agreements to licence, assign or option (LOAs) the technology and intellectual property in question to a company. For especially disruptive technologies, a spin out or new company is often the entity an LOA is given to and these are captured here, too.
I’d note that Dublin City University (disclosure of my own – I work there) is doing comparatively well. DCU has the highest level of IDFs per €10M, NUIM the lowest but the other universities are clustered around the mean. DCU also does well in commercialising its research via LOAs and spin outs. It’s notable that spin outs suffer from the law of small numbers in that it’s a metic that can move markedly around a small base each year in each institution. Hence there are some zeros this year.
The AKTS survey contains a very good overview of other trends. For examples, there seems to be a decline overall in patentable IP being commercialised whereas other other forms of intellectual property such as the copyright inherent in software is increasing in importance to industry. An average of 28 spinouts emerge from the third level sector – this year there were 30, of which 25 arose from the universities. There were a total of 39 new product and service launches in 2020 arising from licences of IP from the third level concluded in recent years.
Yesterday, the Irish Venture Capital Association released their most recent quarterly overview of venture investments made in Irish companies. Of the 58 investments worth €392M for which they have data, details are shown here for 38 for which they’ve published further information. This quarter, it’s Software and Lifescience plays by number in the lead.
Looking at the amounts invested, it’s notable that just two investments (Let’s Get Checked with €123M and Wayflyer with €62M) accounted for almost half of all the investment made in Q2. A fuller breakdown of the data is available from IVCA. They note two other trends of interest. Firstly, there is a near halving of investments in the €1M to €5M range, the range we see many of our university spin outs active in. It is to be hoped that this is just a temporary blip and indeed the year to date data for Q1 and Q2 combined shows overall health for this stratum of investment. Secondly, there is a big increase in activity by non-Irish investors with some 70% of funds raised coming from abroad in the year to date. Whilst this likely reflects the quality of investments to be found here, becoming too reliant on mobile capital that can go anywhere else in the world is a risk.
A big part of my job that I greatly enjoy is working collaboratively with companies and seeing them commercialise our research. The topic of state aid often comes up and requires some explanation. I think my colleague Peter Olwell has provided a great primer on the topic and why it’s unfortunately relevant but manageable. I reproduce the article here with the author’s permission.
Universities, Industry and State Aid
By Peter Olwell
We work with a variety of companies in university technology transfer offices. Many want to commercialise the university’s research or to partially or wholly pay to co-design a research project to help compete against their competitors in the market. When companies engage with a university, they may often feel that intellectual property owned by the university should be provided to them at reduced, or less than market cost, or even for free. This belief is honestly held and based on the idea that universities are essentially charities, serving the public good by providing education and conducting research. This idea is reinforced by government policy which aims to maximise innovation and research in companies by promoting collaboration with and licensing from the university. However, what is often missing from this view is an understanding of what is permissible under competition law, and the legal constraints a part of competition law called ‘State Aid Rules’ place on universities and on companies. Here, I outline what these constraints are and how we are obliged to adhere to them. With a better understanding of the controls that are in place and why they are there, it should become clearer how these issues can be managed in a way that leads to successful collaborations.
What are these State Aid Rules and why do they matter?
EU Member States could distort competition if they were free to give unlimited aid to indigenous industries but withhold it at-will from their competitors elsewhere in the EU. For the purposes of this article such aid might include intellectual property owned by the university. In such a free-for-all scenario, if left unchecked, each Member State would find it necessary to maintain or increase subsidies to indigenous companies to help them compete in a market where every other company was receiving similar subsidies from their own governments. Such a scenario would disrupt free trade and unbalance the single market. The EU developed what are called ‘State Aid Rules’ to prevent this, by regulating how and when Member States might legitimately grant aid to industry without distorting competition. These rules are at the core to how the single market functions and were baked-in to its design from the beginning. Non-compliant companies are open to prosecution if they commercialise state-funded research without due regard to these rules. This last point is of crucial importance – it is the beneficiary of the State Aid, the company in the case of an Industry-University collaboration, that is liable for prosecution and fines.
How to comply with State Aid Rules
The EU Commission can exempt any subsidy from State Aid Rules, but does this sparingly using legal instruments such as the EU “Research Framework” which allows universities to licence state-funded IP without breaching State Aid Rules.
For example, Irish funding agencies such as Enterprise Ireland and SFI co-fund programmes where companies and universities work together without breaching
State Aid Rules through careful adherence to the Framework. To comply, these projects must be what are called ‘truecollaborations’, where the project is jointly scoped and both parties share the risks and upsides of the collaboration. If it is a ‘true collaboration’ then no illegal State Aid is considered to be granted where one of the following criteria is true:
the company funds the full economic cost of the project, or
all results are published with no exclusive access for the company, or
the resulting IP is divided between the company and the university according to their contribution to that piece of IP or finally
the university receives the market price for the IP, (through royalty or an assignment fee)in return for providing the rights needed to commercialise it. In most cases company’s prefer this 4th option as they require exclusive access to any IP that is generated in return for co-funding a project.
How is the Market Price for IP established?
Rulings from the EU Commission demonstrate that robust arms-length negotiation between a university and company is sufficient to establish the fair market value of a particular piece of IP. To facilitate these negotiations each Irish University has a technology transfer office funded by Knowledge Transfer Ireland (KTI) to ensure that arm’s length negotiations with companies occur in compliance with competition law. By ensuring that IP is not “given away” these offices protect the university and company from potential prosecution and resulting fines. This requirement by the Universities to negotiate the market price for IP can cause confusion among companies who view Universities as non-market players, and only makes sense when viewed through the lens of Competition Law.
We in the technology transfer offices and our researchers are keen to engage with companies. In doing so, we get to work on real-world problems and make a difference by helping bring the new products and services to the market. In outlining the relevance of state aid to such collaborations, I hope to reduce the scope for misunderstanding about how we all can effectively engage and work together.
To learn more about this issue, I recommend you go to KTI website and read the short guide to the National IP Protocol.