In the midst of a global recession, how do you create a strong biotechnology cluster from an academic base?
When I arrived at MaRS Innovation in 2009, Toronto’s experiment with a centralized commercialization office had just begun, and with approximately half of the impressive and continuous flow of new intellectual property from the research community grounded in medical research, I was tasked with precisely that challenge.
In the literature, several recurring elements are often mentioned as necessary constituents of an ecosystem capable of producing a cluster of successful startup companies: time, critical mass, availability of financing, and an entrepreneurial work force. Less often cited, but of critical importance in the current economic climate, is an approach that de-risks early stage technologies, in order to attract investment at a time when both industry and venture partners are increasingly selective. This approach requires staff with significant relevant management experience and an outreach program that engages industry well in advance of any expectation of a transaction.
In some respects, we were fortunate to have emerged at a time when industry was in the midst of revolutionizing the way it conducts research and development, as the drastic changes made it clear that new strategies would be required. Gone are the days of large-scale, well-funded, in-house departments with resources to liberally support academic and startup collaborations. Financial pressures and the economic downturn have made it clear that the go-it-alone model is no longer sustainable, and industry players are recognizing that they don’t have a monopoly on research acumen and disruptive ideas. Simultaneously, industry has expressed less interest in investing in early-stage technologies that carry significant risk. They remain receptive to the research emerging from academic enterprise, but need a means of bridging the gap that technologies face as they move from the bench to the market.
By doing the heavy work of determining a technology’s best path to market, liaising with industry early in the development process, forming a solid business plan and placing embedded management within the nascent company or burgeoning technology, many of us have been successful in providing industry with innovations that surpass their technological or execution risks and enter the market ready to compete. De-risking involves a high-touch approach to developing assets. Seasoned management may draw upon its own expertise and leverage local and international industry networks to do literally whatever it takes to develop the correct business plan, meet development targets, and breathe life into the exciting, yet very early opportunities accepted for assessment and promotion. This requires an entrepreneurial mindset, which should be encouraged throughout the organization at all stages and also necessitates input from academicians, commercialization officers and industry representatives, all of whom offer a compass through to a market eventuality.
A key component in trying to de-risk in the early stage is pre-seed funding. Industry is open to creative financial tools that can bridge over the financial chasm early on. Industry partners have become forthcoming in recent years as providers of modest amounts of funding and, perhaps more importantly, have agreed to assist with the selection and development of strategies for nacsent technologies. Framework funds have become popular with the goal of bringing forward technologies that address the lessened tolerance for risk among potential partners, are more valuable, and provide a first look without financial or administrative burden. Academic clusters need more industry engagement, and by opening up doors to earlier engagement, without the expectation of any immediate “deal,” academic clusters and industry both win.
Are there challenges ahead? Absolutely. Commercialization of academic assets remains a high-risk venture. However, I am confident that employing a de-risking strategy will be a key factor in the success of any cluster, and I certainly attribute MaRS Innovation’s successes to date to our adherence to this strategy.
Andy Warhol suggested, “They always say time changes things, but you actually have to change them yourself.” We must be able to follow suit!
Raphael Hofstein is the President & CEO of MaRS Innovation.
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