Group of Eight Australia
Australia's Leading Universities
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Module 4: Intellectual property and commercialisation

2.3 Funding

In Australia, commercialising university intellectual property can be more difficult than in the large economies of North America and Europe. The development of early-stage research into market-ready 'products' is a high-risk venture and the number of Australian companies and investors willing to take on this risk is limited. Funding the commercialisation process is easiest in the early-research stage and towards the end of the process when the risk levels significantly decrease and it is easier to engage with international companies and funders. While sourcing funds is most difficult in the proof-of-concept and early start-up company stages, it is also the greatest rate-limiting factor at these two stages.

2.3.1 Research and discovery

There are numerous sources for research funding at this stage, generally in the form of competitive grants administered by the Australian government. Detailed information on the different grant schemes accessible to researchers can be accessed from your university.

In addition, R&D funding may be channelled back into research programs by start-up companies for the discovery or development of new products for their pipeline.

2.3.2 Evaluation, and IP protection and packaging

The cost of evaluating a research project and protecting the valuable IP is almost always met by the university or its commercialisation office. These costs may be recouped from any eventual profits realised from the IP.

2.3.3 Proof-of-concept

Proof-of-concept is often essential for research projects to attract investment or a licensing contract. However, research requiring proof-of-concept is frequently too advanced for government research grants and too early, or unproven, for investment.

Many projects can stagnate at this point due to a lack of funding and as a result, commercialisation professionals often refer to this stage as “the valley of death”. This has been recognised as an issue at the institutional, state, and national levels. Many universities have now set up their own proof-of-concept funds that are usually administered through the commercialisation office.

The establishment of Commercialisation Australia, an initiative of the Australian government, was also a recognition of the issues surrounding this stage of the commercialisation process. Commercialisation Australia was able to provide matching funding in four separate options, depending on requirements and stage of development. These were:

  • Skills and Knowledge
    • Up to $50,000 to access specialist advice and services
  • Experienced Executives
    • Up to $350,000 to engage a CEO or other senior executive
  • Proof-of-Concept
    • $50,000 to $250,000 to prove the commercial viability of new IP
  • Early Stage Commercialisation
    • $50,000 to $2 million to take a new product, service, or process to market.

Following the 2014-15 Federal Budget, the Commercialisation Australia program was closed to new applications and the Government announced the establishment of a new $484.2 million Entrepreneurs’ Infrastructure Programme and a new streamlined Single Business Service initiative to support businesses to improve their competitiveness and commercialise new ideas. More details about this programme are available in the Minister's media release http://minister.industry.gov.au/ministers/macfarlane/media-releases/building-globally-competitive-economy

2.3.4 Commercial development

From this point, the researcher and the university commercialisation office are only involved in securing funding for the commercial development of research in start-up companies. Funding may become more readily available as the research is developed and the risk profile decreases. Investors in general look for companies with the potential for significant growth and which are driven by a committed, professional business team with a clearly defined exit strategy. An informed, committed, realistic and passionate researcher is essential for most investors.

The types of funds from which investment is sought are:

  • Pre-seed and seed funds invest in companies with very early-stage research. In Australia, there are a few companies operating in this space.
    • Uniseed Pty Ltd (a joint venture pre-seed fund between the University of Queensland, the University of New South Wales, and the University of Melbourne)
    • Trans Tasman Commercialisation Fund (a collaboration between Monash University, UniSA, University of Adelaide, Flinders University, and Auckland University)
    • ANU Connect Ventures (ANU)
    • Medical Research Commercialisation Fund (MRCF), a collaboration of medical research institutes, often with university links.
  • Venture capital (VC) funding: Funding for university start-up companies is sourced from Australian and overseas venture capital funds specialising in early stage technologies. Some companies (mainly multi-nationals) also have investment funds for emerging technologies in their field. The majority of venture capital funds in Australia specialise in particular technology fields and late stage technologies. Further details can be found from AVCAL (http://www.avcal.com.au/), the peak body for VC investors in Australia.
  • Angel Investors: Angel investors are individuals who invest in early stage companies, and typically invest time and money to help make these ventures successful. Rather than invest solely on their own, they are frequently forming syndicates of like-minded individuals who will often invest as a group, thereby diversifying their risk and increasing the size of investment available. There are a number of groups based usually in the capital cities with details available through the Australian Association of Angel Investors (AAAI) http://www.aaai.net.au/

Seed, angel, and VC investors expect to make a return from their investments, usually looking to sell their shares in the company within 5 to 7 years. In addition to providing equity capital, they will look to add value to the company through their management expertise and access to networks and further capital.

2.3.5 Value adding

Funding for this stage can be sourced more readily through additional investment from venture capital funds, industry partners, or listing the company on the stock market. Alternatively, funds can be raised through the early sale of product or the licensing of the IP to companies in overseas territories in which the company does not intend to operate.

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