Student IP is critical for developing startup companies in universities

We seen an 7x increase in student startup output in the last few years. My Op-Ed for The Australian.

How a university should foster innovation from its teaching and research used to be an incomplete picture. Parts of it were grainy, hard to define or just plain missing.

To be more specific, the old picture of university-fostered innovation consisted primarily of what a university could patent and license. We gauged innovation output mostly by measuring industry dollars that came in through industry and research partnerships, licensing revenue and research funding. We rarely considered startups or spin-out commercialisation, as that was better left to industry or professionals. Students didn’t even get a mention in this picture. That was a major omission and I can explain why.

Recently I stepped back from INCUBATE, a startup program that I co-founded seven years ago at the University of Sydney.

In that time we directly supported more than 100 idea-stage startups that launched new products, attracted millions of dollars of external investment and built real value. And it mainly came from student-owned intellectual property.

Even today, there continues to be misunderstandings. When I mention student IP to investors and executives they often think of a 21-year-old undergraduate making another app. That is part of the picture but not the whole one.

Student IP includes anything created by a student, at any level of education, is owned or mostly owned by the student.

It comes in many forms. It can be created by the master’s student with five or so years’ experience in the financial sector; by the postdoctoral researcher student who is a world expert in underwater robotics; or by the clinical researcher who has 10 years’ experience running their own practice.

These are all real examples of student entrepreneurs whom I’ve helped build life-changing companies and they have one thing in common — their innovations normally would not be counted in traditional innovation measures.

There is one simple reason student IP makes up the lion’s share of innovation activity on campus. It is due to the simple fact there are a lot more students compared with university research staff.

For example, during the past five years — a period in which the University of Sydney has seen a huge increase in startup activity — 27 companies were formed by researchers at the university, while more than 100 startups were formed from INCUBATE’s accelerator program, mainly from student IP.

The traditional view of innovation would never have included these valuable companies founded by student entrepreneurs through INCUBATE.

But, in fact, 19 per cent of the research spin-outs from the University of Sydney during the past five years had their start in INCUBATE’s accelerator program.

One of the reasons it’s important to empower student entrepreneurs is that, almost by definition, entrepreneurship involves something new and fresh — the perspective students bring.

When it comes to innovation, we can’t just rely on professionals because it could be that no one has ever built the business in question, or even thought about it.

The other important aspect of our innovation picture is that the biggest opportunities are hidden around us.

We need to empower the inventors, builders and entrepreneurs to take charge and discover them and then to have a go to bring them to market. It’s no easy task.

To be sure, I’m not suggesting we don’t invest in commercialising university IP that is created by researchers. A robust entrepreneurial ecosystem will include both student founders — who often have a higher risk appetite and are suited to more consumer-facing products and services — as well as traditional university researchers. Often the two can help each other.

Some Australian universities are stepping up to the challenge. Now 68 per cent of all startup ­accelerators and incubators in Australia are university affiliated and funded.

“68 per cent of all startup ­accelerators and incubators in Australia are university affiliated and funded.”

Examples include the UNSW’s Founders program and University of Technology Sydney’s Startups, both of which have expanded rapidly, hiring many new staff in the past 12 months and launching new student and researcher-focused initiatives. In Victoria, RMIT’s Activator and Monash University’s Generator program continue to grow, both receiving hundreds of applications for limited places in their accelerator programs.

It is now the case that a dedicated deputy vice-chancellor for enterprise is becoming the latest high-level executive position for some of our largest institutions to fill.

Galileo Ventures research conservatively estimates that university-affiliated startup programs are forming and supporting more than 300 startups a year across 20 startup accelerators and programs. This is a sea change compared with just five years ago when there were less than five university-affiliated startup accelerators supporting less than 40 startups a year –– a more than 7 fold increase.

“University-affiliated startup programs are forming and supporting more than 300 startups a year across 20 startup accelerators and programs…a more than 7x increase.”

Investors also have responded with new funds such as IP Group and Main Sequence Ventures pouring hundreds of millions into new deep-tech ventures, and seed funds such as Galileo Ventures and UniSeed expanding to invest in student IP.

UniSeed recently invested in Forcite, creating a smart motorcycle helmet, founded by students out of UNSW. IP Group recently funded AMSL Aero, a startup building a new passenger aircraft formed by an aeronautical engineer and lecturer out of INCUBATE and Sydney University.

The University of Auckland also has had success, with Powerby Proxi, a company that went through its on-campus startup program, being bought by Apple reportedly for more than $100m.

The future challenge is integrating the two areas, university IP commercialisation with student-founded startups, and getting them to work together to enhance both areas.

I suggest looking at three areas:

First, ­universities should align themselves with investors that actively invest in student startups and university spin-outs. Both areas increase the entrepreneurial talent pool available to ventures, and both generate “mixed returns”, with monetary as well as social value.

Second, another challenge is how to lever our world-leading research groups on campuses across Australia to become hives of startup activity. This involves training for staff and researchers, new career incentives and better policies to allow for researchers to flow in and out of research — very difficult if you want to do a start-up.

Third, we need to systematically attract local funding and international funding into our more promising ventures. Outside investors can help bring advanced knowledge into startup companies and help de-risk them from a global market perspective.

Ultimately helping our dedicated researchers create impact, beyond just publishing in research journals, is the next big growth area.

As a thought experiment I like to imagine a world where we no longer count the number of patents as the benchmark of innovation outputs but instead use the measure of the value of the companies we create.

History also shows that university alumni who found successful ventures can give their knowledge back by investing into our universities, attracting more students and talent, and inspiring more entrepreneurs. This flywheel effect only grows once in motion.

We now have a more complete picture of what it means to foster innovation, not only on a local scale but also globally. If we want to increase our chances of success we need to enable more students and researchers to have a go.

James Alexander is a partner at Galileo Ventures and co-founder and mentor of INCUBATE. He regularly advises universities on building entrepreneurship programs.

This Op-Ed was originally published in The Australian Higher Education.

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