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Creating start-up ecosystems in varsities

October 20, 2023
New Sarawak Tribune
5 mins read

Universities are not only places for learning and teaching, but also hubs for researchers and scientists (referred to as scientists) to create and discover new knowledge.

In today’s highly competitive environment, the role of universities is evolving. They are shifting from being gatekeepers of knowledge to becoming curators, creators, connectors, certifiers and codifiers of knowledge.

The generation of new knowledge leads to innovation and economic growth. However, not all universities are successful in commercialising this knowledge and transforming it into innovative products. The question then arises: How can universities effectively utilise and commercialise new knowledge?

Typically, universities commercialise their research by licensing their intellectual property to industries. In return, they receive licensing fees and/or royalties from the industry partners who become licensees. Each university has its own financial and legal arrangements with industry partners. This practice of technology transfer is beneficial as it allows university scientists to focus on their research without the need to directly manage or operate companies.

The universities share the licensing fees and/or royalties with their scientists. However, each university has different policies regarding the distribution of revenues from commercialising their intellectual property.

For instance, some universities allocate the income generated from licensing to three parties: the university itself, the school/faculty affiliated with the scientists, and the scientists.

This arrangement prevents universities from fully harnessing the entrepreneurial spirit of their scientists. It is commonly believed (and often true) that scientists are primarily focused on their work and not inclined to start their own companies. Nevertheless, with the right policies and a conducive environment, universities have the opportunity to expedite the commercialisation of their scientists’ work by encouraging them to establish spin-offs based on their research.

In addition to their extensive expertise, some scientists possess the skills and potential to become co-founders of startups. To benefit from commercialisation, it is crucial for universities to cultivate a vibrant startup ecosystem within their campuses. Creating a successful startup spin-off is not a simple task. It goes beyond science and technology. As Steve Blank, renowned for his Lean Launchpad, suggests, “it is about the team” when it comes to the success of startups.

Where can scientists find other co-founders to establish their startups? This is where university students can be “recruited” to collaborate with scientists in launching their startups. Ideally, these students should be at the Master’s level with three to five years of industry experience. By collaborating with these students, scientists (post-doctoral researchers) can access the necessary skills and expertise to translate their inventions into spin-offs and commercial opportunities.

The combination of business and technical skills will attract investors. This type of collaboration to create university spin-offs generates both monetary and social value at a faster pace.

To establish a startup ecosystem, universities must establish incubator and accelerator programmes that nurture these spin-offs and help bring their products to market more quickly. Additionally, universities should actively align themselves with investors, such as angel investors, private equity funds, and venture capitalists, who are interested in investing in university spin-offs.

For example, in Malaysia, there is Cradle Fund, an early-stage startup influencer incorporated under the Ministry of Finance Malaysia (MOF) in 2003. It aims to fund potential and high-calibre tech startups through its Cradle Investment Programme (CIP). Cradle is presently administered by the Ministry of Science, Technology, and Innovation (MOSTI). There is also a Malaysian Business Angel Network (MBAN) Sarawak chapter, which received assistance from the Cradle Fund.

Angel investors play a crucial role as they are more willing to take risks by investing in very early-stage spin-offs.

Through incubators and accelerators, universities provide training to scientists in business development, market analysis and other relevant areas. This helps create an entrepreneurial talent pool to support potential spin-offs in the long term.

While scientists currently have heavy workloads determined by their research publications and patents, universities should adopt accommodating policies that allow scientists to take time off (either fully or partially) to run their startups. In exchange for this privilege, universities can have equity in these spin-offs. To enhance the startup ecosystem, it is essential to include mentoring and service providers such as patent lawyers, commercial lawyers, accountants, and other professionals as integral components of the ecosystem.

Dr Eryadi K Masli is a Senior Lecturer, teaching Entrepreneurship & Innovation at Swinburne University of Technology, Melbourne, Australia. He is co-founder and director of mDetect and SensFit Technologies; both are Swinburne’s technology spin-outs.