If we’re ever going to be the Innovation Nation we covet, we must follow the US example of meaningful investment in start-ups.
There is constant noise across Australia when it comes to innovation, start-ups and technology. This is especially true in healthcare. Blogs abound, meetups and accelerators are in orbit, researchers have never been more inspired, corporates are anxious not to miss out and governments are trying to navigate their methods of contribution and justify their electoral pitches.
In fact, we’re not really witnessing a birth of something new, but rather a fresh focus on “fashionable concepts”; innovation, invention and commercialisation. With so much energy, will and attention, how can we fail to build the so called Innovation Nation?
Easily, and that’s the problem. Starting with the facts; innovation is hard. Innovation is risky and innovation’s middle name is “failure”. Generally, we don’t like hard; we are risk adverse and no one likes failure.
But has anyone actually articulated what success could look like?
We look northward to places like the US longing for our very own Silicon Valley and wondering why we haven’t really embraced or launched the “Stanford model”; perhaps the “Israeli model” might better? Then we try to understand the money trail of investment; what works and what doesn’t. But the well-trodden pathways to venture capital are fundamentally inconsistent with Australian investment models.
In contrast, US investors have pumped over US$10b into bio, MedTech and digital start-ups in 2016. It has to be said; US start-up investment is extremely energised.
If we are to build a vibrant, innovative country we have to start at the beginning of the innovation food chain. These are the amoebas. The small, uncomplicated organisms who are the first forms of life. Without them, we cannot have the kings of the jungle. But early forms need food, air, security and an ability to reproduce. In particular, they must have time if they are to flourish and grow into top predators.
The source of novelty, solutions, science or just good old fashioned ideas has to be the starting point for change. Researchers, universities, inventors and young entrepreneurs create the early phase opportunities in their sleep. However, the disconnect between the novelty, science or idea and successful commercialisation is in fact where true innovation needs to happen.
Yes, it is hard to take an idea and turn it into a commercial success. It’s long hours, requires dedication and a “never say die” attitude. The success stories always have an almost unhealthy level of virtuosity and even religious zeal underpinning their story.
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But the route to commercialisation has a permanent mental scaffolding that is inconsistent with innovation. Advisors, investors and regulators surround the entrepreneur with wagons of gusto, pitching the project’s risk profile to all who will listen. The old saying prevails; if you look hard enough you will find a reason to walk away. Capital in Australia is generally shy and even averse to failure. The idea of investing in good ideas that will “do good” or provide positive impact on society in the long term whilst accepting in full the fact that 8 out of 10 will ultimately fail (and yes, people, funds and governments will lose their money) is not an acceptable notion here. Nonetheless, it’s the fact. Feels like a visit to a casino but with worse odds.
This leads to such a weak appetite for risk. The base of stakeholders gets diminished over time and the sector becomes too weak from an intellectual perspective to move in any direction with vigour or confidence. It simply hasn’t been fed enough data to make good decisions.
So much for creating top predators!
In innovation world, basic housework is painful. It’s not that much fun to have to prepare a suite of in depth financial models, cash flows, balance sheets, NPV etc, before you even have an application or therapy. And intellectual property reports seem self-evident, but are they? Unless they reflect the overall strategy in respect of the product or application they will become a problem sooner than later.
No point in developing business models that are outdated, inconsistent with custom or contain no commercial data points investors and funders can understand. Competitor examination has to be up front and stringent in its analysis. And by the way, don’t proceed any further if you don’t have a well defined exit strategy.
This concept of self-inflicted, commercial tough love has to be embraced because it drives intellectual rigour and quality outcomes.
All this and you are still at the amoeba stage? Well, actually, yes.
Omitting to deal with these elements will come back to haunt if they are ignored. Raising capital or securing grants for the next stage will get harder and harder and the commercialisation pathway will seem like a distant dream.
Investors and funders must also shoulder blame for not demanding a higher level of scrutiny and objective analysis from the applicant. Until the two are working together towards value creation seamlessly and with common guidelines and goals, commercialisation success will remain hit and miss. We can look to the many examples around the world that already demonstrate it. In reality, it’s not a conundrum but rather it requires holistic change in the way of thinking; where true collaboration is engendered from amoeba to top predator in a circular rather than linear fashion by all stakeholders and failure is revered rather than punished.
If we are to create top predators in the innovation world, we have to have rigour embedded in the process of value creation right from the beginning of life because in innovation world the amoebas can all become top predators if they course through the evolutionary process successfully.
Survival of the fittest means being fit enough to survive. Amoeba, top predator and the investment community; they are all in fact, one synergistic organism.
This article was originally published on which-50.com and is reprinted with permission.