A little over one week ago, the Federal Minister for Innovation, Industry, Science and Research, Senator Kim Carr, issued a call for public comment to help inform the development and operation of the Commonwealth Commercialisation Institute.
For those unfamiliar with the proposed Commonwealth Commercalisation Institute (CCI), the initiative was announced as part of the 2009 Budget and involved the allocation of $196m over its first four years and $82m per annum thereafter.
It was launched “to provide a radical new approach to commercialising the best Australian research.”
Over the past seven days, we have been pressing our readers to get involved and provide a ‘private sector’ perspective (after making the seemingly unpopular suggestion that commercialisation in Australia has been hijacked by public servants with MBAs).
Today, we’re turning our attention to the last section of SmartForm, which requests suggestions for the delivery of funding.
The form asks:
The Institute will build the capacity of our talented researchers, entrepreneurs and innovative firms to rapidly convert ideas
into successful commercial realities. To ensure that the Institute can provide high quality assistance to applicants, it may need to adopt measures for it to be self sustaining. This could be achieved through a mutual obligation approach where the Institute shares the risk and returns on commercial success. This approach could include mechanisms for repayable support.
What are the most appropriate mechanisms to implement principles of mutual obligation and repayable support?
Five options are then presented:
- Grants that are repayable if the project is successful
- Co-Investment Scheme (i.e. the CCI would invest alongside a third party private investor in a company)
- Facilitate Foreign Direct Investment
While we’d naturally like you to go to the form and make sure your views are heard, we also are encouraging readers to share their thoughts below, as a way to encourage open dialogue and the sharing of opinions.
To get the ball rolling, here’s what we think…
Funding. It’s a thorny issue.
The Australian public has historically reacted badly when public sector organisations have been asked to invest tax-payer money (i.e. ‘pick winners’). This is because a degree of risk is always involved, particularly with respect to the early stage venture space.
However, their is an educated minority who believes a small percentage of public sector superannuation funds (1-2%) should be allocated for just that. In other words, less than $o.02 of every superannuation dollar invested (an amount few very would miss).
A government mandated ‘early-stage venture’ component would solve the ‘availability of capital’ issue overnight. Plus, the overall risk (in terms of impact on superannuation savings) would be miniscule.
Such an move would create a new profession of ‘early-stage investment experts’ within the superannuation funds that would also help pollinate the wider industry as new skills are acquired and shared.
However, in the event that such an idea proves unpopular with the political decision makers (such a decision could only be described as “couragious” in BBC parlance), repayable grants and micro-loans, in our opinion, trump Co-Investment Schemes (if these are the only options).
It is simply too difficult, in the context of Australia’s current early-stage funding markets, for start-ups/researchers to find Co-Investment partners. Co-Investment Schemes create a level of complexity that is often ‘too hard’ for a business developer to pursue.
Creating a Loan structure to compete with the banks would open a can of worms, unless a ‘micro-loan’ structure could be created. Banks do not want to lend small amounts of money to enterprising business builders. Their is perhaps a gap here that the CCI could fill.
Perhaps a scale of investment options could be developed – create a Micro-Loan Scheme for companies seeking less than $100k, a Grant Scheme for companies seeking less than $1m (but more than $100k) and a Co-Investment Program for companies seeking anything above.
Thems our two cents (pun fully intended).