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Q&A: Nigel Poole

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WHAT GAP?

Nigel Poole
Photography: Kym Thompson

As the person responsible for commercialising all new technologies emanating from the Commonwealth Science and Industrial Research Organisation, Nigel Poole knows all about transforming ideas into companies. From where he sits, Australia’s so-called “commercialisation gap” is receding, with seed investment culture and managerial experience the keys. He’s a busy man with busy ideas and a penetrating vision for Australia’s future as a knowledge nation. By Paul Ryan.

PDR: You’re Executive Director of Business Services at CSIRO. Can you give me a description of your day-to-day responsibilities?

NP: I head up four of CSIRO’s functions. I came into the organisation to commercialise technology, and that function still reports to me. I also head up CSIRO’s legal function, which includes general counsel and all of the in-house lawyers. The information technology function also reports to me, as does the property and facilities area, which includes the land, buildings and specialist facilities where we do the science. We’re located right around Australia – we have 57 sites across the nation and a couple overseas, and we have to maintain and develop that infrastructure.

So those four functions make up my day job. In the private sector that would be a corporate services role. On the executive team we also have a CFO, who runs the finance and governance functions; an Executive Director runs the communications function; and another Executive Director runs HR and people services.

What do you perceive as being your greatest challenges?

We’re in the midst of quite a large organisational change. From running the organisation in separate business units, with those functions reporting separately to each business unit, we’re now working across the organisation with single functions. That change process is ongoing though 2006. It’s all about harnessing the power of each of CSIRO’s functions; having one face to the outside world instead of 21 faces.

And then there is the day-to-day transaction intensity of running a commercialisation pipeline. That means that we have deal deadlines, approval processes, negotiations that are going forward and stopping, with large teams dedicated to each project. The management of CSIRO’s deal environment works exactly the same way as a deal environment in an investment bank or an advisory firm. There are odd months or days where there is an extraordinary amount of activity, and then there are other times where it is quiet and you want it to be noisier because you are not making progress at the rate you want.

Is there one element of your job that you prefer over the others?

I came to CSIRO to help build the interface between the organisation and the outside world. I have a business background. I’m here with business skills, and the commercialisation of CSIRO technology is really the most important contribution I can make.

The associated parts of managing a deal-oriented environment are exciting, energising and fulfilling; but you have to undertake that work in the context of a public sector environment, where compliance, governance and policy are vital considerations. Those responsibilities exist in the private sector, but I would describe the burden in the CSIRO sense as being different and potentially slightly higher. We have to be very transparent and accountable on the assumption that each transaction is justifiable and coherent in hindsight.

Australian’s are commonly acknowledged as wonderful researchers and inventors. But do you think that, on the whole, Australians are entrepreneurially minded?

I think we are. I just think that we always contrast and compare ourselves to the US. Because Australia grew up as a relatively “extraction-based” economy (by that I mean agricultural and mineral resources), we didn’t have the entrepreneurial boom, in a science and R&D sense, that both Europe and America had in the latter part of the nineteenth century.

So while the German chemical companies and French companies were getting moving, and even in the US the early stages of industrialisation was occurring, Australia was still busily expanding farming production and digging gold and other minerals out of the ground. I think we missed part of that cycle and, therefore, some of the things that we are doing now are behind the advancements and experience base that other parts of the world have had. It’s true that we have this wonderful climate and resource endowment. The green rim of the continent is pretty good at growing things, so that’s also where some of our best entrepreneurs spent their time.

It’s also true that we have a very small market compared to the United States or Europe. Do you think that the success of research breakthroughs in Australia (for instance, at CSIRO) hold commercialisation levels to too high a standard?

The world is shrinking, as many commentators have observed. And, therefore, when we’re thinking about the adoption of technology that’s been created at CSIRO, it’s very rare that we think about the Australian economy as the marketplace. When my team is doing its assessment of a new biomaterial, a new therapeutic or a new internet search engine, they don’t start off thinking about the Australian market as a unit.

Of course, it would be lovely if we could build a revenue base or a break even position within Australia, but when I look at business plans, in most cases, people are thinking of 700 million people in the first world and then the emerging world of another billion or two. They’re thinking about adoption rates and market shares in that context. It’s about how fast you are going to penetrate that market and in what sequence you are going to do so. We live in a country of 20 million people and we are located a long way away from the rest of the world.

Do you think there is an impatient culture among Australia’s investors? And, if yes, do you think it inhibits the technology transfer and commercialisation of our scientific discoveries?

No, I don’t think it’s impatient. The market is emerging and developing and I think that “patient” versus “impatient” has value-loaded implications. Venture capital, pre-seed and other private equity funds are usually run by pretty rigorous return on investment criteria. In some cases, especially for some of the technologies that may not be in the hot investment areas, we’re not going to be able to meet those yardsticks. If they can find investments that can meet a return of three or four times or even seven or ten times in a desired time period, then that’s what they will pursue. And if we can’t meet it, that’s OK. There’s no problem there. It does mean that if we think a piece of technology is going to take seven to ten years to get to market, then we have to look for partners or investors who have that mindset.

When presenting technology to potential investors, we have to ensure that we manage a discussion around those expectations. It’s about saying, “This is what we think the technology can do and how it will perform in the marketplace. What does your experience tell you about its market potential?” The conversation around capital value and timeframe only comes after we’ve had a conversation about where we all think this technology can go.

VCs screen lots of business proposals. If they say to us, “We don’t think this technology will fly for five or six years,” or “We don’t think that the market wants or is ready for it,” or “We’ve seen something that’s similar or better that we think will get to market earlier,” that’s an enormously valuable conversation. We call that a good ‘no’. A bad ‘no’ would be, “We’re not even prepared to chat to you about the technology because we don’t like that area of the market.” It’s about respecting the differences and respecting different perspectives.

New technologies are notorious for taking up to a decade or more to commercialise fully. In that space between idea and venture capital funding, if it wasn’t for state and federal government pre-seed and seed funding programs, most of these breakthroughs would not see the commercial light of day, or would be quickly licensed offshore. Would you prefer to see ‘angel’ and other private early-stage investors take on more of the responsibility?

I think they are. They clearly do it in a much quieter way than others who might need to publicise their investment profile. Yesterday I met a high net worth investor who had just put $50,000 into a seed investment in a particular area – a direct marketing, dot-com survivor type venture. That investment will never hit any deal database or venture capital statistics table.

I think angel investors are making plenty of investments. I think it is more of an unreported area of the market rather than an inactive area of the market.

We can’t determine the proportion of private early stage investments taking place. We can see what the public sector is doing. It’s only anecdotal, but I suspect that there is a lot of seed and pre-seed investing going on in regions and in parts of capital cities that we aren’t aware of. It’s not subjected to that level of public scrutiny.

Nigel Poole
Photography: Kym Thompson

Often, foreign executives or expat Australians are brought in to run our R&D spin-off companies. Does Australia produce enough quality, experienced executives who are capable of managing that long journey from scientific discovery to successful company?

I think it’s increasing. We’re seeing a boom in serial entrepreneurs. I think we have a cadre emerging of experienced executives who love the thrill of picking up something new, employing the first 10 staff and getting the first dollar of revenue. That’s been an evolution that occurred without any intervention from policy makers.

I think a balance will occur. Once, the search for a quality early-stage technology executive began offshore. Now, thanks to the maturing of several entrepreneurship programs and successful waves of biotechs and dot-coms, we have many executives rocking around in Melbourne and Sydney who’ve done it before. Of course there are people with good track records and people with mixed track records. When we look for a CEO, country of origin doesn’t factor. It’s a borderless world. The question is: can they do the job? There are many Australians driving these new technology companies and they are looking to do it again and again.

In addition to overseeing commercialisation, you’re also responsible for CSIRO’s patent portfolio. Your website says you manage 3,500 patents – I imagine it’s slightly more than that now?

We now have about 4,000 pieces of intellectual property (IP). We add about 100 new pieces of IP to the portfolio every year. There are also patents that are expiring, due to the natural timeframe of patents of 14-20 years. Also, patents are expensive things to maintain, so if we think they are not being adopted, we’ll let them go. As those new pieces of IP come onto the portfolio, the commercialisation team takes a pretty close look at them and asks, “Are we ready? Do we have a market adoption pathway? Do we have a licensee who’s worked with us to develop the technology?”

Given the number of years that it takes to nurture and build a successful company out of a research discovery, is patent infringement common? And do you litigate aggressively?

The portfolio is an asset base. We don’t value it as an asset in the traditional accounting sense, but clearly it is regarded by me, the board and the Minister as a valuable portfolio. It’s the manifestation of the investment taxpayers and our other partners have made in CSIRO science.

In filing new IP we do a lot of due diligence around both the science we do and the filing of intellectual property to ensure that we don’t infringe on the rights of others. But the reciprocal of that is that we expect others to respect our rights as well.

What happens, especially in the fast moving areas of science, is that there are a lot of people patenting in the same place. Research teams compete with one another and, inevitably, they bump into one another. Sometimes it’s resolved in a gentlemanly, polite and collaborative way. And sometimes that polite interaction doesn’t occur, and the ultimate manifestation of that is patent litigation and infringement action. There is a certain proportion of that that goes on, but it is very small compared to the size of the portfolio. We don’t wake up in the morning thinking, ‘who can we sue today?’ And other companies and organisations, by the main, don’t think about that when they get up in the morning, either…

I can think of a few that I’ve spoken to who do…

Oh, they do, but the majority of business isn’t conducted that way. It’s very much a small part at the margin. Pursuing legal action is something we do reluctantly, but if we decide to do so, we clearly apply our full effort to it, because we believe it is important to protect CSIRO assets, which are effectively Australian assets.

It happens, but it’s not the main function of our legal department, nor the main function of CSIRO. It’s part of making sure that the technology we develop is protected. If others use our intellectual property without authorisation or permission, our belief is that they should pay reasonable royalties and that these royalties should be applied for further research, for the benefit of Australia.

What’s exciting you at the moment? What’s going on at CSIRO that Anthill readers might not know about but should?

A couple of things. CSIRO has been a relatively distant organisation from the technology market and innovation in general in Australia. One of the most exciting things that we’ve done in the past few months is to actually make the portfolio more transparent within the organisation, which will in turn make it more transparent outside the organisation.

I often get asked by entrepreneurs, innovators and investors, what areas of research is CSIRO in. Sometimes, that was a pretty difficult question to answer. We’ve organised our research in a funding sense and a project management sense, rather than organising ourselves into 5,000 projects. We’ve organised research into 125 themes. I can tell you very quickly the eight or nine areas that we are pursuing in, say, material science. In the past, it might have taken a couple of weeks of emails and phone calls to get that information. Now it’s at my fingertips. That visibility should help us to engage all participants in the market – other innovators, collaborators for research and investors. We want what we’re doing to be transparent and accessible to the outside world.

And in conclusion, what kind of organisation will the CSIRO to be in 20 years? What’s going to change it? Where would you like it to go?

Wow, that’s a big question. We’ve been kicking around all sorts of ideas about where CSIRO is heading.

One idea: Australia has a serious endowment of incredibly capable scientists and researchers, located not just in CSIRO but in universities, medical research institutes, in companies and individual organisations. And yet, we have very few world scale research facilities.

One exception is CSIRO’s world leading radio astronomy facilities. In addition the Synchrotron being built in Melbourne will be a wonderful resource to do science in a whole range of areas – from biotech through to materials, chemistry and metallurgy. In 20 years time, Australia has to have more equivalents of the radio astronomy and Synchrotron facilities, so that we can do science on a scale and with an impact that is well beyond what we can do now.

Another area we are keen to develop is Australia’s role in the environmental sciences. The challenges we have in Australia around climate change, water and sustainable agriculture are all threats, but they are also enormous opportunities. Australia is leading the world in those areas and I can see that what we’ve learned and what we are learning can be applied on a scale of world influence. We’re building a body of science around keeping this planet healthy, as opposed to keeping just this river or that region healthy, which will have enormous benefit across other areas of the globe. That’s something CSIRO will definitely pursue.

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