Transcript Slide 1

Private Sector Advisory Board
Report on Activities and Impacts of the Centres of Excellence
for Commercialization and Research
NCE Annual General Meeting
December 5, 2011
Introductions
• Nancy Hughes Anthony – New PSAB Chair
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Sue Abu-Hakima
Donald Lush
Kevin O’Brien Fehr
Adam Chowaniec
Key Elements of PSAB Mandate
1. Provide advice to the NCE Steering Committee, as
appropriate, on the implementation, delivery and
performance measures of the following three programs:
CECR, BL-NCE and CCI and their possible future
directions
2. Review the progress and impact of funding of these
programs and provide additional guidance, and other
advice to the NCE Steering Committee;
3. Provide advice to the NCE Steering Committee on other
industry-related initiatives, as required.
Snapshot of NCE programs:
Networks of Centres of Excellence - 1989
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Fund research at “virtual centres” performing R&D and “translation-commercialization” activities
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Focus on broad Canadian issues using multi-disciplinary approaches
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Required to demonstrate unique value-added HQP training
Centres of Excellence for Commercialization and Research – 2007
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Fund Internationally recognized centres of commercialization and research
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Targeted to S&T priority areas
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Funds for operating and commercialization activities (75% / 50%) cost-shared with partners
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expected to become self-sustaining
Business-Led Networks of Centres of Excellence - 2008
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Funds research by not-for-profit private sector consortia responding to private sector S&T needs
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Must have 50% matching funds from partners
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75% of administrative costs from BL-NCE Funds
Industrial R&D Internship program - 2008-09
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funds 1,000 internships yearly to introduces students and postdoctoral fellows to practical
business problems and exposes the private sector to the benefits of S&T
CECR Snapshot 2008-2011:
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22 active Centres
More than $138M in partner contributions
107 patents issued
8 copyrights
34 licenses granted, 101 under negotiation
3786 workshops
310 projects funded*
55 start-ups
230 organizations served*
*data only available since 2010-2011
2011 PSAB report: “Turning Research
into Commerce”
In 2011, Members of the Private Sector Advisory Board
met with all 22 CECRs in two separate 2 day meetings
on March 30-31 (Vancouver) and May 16-17 (Toronto).
Each centre was asked to prepare a presentation on its
objectives, progress to date, and expected impacts.
Through these meetings, and through a review of the
annual data provided by the Centres, the PSAB has
made a number of observations and recommendations
summarized in this year’s report.
PSAB Observations – CECR Strengths
• Strong Partnerships with Industry and other
Receptor Organizations (297 partners in total)
• Flexible business models adapted to each
sector or situation (from business accelerator to
mentoring to investment capital)
• Ability to provide operational and financial
support for technology start-up firms
• Sharing of best practices between Centres
Investment Models
Micro-Loans & Syndicate Funds Seed Investment & Syndicates
- OCE-CCR:
MaRS Innovation:
- seed investment angels proof of concepts
- convertible debenture to attract coinvestment from VCs
- $500K IAF seed funding & management
resources help spin-off firms develop
business plans & secure syndicate
investments.
Seed Investment & Strategics IRICor:
Project Funds: Tecterra
-seed investments ~$50K
- follow-on ~$150K strategic investment,
matched by government, VCs
$100-$500K Industry investment Programs
for projects partnering university
researchers with geomatics company or
end-user.
Pre-seed - C3E
- $150M pre-seed fund with other funds
Equity Investments – BIC
- portfolio in sustainable technologies,
designed for early stage clean tech Co.
processes and businesses.
Micro-Loans & Syndicate Investments:
OCE-CCR
 micro-loans with angels - $50K for technology/product
development, commercial demonstrations and initial operations.
 Embedded Executives to help start-ups/SMEs
 Follow-on debentures up to $250K co-invested with VCs
 Debentures converted on Series A, M&A, etc.
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# of companies supported through micro-loans: 67
Co-investment ratio: 5:1
Follow-on investments: $42 million
Leverage ratio: 15:1
Seed Investment & Strategic
Funding: IRICor
• Institute for Research in Immunology and Cancer
– Seed investments averaging $50K
– Follow-on funding $150K in return for revenue sharing.
– Some co-funding is provided by companies, government
agencies or venture capitalists.
– IRICor’s business model is based on revenue sharing. It licenses
mature technologies to biopharmaceutical companies in return
for licensing fees and royalties and takes an equity position in
new spin-offs.
Project-based Investment TECTERRA
 Suite of investment programs through partnerships with the
Canadian geomatics industry, Alberta university research groups,
and the Canadian resource sector.
 Industry Investment Programs provide $100,000 to $500,000 per
project, with each project led by a SME.
 University R&D Investment Programs provide $100,000 to
$500,000 for projects led by an Alberta university research group
in partnership with a geomatics company or end-user
government agency.
$150M Pre-Seed Fund – C3E
• Centre of Excellence in Energy Efficiency: C3E
– one of several investors in the $150-million Cycle-C3E pre-seed
fund, designed to help early-stage clean tech companies close
the gap between technology demonstration & commercialization.
– Other fund contributors include the Quebec government, Rio
Tinto Alcan, Lonza, Gas Métro and Systemex.
– Average award: between $350K to $400K
– Un-secured convertible debenture can be converted into 15%
equity and/or carbon credits or royalties flowing back to the
CECR
Working with SMEs
• Why SMEs are good, fast return,
commercialization partners.
– Successful SMEs have an established business
infrastructure into which appropriate technologies,
products and services can be integrated.
– Many SMEs are looking for new technologies,
products and services to help them remain
competitive.
– SME management is generally lean and can make
decisions quickly.
Why SMEs may NOT be good partners
– Most SMEs do not have significant excess cash flow
for providing matching funds or time for providing in
kind and as such many SME partners are needed to
match the contribution of one large partner.
– Most SMEs are very busy with the day to day running
of the business and do not have a lot of time to put
into seeking out CECRs and participating in joint
work. They are not “plugged into” the system. They
require work to find appropriate partners
SME needs in a Commercialization
Context
These needs are opportunities for CECRs
– Technological help and guidance for de-risking and
prototype testing and assistance with integration into
the existing business supply and sales distribution
chain.
– Much like “start-ups” some may need mentoring and
assistance with financing models for integration of
technologies/products and services into their
business models
SME needs in a Commercialization
Context
• Assistance from CECR in developing of complementary
SME and larger company networks/ecosystems of
supply and sales.
– Many SMEs have only proprietary technology or knowhow or a
small patent portfolio and are as a consequence leery of sharing
this knowledge. Trust barrier must be overcome
– SMEs may perceive themselves to be in competition with other
SMEs or companies that may be in the network and need to be
made to feel comfortable working with them.
– Many SMEs do not have an IP strategy and need assistance in
developing and funding one.
SME needs in a Commercialization
Context
• Assistance with advancement incremental
financing for the SMEs business by
• Assisting the banks in understanding the degree of
risk involved so they may extend credit outside of
their ordinary comfort zone
• Helping the SMEs work with IRAP and other
assistance programs
• Introducing the company to the appropriate VCs
• Having the CECR directly assist in funding
SME /CECR commercialization success
models
• Examples such as that provided by TECTERRA
– Industry Investment Programs provide $100,000 to $500,000 per
project, with each project led by a SME focused on solving a
critical commercial need.
– Investment supported by
• Recognition of true partnership model where both parties bringing
critical elements to the partnership
• IP support
• Mentorship where appropriate
• Expansion of commercialization network
• Assistance with follow-on funding if necessary
Commercialization Success Metrics
• At present unlike for start-ups metrics on SME
involvement and CECR success in assisting with
technology commercialization are not kept.
• Will require data on
– Numbers of SMEs assisted and in what areas Technology Transfer, Financing Mentorship etc.
– Success Metrics from the assisted SMEs with respect
to value added – incremental sales domestic and
export attributable to assistance
SME Summary
• SMEs can be excellent commercialization
partners
• They require more work than large companies to
make the finances of a CECR work
• An SME network can be excellent receptors for
technology getting it quickly to markets
• Insights into success of SME integration into
CECRs is an important metric.
Advancing Health Technologies
Challenges:
• Product development cycles
– Long
– Complex
– Expensive
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Regulatory requirements/validation
Reimbursement issues
PoC bar for partnerships getting higher
Early stage funding difficult
Advancing Health Technologies
Portfolio Focus on Opportunities:
•Therapeutics (CDRD, IRICoR)
•Devices (CSII, ClmTeC)
•Diagnostic supplies (CPDC)
•Biomarkers (Cepmed, PROOF)
•Discovery/development platforms (CCRM)
Advancing Health Technologies
Meeting the early funding challenge:
• Pooled innovation funds (CDRD, CQDM)
• Contract research activities:
– Platforms
– Discovery
– Human, animal, veterinary trials
• Out-Licensing
– Biotech
– Multinational pharma, diagnostics, devices
• Spin-off companies/venture capital
Direction for CECRS:
Need for Strong Business Plans
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Different technology sectors have different business outcomes
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However there are common basics tied to commerce
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Time lines
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Focus on business strategy
Understanding of market needs
Adequate funding to achieve goals
Execution risks
Ability to recruit experienced business talent
Things usually take longer
Contingency planning
Strong IP management
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Importance of patents as a defence
Licencing and expected results
Business Talent
• Commerce requires experienced business talent
– Can you hire it
– Can you grow it
• Successful enterprises require skills in: Finance, Marketing, Sales,
Operations, Human Resources, as well as technology skills
• Inter-disciplinary skills are paramount
• Are these skill sets adequately represented in business plans
Demonstrating Economic Impact
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What is a realistic time line for analysis?
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Jobs created
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New companies
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How to measure leverage
Internships
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Are they sustainable
Are they adequately funded
Interaction with Industry
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What multiplier should we expect
Is this a meaningful measure
Are they cross-disciplinary
Societal impact
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What are we looking for
How the CECR program can work better
Governance and operations
– Centres should provide regular updates to Business
Plans
– New applicants and existing Centres should establish
baseline data and relevant performance indicators for
measuring CECR impacts and outcomes
– Financial sustainability: Should still be a goal, while
recognizing the priority should be on the economic
sustainability of business enterprises supported
How the CECR program can work better
Maximizing program impacts:
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That the NCE Steering Committee and Federal Government
review the mandate of the CECR program and its funding
levels with a view to maximizing its impact in Canada’s larger
innovation system
That the CECR program remain flexible with the types of
business models adopted by individual Centres.
That CECRs be encouraged to:
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Involve all participants in the value-chain
Collaborate with each other (Where appropriate)
Share best practices between Centres