How to identify potential: Four Technology Transfer fund managers spill their secrets
Much of what we use today was born in a laboratory — but how did it develop from research to a product that we can buy? Technology Transfer (TT) funds commercialise promising research, allowing it make that crucial step from the prototype world into the commercial space.
We talk to four of Europe’s TT fund managers, across life sciences, digitalisation and other sectors about how they identify true potential. What is the magic ingredient that makes a TT fund manager sit up and take notice of a product? Can they always recognise it instantly? And what advice would they give to a research team in search of that vital, pre-seed stage funding? The EIF finds out…
What signifies potential to you?
Joerg Wamser, Fraunhofer Technologie-Transfer Fonds — FTTF (TT fund, Germany). For me, I am interested in a team that has invented good technology, but also a team that I feel comfortable working with, people with whom we can build strong trust.
We will ask ourselves three questions when we are considering whether to work with someone –
1. What is the team like? Do the people in it cover all necessary areas, not just scientifically minded but business-minded?
2. What is their market? Is it large? Are there any barriers to entry?
3. How urgent is the customer’s problem and what is the solution, the technology? Is it a high-level technology and can it be protected through intellectual property (IP)?
If we have encouraging answers to these three questions, then the investment is worth a closer look.
Xavier Lazarus, Elaia (TT fund, France). The speciality of Elaia is digitalisation, so above all we are investing in the brain of the team. When we are looking at making an investment, we are studying the person:
1. Can they describe what they do?
2. Do they have the intellectual flexibility to transition from what they know (their research), to what they don’t know (commercialisation)?
3. Can we look at how their ideas, their potential, their proactivity intersects with the time we need to spend on them, and can we get excited?
In one case, we really became excited about the brain, but the product wasn’t ready. However, eighteen months later, we were able to connect him with an entrepreneur, and this guy’s brain was an important part of joining those dots.
Graziano Seghezzi, Sofinnova Telethon (TT fund, Italian focus). We invest in life sciences, which is a very defined market. There are so many patients suffering from diseases that today still have no cure, and at Sofinnova Partners, we decided to orient our investment strategy towards technologies that address markets with strong unmet needs, rather than technologies that create new markets. In any kind of start up, we are prioritising the following:
1. Iron-clad IP
2. Excellent science
3. A team which can grow and develop
This sounds like a very established set of characteristics but we also bring flexibility into the way we look at things. For example, excitement plays a big role. I only do things that get me excited.
Anders Lian, SINTEF (TT Fund, Norway). For us it’s about vision. We operate across life sciences, biotechnology, materials, ICT, but several things remain key:
1. The technology
2. The right team
3. The right business concept
With this vision, we can add on the commercial side, bring in the expertise of someone who has done this before.
How do you find potential?
Joerg: We mine it from the institutes of Fraunhofer, which is Europe’s largest applied research organisation with 72 institutes in total. Fraunhofer has an internal incubation programme called AHEAD, which works the team through their team issues and the technology issues, the IP — it even does some mild due diligence by screening the teams that apply.
This is a really important process because most teams have issues to work on but after six to 12 months with AHEAD they will have addressed these problems and be in better shape for investment. AHEAD runs a four-day boot camp in which the FTTF also takes part.
We don’t have ‘pitches’, instead we observe, we talk, we discuss openly about the business and the model.
From these 20–30 teams, only two or three are really suited for the FTTF and subsequent venture capital funding.
Xavier: We are investing in brains and we are always looking. We will reach out to incubators, public incubators, big tech, deep tech, to find the right people. Like with Fraunhofer, there are no pitches, we will discuss the ideas with teams in the lab or we will meet without an agenda — it is more of a discovery exercise.
A very important priority for us is universities and research centres with traction. We obviously can’t afford to work with centres with no track record.
Graziano: We search our projects in academia, in spin offs of established companies and within the pharmaceutical industry. We spend a lot of time meeting with all three types of players, nearly a third of our time. We mostly rely on referrals from our strong international network to seek out and identifying potential investments.
Anders: SINTEF itself is a source of investment possibilities, as it offers a big pool of potential. However, the more difficult part is tapping into that pool of potential, bringing it to a level where we can invite other investors.
What do you offer?
Joerg: Our value proposition is to help build the right structure of spin out (separation of the company into a new company) from very early on. We look at optimising the shareholder structure, the team or the business model. In addition, we help with IP, structuring the financing, and diving into the technology. We will do around six to eight investments a year.
Xavier: We take a really strong portfolio management approach, working with people on the ground. As a result, our funds are not small, we need lots of people on the ground to work with our teams, there is no pyramid of seniority. We are careful about who we invest in, we will make between five to seven investments a year, growing to possibly 12–15 in the years to come.
Graziano: We dedicate about two thirds of our time on managing our current investments and helping them develop new drugs and medical technologies that by nature are capital-intensive. With more than 45 years of successful track record, Sofinnova Partners provides its portfolio companies with key resources arising from its historical network and from its experience in building from scratch world-class leaders in biotechnology.
Anders: One of the difficulties in Norway is getting that early-stage funding, as early-stage investors are very hard to bring to the table. At SINTEF, we can mitigate this with a programme called entrepreneurs in residence where
we are working with entrepreneurs who have successfully exited companies and we invite them into the team
on a project level in order for them to fully understand the business concept and contribute. We make between three and five investments a year.
What makes you proud?
Joerg: Apart from that excitement of finding the right investment, we are proud to contribute to some meaningful spin outs of Fraunhofer. One of these is a very interesting company that improves fish health in aquaculture and thus enables a more sustainable way of raising fish.
Xavier: I have a PHD in mathematics and algebra but every day I am encountering technology in digitalisation that I have to learn about, that I have to understand. This makes me excited.
Graziano: Working with teams that are highly committed to bring breakthrough therapies to patients is truly gratifying. We usually work with them for years, and often become friends. It’s a dynamic and fascinating sector; right now, we are looking at many promising areas, among which neurology and neurodegeneration, two fields that have become key in a society characterized by an aging population.
Anders: I liken potential to a stallion racehorse that is ready to go, but lacks the jockey. I like to bring in the commercial side, contribute on a project level and witness the success of the race.
The EIF supports TT fund in Europe by using EU resources to take cornerstone investments in new funds, helping them to fundraise. So far we have already invested in 52 funds, which in turn support hundreds of innovations in their journey to commercial use. In 2019, we expect to commit at least EUR 200 million to technology transfer initiatives.
Our beneficiary- and partner institutions currently include Fraunhofer, Trinity college, University College Dublin, Centre National de la Recherche Scientifique, Polimi, KULeuven, University College London, TNO, TU Delft, Universitat Politecnica de Valencia, VIB and SINTEF.
