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More Australian universities must drastically review their current revenue streams if they are to remain viable in a highly disrupted market, according to a leading venture capital specialist.
Stoic Venture Capital partner Dr Geoff Waring warned of an “over-reliance on government grants and overseas students’ fees to fund Australian universities’ research activities”. Instead, Waring recommended institutions should “trade” their huge intellectual property in “equity in companies commercialising their research”. This would lead to more robust partnerships with industry that can put excellent research to commercial use.
“Government and philanthropic grants fund basic research and academic publications but venture capital finances the next step of forming a company to prove the concept in the field,” Waring said.
“More resilient universities work with seed venture capital to finance start-ups in sectors such as health sciences, renewables or agritech where Australia has an international competitive advantage.
“The pandemic has demonstrated how important Australia’s focus on home-grown medical and biotechnology solutions is.”
Waring said universities can let venture capitalist managers take their “valuable intellectual property to the next level” once it is secured and linked to an “unmet need” in the market.
“Building stronger connections with seed venture capital investors and industry through partnerships like the Cooperative Research Centres could better align research priorities to solving the unmet needs in our society,” Waring said.
“This collaboration with industry helps university research translate into new start-ups that are developing critical new drugs, devices, vaccines and other important innovations.”
Stoic Venture Capital is one of a few venture capital funds in Australia dedicated to start-ups based on promising university research, Waring said, “committed to financing translational research”.
While the company wants to encourage researchers in the medical, applied science and engineering fields “to go beyond publishing their research”, there is a demand for commercialising research from other fields, too.
The issue of declining revenue – brought about primarily by the plunge in international student numbers both on and off-campus since the pandemic – has seen universities across Australia sell-off non-core real estate, as well as laying off thousands of permanent and casual staff, and implementing employment freezes.
Waring told Campus Review that, despite a slow return of international students, data from IVP Connect showed that in the last two years Australia’s share of international students “has fallen from around 18 per cent to 12 per cent”. At the same time, he adds, the share of the international student market in countries including the UK, Canada and the US have all risen during the same period.
Although the new drug Sinopharm looks promising in getting international students back to Australia, Waring added “it will take a bit of time to get back to where it was”.
“There are a couple of reasons for this. One of our biggest markets is China, and they have said they are discouraging students from coming to Australia based on trade punishments, so that’s going to stop them coming back.
“But there will be a gradual return over time, just maybe to the level of what we lost.”
The venture capital expert said that roughly 30 per cent of all research grants in Australia are funded by the Australian government, but spending on science-based research and development, as a percentage of GDP, has fallen over the last 10 years “and we’re well below other developed countries”.
Over time, Waring expects that the government will try to get a better return on their investments in R&D, as “they just don’t want to keep pouring money into [research] without better returns”. One way of achieving this is to tie more money to linkage grants and cooperative research centres, which require an industry partner for the funding to be approved.
An example of such a partnership involves the CSIRO, a government body, which has funded the biggest venture capital organisation in universities – Main Sequence Ventures.
In a recent Campus Review article based on an EY report, commercialised research to fund university operations was also identified as a priority, including corporates, governments and venture capitalists.
The report’s author, Catherine Friday, EY global head of education, said the pandemic has exposed the searching our universities must do “when it comes to finding their place in the future of education”.
“Our universities cannot rely on ever-increasing inflows of domestic and international students to pay the bills, with student levels unlikely to return to 2019 levels as the sector continues to reel from the pandemic,” she said.
Must all academics need to commercialise research to survive?
As the pressure to commercialise research has never been so important, Campus Review asked Waring whether some academics will be reluctant to treat their intellectual property as a business venture.
“From the academics I know and worked with, the two things they care about most is, one, social impact – that their research has a big benefit to society – and two, about their status of their peers in the field,” he said.
“Now, I think that’s compatible with getting more commercial funding because, if you look at what they have to do now for government grants, they keep having to do these short-term grant applications where they’ll get a grant which will last them for a year or two.
“And as long as they reach their goals, they’ll need to apply for another grant, and that grant-writing process is very uncertain and time-consuming.”
As Waring argues, some academics would prefer to get their grant money from venture capitalists or industry partners, allowing them to get off the “grant application treadmill”.
Other promising commercialisation opportunities
While health services, agritech and renewable energies are common research commercialisation opportunities in Australia at the moment, Waring told Campus Review that design – of all types – is another field in which opportunities abound for venture capitalists and industry partners.
“If you look at Apple, the most valuable company in the world, that was built on having good design,” he said.
“Those products that are co-developed and are very useful for individuals and businesses have a high-potential return, I think.”
And while in the past product design hasn't been a huge priority for universities, Waring says that you need only look at what Apple has achieved to think of the possibilities.
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This article does nothing more to further the discussion about academia than promote the neo-liberal school of thought that everything should be commodified.
In regards to education and research, this simply does not add up.
Over the course of history, education and research have, for the majority of the time, been funded on a not-for-profit base, because their aim is not to make a profit. Their aim is for a better understanding of the world around us, and through this better understanding to improve living conditions for anyone and anything on this planet. Much research has created understanding and solutions that were not comfortable or profitable for companies that funded it, but which was priceless for society as a whole nonetheless. If we stick to the idea that research must be funded for profit, we will loose swathes of fields of fundamental research and tinkering around the edges that would benefit society as a whole.
Apart from that, if we are discussing why it is so difficult for academics to get research funded, we must first and foremost look at the current government consistently spending less and less on its national research budget over the last decade. The mentioned issue of the plunge in international student numbers both on and off-campus since the pandemic would be far less severe if the current government had not made international student revenue a required income stream in the first place because of reduced government research expenditure.