The Way I See It… by Michael C. Volker
Crossing the funding chasm is a startup’s biggest challenge
There’s a widening chasm forming between ideas and the successful commercialization thereof.
In the recent federal budget, an increase of almost $2 billion was announced for R&D and universities are major beneficiaries of this. $11 billion has been invested since 1997 and for the first time, indirect research costs are being supported to the tune of $245 million per year.
Total R&D spending in
What worries me greatly, though, is that much of the new knowledge that's being created will sit in university labs and offices and never see the light of day. That's because there's a dearth of very early stage funding available to support technology entrepreneurs in the early pre-commercialization stages of an innovation. Actually, "dearth" is an exaggeration. There's none.
A recent AUTM (Association of University Technology Managers) survey, noted that whereas American universities created 402 spin offs in 2001 at the rate of 1.46 companies per US$100 million in R&D expenditures, Canadian universities formed 68 such companies at a rate of 3.84 new ventures per US$100 million. And, B.C. is outperforming other provinces in this regard with SFU, UBC, and UVic routinely churning out new companies.
I recently listened to Charles Wessner of the U.S.
National Academy of Science's National Research Council. To address the
early stage funding gap, he noted that the
It reminds me of our UP Program - that's the old "unsolicited proposals program" run by our federal government's Department of Supply and Services. Unfortunately, it was abandoned some years ago.
Another program discussed by Wessner was the
Advanced Technology Program (ATP) that, although politically
controversial, was recognized as one of the most effective of the major
innovation funding programs in the
Wessner compared these types of programs with the
tax credit programs such as
In comparison to the
We've got a great innovation climate - fountains of ideas and I.P. at the universities, not to mention many other research institutions, budding entrepreneurs, angel investors, mentors, and growing pools of capital that are ready to fund enterprises when they get to a certain stage.
Getting companies to the VC-ready stage is a completely different ball game than getting companies launched in the first instance. In B.C., there are two new early-stage funds that have been formed thanks to a Provincial tax incentive. These are the BC Advantage Fund and the Western Universities Technology Innovation Fund. Both of these offer B.C. investors a 30% refundable tax credit and RRSP eligibility.
The way I see it, we need more initiatives such as these to support technology entrepreneurship and to see our national investment in R&D bear fruit.
Michael Volker is a high technology entrepreneur and