NautaDutilh, a law firm involved in the various development stages of spin-offs conducted a survey entitled “Belgian TTO’s and their spin-offs: a match made in heaven?”. One of the main goals of the survey was to find out which sectors the Belgian universities and their KTO’s invest in and provide research units the opportunity to start up a spin-off. In regard to which sectors these KTO’s intended to incorporate spin-offs, this survey revealed that the expertise leading to a spin-off is centered mainly on three sectors: ICT, biotech, and the diagnostics and medical devices sector.
Patrick di Stefano (ULB-TTO, coordinator of the LIEU Biotech and Health Thematic Group), and Philippe Durieux (CEO of Sopartec – a member of the UCL LTTO (Louvain Technology Transfer Office) – and Co-Head of LTTO) go over these results and raise attention to the importance of other major actors involved and the strong positioning of the region in regard to spin-offs.
What factors determine a projects fate- between being licensed out and evolving into a spin-off?
Patrick di Stefano: I agree with the concluding remarks in the survey. ‘…the scope of potential applications and researchers’ personal preferences are most decisive. If the potential applications are limited, a license is more interesting’. This is true. What is important to know is that, in the past, we were looking for the results before filing the patent and determining what was the best solution for the project. Today, before the project has started and before the results are there, we can determine right away whether an applicant will be chosen for a spin-off or for a license. On the one hand, there are projects that clearly need to become spin-offs. On the other hand, there are R&D projects (such as those launched by BioWin) that are led by industrial partners who normally will take the license for the intellectual property rights based on the results (which means that they have taken, from the beginning, a first right of refusal).
Philippe Durieux: To be successful, a project must demonstrate a strong potential IP rights with a positive FTO and a strong business model. During the incubation of the project which will define the business model, the researcher has also to test his invention by developing, for instance, a prototype which will be used by a potential client. During the maturation phase, the presence of business mentors is very important to validate the various assumptions of the business model. They give access to first hand concrete experience. Not all researches lead to new businesses. Moreover, if the project is economically and technologically viable, it is important to build a blended team with appropriate skills to execute the business plan and convince the investors! The trade-off between the incorporation of the spin-off and the licencing-out depends on the own merits of the business plan and from the appetite of the investors or the industrials. Based on the outputs of the maturation phase, we are able to define the best next steps for the project: licensing or spin-off.
In the event of a spin-off, which do you consider to be the greatest determining factor for success? Market potential or quality of management team? Or both? Although ranked third in the survey, how important do you consider support from investors to be in regard to the success of the spin-off?
Patrick di Stefano: I cannot say they are of same importance but they are both important. One cannot work without the other. There must be a good management team and a strong market potential. Regarding the importance of investors for the success of a spin-off: in biotech, investors remain in third position, in ICT no. In ICT, you don’t need the investors as much to start. In Biotech you have to raise a significant capital from the very beginning. Afterwards you still have to have further rounds of funding with lots of capital because the investments going forward are very heavy, so investors are necessary. If you have to invest 1-2 Million, which is not much in biotech, and you hit the market but don’t find your place, then you’ll never make it…. Even if diagnostics or medical devices may be less ‘capital- intensive’ than biotech or the healthcare sector, nevertheless you have to make the prototype, pass the regulatory, and all this process costs money. Not to mention we’re not making money during this period, which means we are “capital burning” so just for this there is a need for capital. At this level the investors are “indispensable”.
Philippe Durieux: We consider that three key factors are critical. First of all, a great team, as from the inception and afterwards, is of paramount importance for a successful spin-off or start-up. A high caliber and motivated team with diversified and relevant track record is a prerequisite. Next, a good interaction between the researcher, the father of the invention, and the manager of the company is key. When you launch a spin-off, the technology is often disruptive but requires incremental improvements. A good relationship between the lab and the start-up is important: we have to ensure the spin-off is really autonomous, pursuing its commercial purpose, but maintaining a win-win partnership with the lab. A spin-off cannot drain the substance of the academia lab. The third key factor is the viability of the business model together with the quality of the funding of the spin-off company. A big trap for a
start-up is the poor quality of the funding strategy. Investors with strong funding ability combined with extensive networks and industrial backgrounds provide significant help to young ventures. In summary, a project is like a puzzle and each project is a different puzzle so, sometimes, the funding is more important, other times the team is key and in other circumstances, the access to the market that is the most important. All these factors need to work together. I think the environment is increasingly complex for start-up and spin-off because they are facing a global competition from the beginning. The current economic environment is also requiring a faster pay-back.
Anything else you would like to add regarding the positioning of the region an international level?
Patrick di Stefano: I do go regularly to international lectures (Europe and the US) and in comparison the results for Wallonia are quite remarkable. Belgium is extremely well positioned globally. The French-speaking universities in Belgium and the Wallonia universities, according to an international peer survey of the LIEU Network done in the past few years, are among the top in Europe in terms of KTOs.
Philippe Durieux: UCL has implemented a unique system around its TTO to maximize the chance of success from discoveries to economic development. All the ingredients are present to create breakthrough spin-offs in our region. It requires time, perseverance and a lot of passion! The experience we gain every day contributes directly to the positioning of the region that I’m convinced will keep improving over time at international level.
ULB – Coordinator of LIEU Biotech and Health Thematic Group
tel:+32(0)2 650 9656
CEO of Sopartec and Co-Head of LTTO
tel: +32 (0) 10 39.00.50