The love of brewing beer set the scene for an unexpected business success

Two scholars at the University of the Free State (UFS) took their scientific know-how and, together, with support from the university, created a successful business.

Mr Christopher Rothmann (right), who is doing his PhD in food biotechnology specialising in mycology, presented the tale of the development of his company, LiquidCulture, at the Entrepreneurship Development in Higher Education (EDHE) Lekgotla last month. His talk, Case Study: Best Practice in University-supported approach to Starting and Growing a Business, was part of the session titled The University as Catalyst for Entrepreneurial Change on September 16.

Rothmann and Dr Errol Cason, who has a PhD in biochemistry and is lecturing in animal breeding at UFS, started LiquidCulture two years ago. The company produces liquid yeast, mostly used to ferment beer, and supplies 10% of South Africa's craft beer industry.

While each business is distinctive, Rothmann said his case study is relevant to any entrepreneur at a university who invents a product and wants to market it.

Mr Christopher Rothmann

What contributed to starting the company

Even though LiquidCulture was not their initial intention, they had two things which helped set the scene for the enterprise: knowledge and interest. Rothmann and Cason were postgraduate students in fields which helped them understand yeast, a single-cell fungus visible only by microscope that can convert sugar and starch through fermentation into carbon dioxide and alcohol. And they had a mutual hobby: they were avid home brewers of beer.

In that capacity, they competed in several intervarsity annual brewing competitions which, said Rothman, "was a very good catalyst for commercial training" and "really led to a love for the brewing industry".

They first set out to brew beer

In 2016 they started Kovsie Brewing at UFS, now known as the Kraft Brewing Co. Yet it was the offshoot of the brewing company that led to LiquidCulture. Needing yeast to brew the beer, they started to grow their own, thinking that as microbiologists they could probably do this and not need to buy it anymore.

"We found vast improvements in our beer and consistency," said Rothmann. And so did others, who started buying their yeast.

They next set out to research and develop yeast

Two years down the line, they realised they were sitting on a business opportunity. There was a market for liquid yeast in South Africa. No labs in Africa were growing it, and very few overseas. They started the Yeast Research and Development Initiative to add to UFS' yeast culture collection, one of the biggest in the world, which includes some isolated from the top of Mount Everest, and from the digestive tracts of butterflies in the Amazon.

Christopher Rothmann in a UFS laboratory
The yeast used in LiquidCulture was developed from scratch in one of the laboratories of the University of the Free State.

They wanted to discover new brewing strains for the market, said Rothmann, and in the process, could also provide third stream revenue to UFS.

How they went about it at UFS

In what Rothmann described as "one of our most important steps", they approached the university's Directorate: Research and Development (DRD) about possibilities for business opportunities. They already had a proof of concept, and, having tested the commercial viability of their product by doing small scale sales, were confident it would work. Apart from this however, they felt pretty clueless. "We're scientists, we don't really know anything about business," said Rothmann. Here the university stepped in.

The yeast used in LiquidCulture was developed from scratch in one of the laboratories of the University of the Free State.

How the university helped them

UFS' DRD and its technology transfer division, KovsieInnovation, where Gerardus Verhoef is Director for Innovation, played a guiding role. They helped Rothman and Cason with:

  • a techno-analysis to determine whether the business was viable and who its clients would be;
  • information about basic marketing principles and what commercialisation would involve;
  • a funding application to the Technology Innovation Agency (TIA), an initiative of the Department of Science and Innovation;
  • connecting with experts on campus who helped them identify the best marketing strategies and develop and fine tune the labelling for their products;
  • trademark registration of their name and logo;
  • a space to work at the Department of Microbiology, Biochemistry and Food Biotechnology with its world-class equipment.

Rothmann is very grateful to the DRD. "The DRD really helped us to have freedom to explore creativity and to get our product out there," he said.

How other UFS students became involved

Some students did projects on LiquidCulture, such as how to market and package it. "Once again, we weren't experts in any of this. And branding is very important," said Rothmann.

Production got off to a flying start

They began production and sales last year. ''Our customer base grew very rapidly as word of mouth spread that we were supplying a superior product at a competitive price to what was being imported,'' said Rothmann. Within seven months they had broken even. When their collaboration with UFS was adapted to establish a separate financial entity for LiquidCulture, the university helped them kickstart the invoicing and collecting payments. Their income was very well monitored, he said, yet another way the University helped them feel secure.

Registering LiquidCulture as a private company

It became awkward to run the business through the university as clients started wondering if they were dealing with a university or a company. On the advice of the DRD and KovsieInnovation, they registered LiquidCulture as a private company with its own bank account, sorted out shareholders' contracts, and entered into a rental agreement with the university for the use of the lab space and equipment.

"We were officially spun out of the University of the Free State administration system, which was a very big leap. We'd been nurtured and now, all of a sudden, you have to run everything on your own,'' said Rothmann. The University also guided them through this transition.

The benefits for the University

Besides adding to the University's third stream revenue, Rothmann said LiquidCulture also provided "a little bit of bragging rights in the microbiology departments''. The University was especially pleased to have been part of job creation.

The way ahead

LiquidCulture is still partially involved with the University, and is moving its production to the Paradys Test Farm, a UFS science park being created for entrepreneurs. The company experienced consistent growth even when alcohol was prohibited in the early levels of the national lockdown, thanks to those who brewed pineapple beer at home. Now they are planning to increase their share of SA's craft beer sector.

What Rothmann and Cason have learnt

Student entrepreneurial success starts with willingness – the university and all the departments involved have to want the venture to work. Rothmann said it has been an absolute pleasure working with the University and they wouldn't be where they are without the institution. He is also grateful to his study leader for believing that science is not just about doing projects, and then publishing. It's about seeing if the research can add value to South Africa or even beyond, and then commercialising it.

"Universities have to make space for students who want to create something instead of just coming in, getting a degree and starting to climb the corporate ladder. So study leader support is extremely important," said Rothmann.

LiquidCulture is one of the first spinout companies from UFS. By being "brought up" in the university system, LiquidCulture helped create the protocol for future companies.

How universities can help entrepreneurs

Dr Linda Meyer, director for Operations and Sector Support at Universities South Africa, who chaired the session, asked:

Question What are three takeaways about how universities could do better to enable an entrepreneurial environment to generate third-stream revenue?

Answer: Some people aren't that willing to help because the success of the entrepreneurial venture doesn't affect them, so they see problems and not solutions. It is important to work with like-minded people to lead these ventures.

Secondly, it is important to keep an eye on research projects and identify possible commercialisation ventures. Entrepreneurs are not necessarily in the financial departments on campus. Sometimes they are a musician or a microbiologist sitting lonely in his lab. The Entrepreneurship Intervarsity Competition (Rothmann was a joint runner-up last year) is an important outreach.

Entrepreneurship Intervarsity Competition
The annual Entrepreneurship Intervarsity Competition not only motivates students to create businesses; it also helps them grow their networks and get constructive feedback on their ideas, Rothmann says. He is pictured here with Ms Fuzlin Levy-Hassen, CEO of Technology Innovation Agency (TIA). TIA helped fund LiquidCulture and therefore celebrated this venture's recognition as a runner-up in the Existing Technological Business Category at the Entrepreneurship Intervarsity awards ceremony on 19 September 2019.

Lastly, universities are governed by very strict bureaucratic rules so it is important to have a streamlined pathway through this maze, he said.

The thought leadership that Rothmann shared at the 4th annual EDHE Lekgotla was heard by no fewer than 1221 delegates from around the world. This conference attendees comprised studentpreneurs from South Africa's 26 public universities, academics and senior leaders from the sector, including policymakers as well as delegates from Africa, Ghana and Nigeria, in Africa, and also from parts of Europe and the United States.

The EDHE programme, that is driving entrepreneurship development at public universities, is a flagship programme of Universities South Africa that is being funded, in the main, from the Department of Higher Education and Training's University Capacity Development Programme.

The author, Gillian Anstey, is an independent writer commissioned by Universities South Africa

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