Perspectives on commercialisation and technology transfer in the SA university ecosystem

Professor Kyle Farmbry of Rutgers University in Newark in the United States (US) made an announcement at the Entrepreneurship Development in Higher Education (EDHE) Lekgotla that could have far-reaching implications for South African universities. Professor Farmbry was chairing a panel discussion at the Lekgotla, which formed part of the session on Global Entrepreneurship in the Context of the Pandemic.

He said the US Embassy was providing funding to launch the US-SA Virtual Business Incubation Network in 2021 to focus on enterprise partnerships that might come out of universities. He urged people to register on www.ussahighereducationnetwork.org.

Professor Farmbry (left) is no stranger to South Africa. Initially he worked with the University of Pretoria on a fellowship. In May 2016 he launched the US-SA Higher Education Network, and has subsequently been frequenting South Africa to visit universities and to attend conferences in that capacity.

Three of the four participants in the Lekgotla discussion had strong links to this network. Two of the three, based in the US, and the one from South Africa, had visited each other's country as part of it. The only one who had not been on the programme is a former South African living in the US.

So, despite the fact they were speaking from three locations in the US and the Eastern Cape in SA, they had ties that extended beyond their knowledge on the topic: Perspectives on commercialisation and technology transfer in the SA University Entrepreneurship Ecosystem.

What entrepreneurship means to university technology transfer offices in SA and the US

The first speaker was Ms Suzanne Wolhuter (right), Manager: Technology Transfer at Rhodes University. Technology transfer offices serve to identify intellectual property with potential to make money, and then set out to facilitate the commercialisation process. Wolhuter and her team at Rhodes manage 11 patents and over 30 technology development projects.

She said what struck her the most during her visit to the US were the differences in innovation culture and the ''stark differences in skills and capacity development between our two countries". She said the differences were exacerbated by Rhodes University's location in South Africa's poorest province. The US visit also made her question whether entrepreneurs are born or made. This had a bearing on whether universities were instilling an entrepreneurial mindset or whether they were actually teaching students to become entrepreneurs.

Mr Drew Bennett (left), Associate Director of Software Licensing at the Office of Technology Transfer at the University of Michigan, said it was not the monetary and other resources that made a difference in their office. Instead, it was about how they went about doing their work. This involved reinforcing the notion that risk is part and parcel of entrepreneurship, but that it is manageable.

They wanted people to be involved in the entrepreneurial experience. At Michigan, this is not a hard sell because most of the students want to feature a startup experience on their CV. Bennett's strongest piece of advice was a warning that "the minute you think that you have this handled, is probably when things are going to go south for you". The COVID-19 situation was a clear example of this. It exerted such financial pressure on startups that the office had to intervene to help entrepreneurs continue to operate successfully.

What investors say they look for in enterprises they consider funding

The next two speakers provided the perspective of investors working in mergers and acquisitions.

Mr John Miscione (right), who has an MBA from New York University, has insight that comes from having been on both sides of the equation. He is a director of multiple companies, has previously been an intermediary raising money for companies, and has also lent money to companies.

His first bit of advice is that, although it depends on the country, capital markets are ''really, really diverse, so the first thing for anybody who's raising capital is you have to find the right place to look'', he said. Was the entrepreneur looking for an angel investor, who was looking to give money in exchange for some ownership in the company, or a first or second stage one (that is, those looking for best startups and go on invest at high risk and potential high returns)?

He said many companies needed a mentor to advise them. He also recommended having two sources of funding to ensure negotiating power. "A wise person who made and lost a lot of money, and made it back, said to me you never have a sale, unless you have two providers. It's important to take that practical advice", he said.

As for the impact of the COVID-19, he was shocked at how many US companies, of differing sizes, lacked the capital reserves essential for the sustainability of any company.

Mr Craig Mullet (left), a BComm Honours graduate from the University of Cape Town with an MBA from the Nyenrode Business University in the Netherlands, is founder and president of the mergers and acquisitions advisory company, the Branison Group. He is also a director of Angel Investor Forum and has backed 29 startups.

He said "university startups sometimes are a dream, and sometimes are misguided dreams". Like Miscione, he also felt mentors were important for guidance. Mullet is a mentor at Yale University near where he lives in Connecticut in the US and said "even at this world-leading institution, some of the startups suffer from exactly the same faults I've seen at other university startup incubator systems around the world".

He has developed a Five T Framework to screen startups to see if they are investable or not and said university economic development teams would find the system useful. The five Ts represent the:

• Target market – is it big enough?
• Technology, or product – not only if there is intellectual property but if it is of use to end customers;
• Team - universities incubators struggle a bit as academics are often unable to run a real business, and students are enthusiastic but might opt for a secure corporate job after graduation;
• Traction – at least some proof of concept to know the business will work; and
• Terms – a ready answer as to what the company is prepared to offer the investor.

How can universities help students understand investments to startups?

The first question from the online audience came from Ms Charlene Duncan (left), Director of the Centre for Entrepreneurship and Innovation at the University of the Western Cape: how can SA universities better equip students to understand investments to startups?

Mullet said he has given a talk around the world called Building a Startup for Exit. Both he and Miscione believed that those building a business should also have a plan for all the things an acquirer would want; it was too late to do this when trying to sell the company.

Wolhuter said SA universities were registered to the Southern African Research and Innovation Management Association (SARIMA) and she recommended their webinars about developing business ideas.

How can entrepreneurs have easier access to funding?

Mr Talha Mahomedy, Director of Strategy at SMYL solutions, which provides training and HR solutions, asked Mullet: how important are economic policies to provide ease of access to funding?

Mullet advised him to look at Chile as a model. Similar to SA, it had a type of first world economy with a lot of wealth inequality. It had outstanding universities that had successfully enabled technological transfers to startups, and it had spent a lot of resources on developing a startup ecosystem.

Chile had been much more effective than SA in getting the state apparatus to back venture capital funds for startups, and the government backed the angel group in the capital Santiago. "I have encouraged South African government entities to do something similar, but we haven't had that much traction," said Mullet.

Even in Connecticut, the state with what he termed "one of the most developed ecosystems on the planet", the state government gives a 25% credit to angel investors in startups.

The million-dollar question – can entrepreneurism be taught?

Dr Therina Theron (right), president of SARIMA and Senior Director: Research and Innovation at Stellenbosch University, who chaired the session, overall, repeated the question Wolhuter had asked at the beginning: can an entrepreneurial mindset be taught?

Mullet said an entrepreneur needed to be both incredibly driven, focused and determined, as well as very flexible to be able to shift if things do not work out. Sometimes one needed two people to get those two qualities. While it is possible to enhance the skill set to allow people to be more successful, he believed the genesis of the driven personality is hard to teach.

Miscione said he had worked a lot in the fashion industry over the years where it was common to see partnerships of the type Mullet spoke of: people with boundless energy who think all the time teaming up with people with a structured, institutional mindset.

Wolhuter said the trend in SA was towards survival entrepreneurs. They were seeing "a lack of real hunger for these entrepreneurs that will drive and keep driving until a startup grows and there is massive traction".

The annual EDHE Lekgotla, the fourth since 2016, is a premium event on the EDHE Programme calendar. The EDHE Programme is one of Universities South Africa's flagship projects funded largely by the Department of Higher Education and Training's University Capacity Development Programme. The Lekgotla 2020 attracted 1221 attendees from South Africa, other African countries such as Ghana, Nigeria EDHE and Tanzania, as well as Europe and the US.

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