Research exploitation: catching up at a quick pace!

Photo Jacques Lewiner / Professor and Honorary Scientific Director of ESPCI ParisTech, Dean of Transformation, PSL Université Paris / February 15th, 2017

Academic research is not only a driver of scientific progress. It is a means to change the world. Many discoveries, including in areas related to basic research, can lead to new processes, products or services. How can we speed up the integration of these discoveries within the economy? The key issue is that of research exploitation, a field in which France has been trailing behind for a long time. But it is now catching up at a quick pace.

Paris Innovation Review – In France, there has been a long-standing contrast between the high level of academic research and the modest result of research exploitation. Is it still the case?

Jacques Lewiner – Old habits die hard, but the situation is changing. To understand this, we need to analyze the reasons for the difficult communication between the academic and the economic world in France.

The cultural background certainly makes a difference: in a country such as ours, both highly centralized and where public services are a matter of national interest, “the brain of our researchers is government property” – I am hardly exaggerating.

However, this doesn’t preclude giving thought to the exploitation of academic research. But within large research institutions, we can observe two major biases that have shaped practices and delayed their development for a long time.

The first is that, when we think about exploitation, we stick to patents. I’m not saying that patents aren’t useful: they are even crucial to protect new processes, devices or materials – the basis for all innovation. But sticking to patents means ignoring the essential, i.e. the entrepreneurial aspect of exploitation. It took a long time for French schools and universities to understand this, and one of the reasons for their slowness is what I call the “Pierre Potier illusion.” Potier was a brilliant chemist who discovered and developed several molecules with proven pharmacological effects. The patents for these molecules generated real income for all relevant parties, especially the CNRS. As a result, this income created the illusion that filing patents was enough for the valuation of their researchers’ work. But this overlooks the fact that many patents don’t generate income at all! Even when this income exists, it only accounts for a modest fraction of the value created by the companies that use them. Hence the importance of the entrepreneurial aspect: encouraging researchers to found startups and develop by themselves the economic potential of their discovery.

But then, the second bias comes into the equation, namely: a strong reluctance to admit that a researcher can make money, or even a fortune, from his research while being paid by the community. While understandable, the dilemma does not resist to a well-founded argument.

First of all, it is a win-win situation for all, in terms of job creation, economic development, industrial specialization, or tax redistribution.

Next, if one considers that this entrepreneurial valuation has any sense at all and tries to support it, researchers need to be motivated. In the case of patents, institutions are already obliged to repay their inventors a significant part of the income generated by their patents. With entrepreneurship, researchers enter a whole new dimension with broader perspectives and a new set of human, organizational, economic and industrial challenges.

Moreover, nothing prevents the institution from taking shares in the company or even, in keeping opportunities to participate in subsequent fund raising, if conditions look attractive. 5% of shares, for example, is a reasonable figure, close to what most dynamic ecosystems offer. This allows the researcher, after several fund raising rounds, to keep a significant percentage. 30% of the original shares is too high and wouldn’t be reasonable. Holding golden shares would be equally counterproductive, as it would discourage new investors in getting on board, and ultimately thwart the growth potential of the company.

In short, we need a whole new culture of investment. Unfortunately, major research institutions are slow learners. Nonetheless, in recent years, things have started to change: all major schools have their own incubator and the culture of investment is disseminating quickly.

ESPCI is regarded as a precursor, even though it has produced world-class fundamental research and several Nobel Prizes. How do you explain this?

As pointed out by two historians of science, Ana Carneiro and Natalie Pigeard, ESPCI benefited since its inception from a particular cultural environment. Unlike other French Grandes Écoles or institutions such as the CNRS, all of which were created by the government to form its most qualified public servants, ESPCI was created by the City of Paris after the French defeat in the war of 1870, when it was discovered that all main French chemistry schools were located in the East, in the part annexed by Germany, or in its dangerous vicinity! The City of Paris has been very responsive. It recruited teachers and researchers who came from the East… with a different culture, whether Germanic or Anglo-Saxon: a culture that readily accepts that university and industry should work hand in hand.

ESPCI has always welcomed the fact that a researcher should apply for a patent. Thus, the Curies and Paul Langevin have all filed patents, some of which have had a major impact. But patenting has a cost. In the 1970s, as a young researcher, when I placed my first patents, I did it at my expense and risk – a very expensive move! So with one or two co-inventors and colleagues, we decided to market our inventions by selling them in an electronics fair. Unlike a physics fair, considered as “noble,” this one was mainly attended by industrialists and therefore considered as less noble. It was such a surprising move that we received a full-page article in Le Monde! This fact alone gives you an idea of the spirit of the times…

We are no longer there, but it took a lot of efforts from politicians of all persuasions to change their attitude and get institutions to change their practices. Before the Allègre Act of 1999, for example, a public researcher could not be a member of a company’s Board. Imagine the loss of expertise for the French industrial world! It is true that in that time, large firms were mainly run by engineers, with some technical culture – but they weren’t at the forefront of scientific discoveries.

To my knowledge, CNRS researchers still don’t have the right to be consultants on their research topics. As I said earlier, a researcher’s brain is government property!

However, no need to be a genius to understand the mutual benefits of increasing contacts, both for the industry and academic research. The industry can clarify and refine its projects, push technological frontiers and generate breakthrough innovations – and this is obviously in the interest of the country. Meanwhile, researchers are confronted to industrial realities, become aware of constraints and opportunities, and are able to anticipate the concrete prospects offered by their work. It’s a win-win situation for everyone, especially for the government.

The basic idea is to help researchers unleash their full potential. Otherwise, it’s a waste –an invisible waste, because by definition, we never see the figures in terms of jobs, turnover and value that they could have generated.

pslinnovstartup

You have filed hundreds of patents yourself, and have become a successful entrepreneur. Aside from the good will you mentioned earlier, what could the institution have done for you?

You refer to the question of coaching and mentoring, which can be summarized in a few words: a novice entrepreneur lacks know-how and a good accompaniment can avoid him many pitfalls. This is one of the keys to success in Silicon Valley, where startupers are accompanied by their VCs (many of which are successful entrepreneurs), by lawyers, by a whole network: they are immersed in an ecosystem of entrepreneurship. But this ecosystem doesn’t emerge spontaneously: it takes two or three generations for it to ripen, and even in such an environment, specific organizations (incubators, accelerators) are needed to disseminate this culture. No institution, regardless of its good will, can replace an ecosystem. But it can actively enable its emergence and maturation. This is what we sought to achieve at ESPCI and what we strive to do today, at PSL.

Does this mean that institutions are gradually transforming into business angels?

Not necessarily – every man to his trade – but investment is one of the tools at our disposal. The institution is not necessarily the only player responsible and entrepreneurs may wish to give back to the system part of what they were given. For example, I created an endowment fund which, as part of a patronage strategy, could help boost some promising projects. Next to this fund, we created a small exploitation unit (now transferred to PSL), which aims to facilitate the work of researchers, enlighten them on procedures, put them in touch with the right people (whether firms specializing in the protection of intellectual property, investors or entrepreneurs).

This unit pays for patent filing fees, if any, and more importantly, provides researchers with a fast and documented response (within a few days, one or two weeks max) concerning the patentability of their discovery. Speed is a real challenge and on this sense, a well-equipped institution with some experience and good contacts with specialist firms can offer a real added value.

Role models can also play an incentive role for researchers. They free them and give them a nudge in the right direction. My former students have become my associates within a sort of “school”. And all of them eventually create their own startups. It’s a virtuous circle. In ten years, we have created or helped launch many startups, with significant success (outflows worth hundreds of millions of euros, iconic products, IPOs): not yet a new Silicon Valley, but the infancy of a new ecosystem, a well-organized network, able to mobilize resources and – something quite new – provide funds quickly. The institution (ESPCI yesterday, PSL today) can finance a proof-of-concept. In a near future, we will be able to push things even further via the ongoing creation of an investment fund (managed by a specialized company supported by a second specialist company). Meanwhile, the Endowment Fund and PSL are already able to provide more than just seed money, during the second or even third capital round. Our recognition within the French Tech also helps the projects we support, by convincing VCs and large institutional investors such as the BPI, which play a major role in France.

Our support work is based on the experience gained while managing or coaching previous startups: the art of convincing investors, the importance of teamwork, the need and possibility of assessing risk evaluation… all these ingredients of the “startup culture” require transmission. Obviously, the personal experience of each person involved is crucial here, and that’s where we touch the limits of what the institution can do: part of its expertise is that of the people it hosts. This is what is really at stake when transforming a few great adventures into a true ecosystem. In the meantime, it can facilitate the dissemination of that culture, by promoting contacts, acting as an intermediary or network enhancer (the value of alumni networks should never be underestimated). But promoting a new culture among new people is also a matter of storytelling.

In the opening of this interview, we mentioned significant changes in attitudes: what are the main signs of this evolution?

Very simply, we are constantly forced to recruit new permanent members within the evaluation unit, which is flooded with requests. Or by reading the press: most schools and many universities now have their own incubators. Undoubtedly, the time was ripe, both for researchers and students: there is a keen interest in entrepreneurship and institutions are adapting by supporting this movement.

Experience is unevenly distributed, because we are talking about a very new phenomenon. But the visible growth of the French Tech (as seen at the CES in Las Vegas, for example) indicates that something is happening today in France, especially in Paris. By simply adding up all the companies I created or helped to create (alone or with others), their total value reaches one billion euros. This figure alone could serve as the ultimate argument to sweep any reluctance towards this new culture (in France) of promoting research: by imagining an acquisition of stakes of up to 5% and a dilution by half during the successive capital rounds, an institution that would have accompanied each one of these adventures would end up with assets worth almost 30 million euros. A nice sum that could be used to equip labs … or to take positions in new startups! All major American universities have been playing this card for decades, and they are doing very well – both financially and in terms of scientific excellence.

I dream of the day when French doctoral students will answer to the question of what they will do after their thesis with the same mindset as their counterparts in Stanford or Harvard: “I’m still trying to figure out in which of my thesis supervisor’s startups I want to work with.”

 

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