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Knowledge-based companies to cross the Valley of Death

30 years of R+D CSIC

Knowledge-based companies help to bring scientific results from research centres to the market and society. Thirty years ago, none existed at the CSIC. Since 1999, the CSIC has promoted about 170 companies. Of these, around 60% are still active.

A diagram to explain the valley of death. At the top, corresponding to the X-axis, the stages of project development. In the lower boxes, the sources of financing that can be used.  The valley is the initial moment in which there is no income or economic resources (Y axis), so it is in negative numbers. Image: R+D CSIC

Knowledge-based companies are created with the aim of producing goods or providing services with high added value based on the results of research at universities or public research centres.

They are also known as spin-offs, start-ups or technology-based companies. Although they may have slight differences, all of them have this point in common: taking science from the laboratory to society and overcoming some of the usual obstacles in knowledge transfer.

Maturing technology to an optimal level

One of these obstacles has to do with the level of development of the technology, since "when it leaves the laboratory it is not sufficiently mature to easily arouse the interest of companies," explains Isabel Gavilanes, technology transfer technician at the CSIC Delegation in Catalonia.

"Also, when the technology is very disruptive, it can be difficult to find companies with the necessary resources or companies ready to venture into the project. It may even happen that companies do not see a future for the technology because the market is not yet ready to absorb it," adds Gavilanes. All these factors are what determine, in one way or another, the existence of what experts call the "valley of death".

Another graphic of the valley of death in the development of a technology. The name is said to refer to the Death Valley desert in California (USA), one of the most inhospitable places on the planet.

What is the "Valley of Death"?

While at the beginning of a research project, the investment required is moderate (since the work is done on a laboratory scale). As the project progresses, whether it is a device, a drug or an industrial process, "more and more resources are needed", says Isabel Masip, also a technology transfer technician at the CSIC Delegation in Catalonia. "It is necessary to do experiments on a larger scale, create prototypes, scale up processes, or move on to clinical trials, and so on. There are not incomes from the technology and a large investment is required to bring it to the market". This is what experts call the "Valley of death", where many promising breakthroughs can end up dying.

Is easier to visualize the idea of this "valley" on a coordinate graph, where the X-axis is the development time and the Y-axis are revenues and resources: as the project progresses, more funding is required, but as the technology is still in the research phase, there is no revenue (and therefore no resources). This is reflected in the concave curve of the graph, below the X-axis (the valley), as resources are in negative figures. When the technology matures and it reaches a break-even point between investment and profit, it is considered that the valley of death has been crossed.

They require complete teams

For crossing this "valley of death" and following the example of other international institutions, the CSIC decided to promote the creation of knowledge-based companies. This companies involve the researchers and entrepreneurs who know the technology and who will collaborate in its development until it reaches an optimal level of maturity to be brought to the market.

But the teams must also incorporate professionals from the business world. "The teams have to be multidisciplinary and complete," says Javier Etxabe, who heads the Industrial Property and Entrepreneurship Support Area of the CSIC. "There are business skills that scientists don't have and scientific skills that entrepreneurs don't have," adds Etxabe.

In the 1990s, it was very difficult to get scientific results to companies. As explained in this R+D CSIC article from 1995, the problem in Spain was the lack of intermediaries, of engineering companies to carry out the developments and get them to the companies.

Sometimes the company is not created to bring the technology to the market but to develop it sufficiently to license it to a large company. It is, for instance, the case of a drug, where the company is set up to carry out phase I and II clinical trials, which are necessary to obtain approval from health agencies.

Once these phases are completed, the technology or the drug is transferred to a large company, which will carry out phase III and IV clinical trials, which require resources far beyond the capacity of the knowledge-based company.

This would also be the case for projects that require large infrastructures, such as technologies in the energy sector, green hydrogen, batteries or similar.

Searching for funding

To seek funding, knowledge-based companies can access funding funds such as some Horizon Europe programme calls, the CDTI's Neotec grants from the Spanish ministry of Science and Innovation, business angels, investment funds or similar. "We have learned a lot in the search for funding," says Etxabe. "Even now, not only we look for external funding but also create our own funding channels".

One example is the CSIC Hackathon. Its first edition was held in Madrid past months and another will take place in Barcelona next July. It is a conference to present and discuss business ideas based on scientific results; after a selection process, the winning projects will receive mentoring and funding to become knowledge-based companies.

170 companies from CSIC in two decades

Thanks to the work carried out by the Deputy Vice-Presidency for Knowledge Transfer (VATC in its Spanish acronym), currently headed by Ana Castro, around 170 companies have emerged from the CSIC, in recent years at a rate of about 10 per year. Of these, approximately 60% are still active.

A very important change, says Etxabe, is that "we have changed the institutional strategy for managing our technology portfolio and now we take the initiative". In other words, he explains, "if we see a promising patent, we don't wait for researchers to propose it to us, but rather we discuss it with them, we generate a team and look for funding for creating a knowledge-based company".

The creation of the first CSIC company dates back to 1999, with the creation of iSOCO, which emerged from the Artificial Intelligence Research Institute (IIIA-CSIC) to commercialise software components based on Artificial Intelligence. The second, Genetrix, was promoted in 2000 by Carlos Martinez Alonso and Antonio Bernad, scientists at the National Biotechnology Centre CNB-CSIC), and Cristina Garmendia, then a former CNB-CSIC researcher from and spanish Minister of Science and Innovation from 2008 to 2011. Genetrix is still active and has several subsidiaries dedicated to cell and molecular therapy.

"In the biomedical sector, almost 3 out of every 4 CSIC successful technologies were developed and marketed through a knowledge-based company"

Another exemple is Gem Imaging, founded in 2002 by researcher José Maria Benlloch of the Institute of Particle Physics and by entrepreneur David Peris. The goal was to bring to market mini-gammagraphy cameras for medical diagnosis, much more compact and lighter than the devices of the time. They explained its project in this R+D article in 2005. Today, they market cancer diagnostic products worldwide through their Oncovision brand.

Nanomol Technologies, a company from the Institute of Materials Science of Barcelona (ICMAB-CSIC), was created in 2010 to offer services and technology to develop nanodrugs and drug-delivery solutions. Marsi Bionics, from the Centre for Automation and Robotics (CAR) created in 2014, which develops exoskeletons that mimic the functioning of natural muscle. More recent projects include Bioinicia, a company created from IATA-CSIC in 2013, which has co-developed the first hygienic and transparent mask, made of nanofibres and a virucidal filter, that allows deaf people to read lips and identify emotions, and Fuelium, from IMB-CNM-CSIC in 2015, develops single-use paper batteries.

A good technology transfer tool

Over the years, "we have seen that the creation of knowledge-based companies, as a technology transfer tool, can sometimes be very effective and even more so than licensing a patent to an external company, partly because the different agents that make up the team (scientists, investors, managers...) see the project as their own and a greater commitment is acquired", states Javier Etxabe.

“For example, in the biomedical sector, almost 3 out of every 4 CSIC successful technologies were developed and marketed through a knowledge-based company”. Moreover, when the level of maturity of a technology is low and high-risk investments are necessary, it is easier to find and channel funding through the creation of a company.

 

Mercè Fernández / Comunicación CSIC Cataluña