Industry Growth Program: discussion paper

MTAA
Industry Growth Program
Final Submission

Eligibility of innovative SMEs
What objective criteria should determine eligible innovative SMEs? For example, annual turnover of $20 million or less, employee cap and/or net asset cap?

A triangulation approach to determining eligibility is commended, as growth businesses may have a large number of employees developing concepts and commercialising new products yet not be generating substantiative revenues.
Accordingly, the criteria ought to comprise:
▪ Revenues
▪ Employee numbers
▪ Net tangible assets

Further, a tiered approach ought to be adopted, as a business generating $20 million annual revenue is relatively small in global markets.1 Grant funding eligibility ought to be matched, within a tiered range, to firm size as proxy indicators of financial stability and capacity to deliver, as well as project requirements.

What level of grant matching is appropriate? Should there be a variation for earlier stage Technology Readiness
Levels (TRLs) programs and the size of the grant?

MTAA supported MTPConnect’s Clinical Translation and Commercialisation – MedTech (CTC-M) Program introduce a tiered approach for the second round to enable companies with limited access to co-funding to finance smaller scale proof of concepts projects and/ or to progress projects through critical validation points to attract further private investment. Projects seeking $250,000 to $500,000 were funded on a 4:1 basis (ie $4 grant funding for $1 co- investment). Those seeking $500,001 to $1million were funded on a 2:1 basis, while those seeking $1m to $1.5m
(the maximum amount provided) were funded on a $1:1 basis.

This tiered approach enabled several smaller, earlier stage and less well resourced companies to successfully receive grant funding for smaller, yet critical projects to enable their technology to progress through key commercialisation stages, including technology and market validation.

This approach also recognises the preference for institutional and private investors in deep technology (ie non- software) commercialisation companies to invest at later stages of development, once technology is validated, market/ value proposition refined and approaching market and production scale up

1 https://www.investopedia.com/terms/s/smallandmidsizeenterprises.asp#:~:text=Micro%20businesses%20have%201%E2%80%934,Large%20businesses%20have%20
500%2B%20employees.
Eligibility of projects
Are there barriers beyond pre-profit stage that the program should consider supporting?

Companies generating profit continue to have difficulty in accessing growth funds, as debt finance is typically constrained by ability to secure loans against personal assets. Further, many deep technology commercialisation projects have extensive capital expenditure requirements before becoming cash flow positive. Funding in these instances ought to be against achievement of key milestones – both technical/ engineering/ product development as well as commercial/ market validation.

Other barriers include:
▪ ability to access local and international markets, particularly in specialist niches associated with medical devices,
which could be enhanced by embedding specialist AusTrade facilitators within relevant industry specific grant
initiatives
▪ access to specialist expertise and capital equipment to validate proof of concept designs and short run
manufacturing, such as those available through NCRIS facilities such as Australian National Fabrication Facilities
and Therapeutic Innovation Australia
▪ ability to access talent through

While many programs exist to support these challenges, there is limited coordination on an industry/ market focus basis. Coordination mechanisms, through industry growth centres (ie MTPConnect) and complementary initiatives enables a focus of effort and concentration of resources. One example of a grants program seeking to provide a level of coordination is MTPConnect’s CTC-M program which draws in industry partners and NCRIS facilities to access specialist regulatory, reimbursement and manufacturing infrastructure capabilities.

Should Technology Readiness Levels (TRLs) be used to determine eligibility of a project? If so, what are appropriate
TRLs for commercialisation and/or early-stage growth phases?

The Technology Readiness Level (TRL) model provide a useful framework to track and communicate the technical and engineering progress of a concept along key commercialisation milestones, particularly to audiences without deep subject matter expertise. It also provides a useful stage gate assessment framework to enable cross project comparison to evaluate incremental progress. Early stage commercialisation projects are often at TRLs 3 – 6, while later stage growth and scale up stage projects are typically at TRLs 7 – 9. MTPConnect’s CTC-M Program has effectively utilised the TRL model to have companies indicate proposed progress from TRLs 4 – 6 at commencement and achievement of TRL 6 – 9 by completion, typically 24 months later.

However, there are several flaws associated with the TRL model. Firstly, it is a subjective assessment framework, whereby Founders/ Promoters tend to overestimate the maturity of their technology. Addressing this natural bias often requires a degree of scepticism and independent validation. Organisations such as CSIRO and Cambridge
Consultants can provide a funder’s technical due diligence perspective.

Secondly, TRLs don’t consider all critical commercialisation activities, such as market readiness, investor readiness, execution capabilities and IP/ regulatory factors. The TRL model requires a triangulation against one or more factors, such as market readiness and/ or investor readiness to enhance its effectiveness. A useful multi-factorial analysis tool in this context is the Bell Mason diagnostic (https://www.bellmasongroup.com/approach) and in medical sciences, CIMIT’s GAITs model (https://www.cimit.org/-/gaits)
How should we determine which projects have the most potential for future growth and market impact?

A multi-criteria analysis framework encompassing market opportunity and attractiveness (size, growth rates and competitive intensity), specific market opportunity (problems to solve and proposed solution), technology validation and product/ market fit, project plan and team capability. Such a framework needs to cover commercial/ market demand, technical/ engineering feasibility, product/ solution attractiveness, proposed project plan viability and team capability.

The New Business Model Roadtest provides a useful evaluation framework across Market and Industry Domains at
Macro and Micro level, as well as team capability assessments
(https://web.stanford.edu/group/techventures/resources/Ch1-Title%20Page.pdf).

Similar multi-criteria frameworks are adopted by other grant programs, such as the CRC-P and MTPConnect’s CTC-M
Program

Should it be necessary that the applicant has the legal ownership, or effective ownership, of the know-how, intellectual property or other similar results arising from the project?

The underlying intellectual property encapsulates the nascent project value, often represented in the form of a ‘real option’. In this context, it is imperative that the applicant has legal ownership of intellectual property and related results. The real options framework presents a useful model to understand the optionality created by the promoter owning the intellectual property (https://hbr.org/2004/12/making-real-options-really-work).

However, academic and research institutions have valid concerns regarding the ongoing financial viability and sustainability of early stage companies seeking to commercialise their intellectual property. In these instances staged licensing to assignment gradual transfer of intellectual property against relevant market and technical/ engineering milestones is a suitable risk mitigation approach. This can be further enhanced through use of securitisation and the relevant research institution taking the equivalent of a fixed security charge over the intellectual property assets.

Is ‘need for funding’ (i.e. why applicants are unable to access sufficient funding for the project from other sources) a useful merit criterion for assessing grant applications? If so, how should this be measured?

The ability to access sufficient funding can be attributed to many factors, including the lack of sufficient demand (ie no market exists) and technical feasibility (ie it doesn’t and won’t work).

Further, the inability to raise funds affects both privately held and publicly listed companies. Often, companies list on a stock exchange too early and are unable to raise sufficient funds in a timely manner to bring new concepts to market. Third party validation can signal the market that a project is progressing and subsequently, raise further growth funds.

A counter-posing view point is well capitalised companies, either through external investment or internally generated cash flows receiving grant funding to the detriment of other high quality projects.
An effective approach to balancing need for funding against project viability is the co-investment/ co-funding approaches explored earlier. Further, the invite only approach will force a more intimate interaction with stakeholders to permit a truly merit-based application.

Diversity and inclusion
What are the potential barriers to accessing the Industry Growth Program?

How can we help overcome these barriers to expand the reach of the program?

Should the program consider more specific merit criteria for traditionally underrepresented groups?

Industry partner organisations
What core capabilities and resources would be most useful from industry partner organisations to improve commercialisation and early-stage growth performance for participants of this program?

Useful core capabilities and resources to improve commercialisation and early-stage growth performance to include:
▪ Commercial/ market opportunity and attractiveness assessment, including ability to validate specific customer
problems
▪ Access to technical/ engineering validation and product design/ manufacturing capabilities, such as those
available through NCRIS facilities such as Australian National Fabrication Facilities and Therapeutic Innovation
Australia
▪ Insights into regulatory and reimbursement capabilities for local and global markets (ie Therapeutic Goods
Administration (TGA) and Federal Drugs Administration (FDA), as well as Dept Health)
▪ Market access and procurement support

The partner delivery format of MTPConnect’s CTC-M Program presents a useful template, as it allows for awardees to draw on a range of specialist capabilities via mentoring/ coaching and vouchers to spend on infrastructure related activities.
What services and support should industry partner organisations provide to participants?

Services and support initiatives may encompass a range of delivery formats:
▪ Project team coaching and mentoring, including establishment of commercial, technical/ scientific and related
advisory boards
▪ Specialised training programs and symposiums
▪ Bespoke consulting, networking and project management services
▪ Access to niche manufacturing capabilities and infrastructure via vouchers program

Program governance and grant assessment
Are there other skills and expertise that should be represented on the committee?

Additional skills to be represented on the committee include:
▪ Technical validation
▪ Industry forum/ association representation
▪ Market evaluation and go to market execution capabilities

Program design to meet intended outcomes
What information would be important to seek during the follow-up (post-grant or post-advice) period?

▪ Market opportunity validation at both macro and micro/ specific segment related customer problem levels
▪ Technical/ engineering, including viability, efficacy and safety initiatives
▪ Product development, including design thinking and user centred development insights such as stakeholder
engagement interviews
▪ Project plan
▪ Project team capabilities and identified gaps. Include willingness to establish external governance committees
and advisory boards to guide development
▪ Financial stability and project budget

Over what timeframe should the program follow up with grantees and advise recipients to collect data on their business?

Depending on resources, data collection and reporting at 12, 36 and 60 month intervals post project enables:
▪ Longitudinal assessment of program and project effectiveness
▪ Opportunities to provide further support, such as export market development through AusTrade
▪ Assembly of a data base for future research purposes

How can the reporting burden be kept to the minimum required to best support a future evaluation of the program?
Enable a periodic reporting framework to ensure the funded project is progressing as initially anticipated and that program objectives are being achieved. This approach ensures funds are being used appropriately and that the project can evolve based on changing circumstances.

This may form a combination of:
▪ Monthly update calls for coaching and mentoring purposes
▪ Quarterly summary reporting outlining detailed progress achievements, identification of issues and challenges
and remit of approved expenditures
▪ Annual in-depth reporting, including independent expenditure audits,
▪ Completion report and closing project presentation/ awards ceremony

What other opportunities (including those beyond data) could be explored as part of the post-grant period?

Consider the capital return requirements associated with NSW’s Medical Device Program, which imposes a capital preservation discipline. Such discipline enhances attractiveness to third party investment.

Alignment with other initiatives
How can the program complement other university, industry and government initiatives?

There are significant opportunities for the Australian life sciences ecosystem to translate local research into clinical and commercial outcomes that benefit patients, enable holistic healthcare, ensure cost reductions, and help the
Australian community and economy. Better alignment and coordination with NHMRC’s MREA and MRFF programs can yield benefits associated with clearer line-of-sight toward translating research into impact and ultimately patient welfare through adopting a research, development and commercialisation translation continuum.

The Industry Grants Program would sit in the development and commercialisation stages of this continuum – after the MRFF’s translation programs and as a feeder into National Reconstruction Fund initiatives.

How could the program support better connections from industry to universities and entrepreneurial students?

The program ought to focus on stimulating better engagement between established small and medium-sized businesses, with existing customers and capabilities (manufacturing and/ or service delivery) to bring second and third generation products to market.

Better data is required to evaluate performance of student and researcher founded start-ups, given the specialisation in technical areas is often incompatible with the skills and aptitude required for commercialisation.

Greater engagement can be stimulated through skills transfer and voucher programs, such as the former Innovation
Connections and NSW Technology Transfer schemes.