Top 25: international insights

April 12, 2016

Leaders of the Top 25 R&D spin-off companies talk about the lessons they have taken from overseas markets.

Top 25: international insights

Some argue that Australian start-ups are more vulnerable to the “valley of death” than businesses in other countries, with only 3.2% becoming high-growth companies. 

Here, leaders of the Top 25 Science Meets Business R&D spin-off companies answer the question: What lessons have you taken from R&D spin-offs in overseas markets as to how to navigate the difficult journey from prototype to commercial product? 


“A key point here is that the journey from prototype to commercial product is much more difficult if you’re trying to penetrate overseas markets at the same time.

When Catapult became a commercial product in 2006, the company’s focus was on the Australian market – specifically Australian football.

Within a couple years the technology reached saturation point in the Australian Football League (AFL), the product was stable and developed based on local feedback, and then we started to attempt a new market in the United Kingdom through a local distributor.”


– Shaun Holthouse, Chief Executive Officer


“Firstly, I don’t think it makes sense to classify all start-ups as being the same, in my view it depends on the attitudes of the early markets a particular start-up is targeting.  

CRCMining carries out research primarily into new technologies and mining equipment, which would be used within the mining sector. Australia has traditionally been an early adopter of new mining technologies, and the mining industry generally recognises the importance of innovation and is supportive of the development of new technologies. This assists tremendously in mining technology companies successfully negotiating the valley of death. 

Mining is, however, a relatively small, niche market for new technologies, so mining technology start-up companies do need to have a plan to become global providers very rapidly.

Secondly, I believe there are a number of factors that need to be solved adequately for a spin-off to have a chance of being successful:

  1. Is there a viable, readily accessible market that is sufficiently large to support a spin-off company?
  2. Is there innovation capability within the spin-off – in particular, do the inventors want to transfer to the spin-off?
  3. Is there competent management and sales capability to direct the business, and generate revenue for the company? (Typically different from the researchers.)
  4. Is there appropriate funding available to get the company through to a viable revenue stream?

If all of the above can be answered appropriately, then a spin-off has a good chance of getting through to the commercial product phase and becoming an operating business.” 

– Kevin Greenwood, Chief Operating Officer


“Developing new pharmaceutical products is a very long process that requires access to a lot of capital.

I observe in the USA, and to a lesser extent in Europe and Asia, that R&D spin-offs tend to have access to greater amounts of venture capital (VC), allowing them to get to clinical proof of concept before undertaking an initial public offering (IPO). The IPO then tends to be substantial and provides the necessary cash to get all the way to the market.

In Australia it is difficult to get enough VC funding to reach proof of concept, so companies are often forced to IPO prematurely and for much smaller amounts.

At Pharmaxis, we are actively looking for opportunities in Australia that haven’t yet reached proof of concept, where we can provide alternatives to an early IPO by collaborating and incubating the technology to a significant value step.

venture capital

– Gary J Phillips, Chief Executive Officer


I think it is a balance and companies need to remain flexible in their strategy so they can adapt to market conditions.

Having some revenue does help underpin the business. Getting an initial program to commercial returns helps to get over the ‘Valley of Death’.  

You should avoid laying single bets, as one-program companies are binary and this can make raising capital difficult.

venture capital

– Dr Julian Chick, Chief Operating Officer


“It is very difficult to take too many lessons from overseas since, for example, investors in the USA would invest enough money to allow you to be a high-growth company; even getting from concept to clinic. Many European countries like Denmark also invest heavily in start-ups.

None of this applies to Australia since we neither have a deep and knowledgeable biotechnology investment community, nor successive governments which advocate evolution from start-up to high-growth company.

While there were some government investment programs in years past, they have only applied to early-stage companies, and biotechnology takes a long time.”


– Dr Jennifer Macdiarmid, pictured above with Dr. Himanshu Brahmbhatt, joint Chief Executive Officers and Directors 


“Making sure the product that is developed suits the market that is available. Ensuring the target market is the best for new technology and has a compelling business case to current incumbents.”

Stuart Smith_intext

– Stuart Smith, Chief Executive Officer


“You need to develop a strong strategy. This involves mitigating inevitable risks through solid and rigorous planning. Developing a well-defined target product profile is key as this will guide your planning and risk mitigation strategies.”

Michael Kotsanis_intext

– Michael Kotsanis, Chief Executive Officer


“In overseas markets such as the USA, the scale of Series A capital is about tenfold higher than it is in Australia and the venture capital firms making these Series A investments typically have very large funds at their disposal. Hence, these firms have the capital needed to make subsequent Series B and C investments for progressing from prototype to commercial product.”

– Professor Maree Smith, Executive Director of the Centre for Integrated Preclinical Drug Development and Head of the Pain Research Group at The University of Queensland


“A key point for any new venture is to prove there is a market for the product. So we focused on getting product into customers hands as soon as possible.”

– Gary Pennefather, Chief Executive Officer

Click here to see the full list of Top 25 Science Meets Business R&D spin-off companies.

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