The Future Of

The Innovation Ecosystem

Episode Summary

How do exciting new ideas become real-world products and services? Hear from Silicon Valley venture capitalist Bill Tai and commercialisation expert Rohan McDougall.

Episode Notes

Special note: This episode was recorded in December 2019 during West Tech Fest, which is now sadly over for another year.

Innovative ideas require significant investment in order to move beyond the ideas phase and become financially viable products that can change lives.

For investors, there’s money to be made. For the broader community, there’s the potential for a product that could be a game changer. Think medical advances, renewable energy and blockchain technology.

For university research departments, the research lifecycle doesn’t end at a research paper or proof of concept. Commercialisation is of utmost importance, ensuring that innovative ideas for new products and services become those new products and services, flowing through to the marketplace where they can have an impact.

Today, David is joined by The Director of Commercialisation at Curtin University, Rohan McDougall; and all the way from Silicon Valley, venture capitalist Bill Tai, who is also Adjunct Professor of Innovation at Curtin University, to discuss the future of the innovation ecosystem.

Learn more:

Got any questions, or suggestions for future topics?

Email thefutureof@curtin.edu.au.

Curtin University supports academic freedom of speech. The views expressed in The Future Of podcast may not reflect those of the University.

Music: OKAY by 13ounce Creative Commons — Attribution-ShareAlike 3.0 Unported — CC BY-SA 3.0 Music promoted by Audio Library

You can read the full transcript for the episode here.

Episode Transcription

Intro:   00:01 This is The Future Of, where experts share their vision of the future and how their work is helping shape it for the better.

David: 00:10 I'm David Blayney. An innovative idea can change the world, but to turn an idea into a viable product, you need money. It's therefore crucial for universities to do a good job connecting the innovators with investors who can provide the capital necessary to turn those ideas into reality. Programs like Perth's West Tech Fest, which is happening this week, aim to bring investors and innovators together. I'm joined by two of the founders of West Tech Fest, the director of commercialisation at Curtin University, Rohan McDougall, and all the way from Silicon Valley, venture capitalist Bill Tai, who's also an adjunct professor of innovation at Curtin university. Thank you very much for coming in, Rohan and Bill. So Bill, you've been a venture capitalist for nearly 30 years. In that time there's a handful of companies that you haven't been on the, on the board of. And you've also helped out quite a few Perth entrepreneurs get their ideas off the ground. In the the West Australian you're quoted as saying that Perth could soon become the new Silicon Valley. How so?

Bill Tai: 01:21 You know, I have to say that when I, when I first came to Perth and I got off the plane and hit the water here I had this, of course, wonderful moment standing at the beach and I thought to myself, you know, I'll bet this is what California was like decades ago, except instead of California's gray water, the water here is blue. The sand is not brown, but it's white. And the air temperature is about 10 degrees warmer. And I thought, what a wonderful place to live. And on the way to the the beach, of course, you know, on the on the roads, I thought, wow, you know, the infrastructure here is great. You know, whether it's roads, telecommunications, the rule of law, is fantastic. This is the kind of foundation you need to attract the workers that you need today to build the kinds of companies that we have that are basically moving bits around.

David: 02:17 Bill, Silicon Valley is I guess, synonymous with innovation and tech and cool people wearing tee-shirts in offices and all kinds of cool stuff. Is that perception changing? Are we seeing new Silicon Valleys pop up?

Bill Tai: 02:33 Oh, absolutely. Yes. I think so. Of course the word Silicon Valley has the - or the phrase Silicon Valley - has the word Silicon in it. And I think there was a time when I think it was really only possible to be competitive in the technology of the day - at the time, Silicon - if you were in Silicon Valley, because the products and the process technologies to make the products in that era weren't a kid in a dorm room. They were teams of people that might number in the hundreds that were specially trained in certain areas like semiconductor physics and you had to collect them in one place because the communications technologies that we have today didn't exist then. And so, in that era, Silicon Valley was the dominant and only place. It was like the stock markets of you know, people stock markets that had network effects because the people that understood those technologies that wanted to work on them, they got up and moved to Silicon Valley. So all the talent was in one place. And I think as we moved from the core of the networks and the little things that move the atoms around to the edge of the networks and the user interface, and it's the next generation and the kids that use that stuff, the companies that build the applications on top of the technology stack, those can be anywhere. And they can be customised to local languages where Western folks may not have the language or customs - the behavioral understanding of the markets in China or Indonesia or Japan. So you're seeing now, at the edge, a cultural fragmentation and creation of giants that map different societies and cultures because they understand how people do things. And so I think as technology continues to progress, you're going to see the spreading of that and the ability to build companies that are scalable from anywhere. It is easier to scale certain kinds of companies in Silicon Valley because you literally have, you know, a million people in the Valley that have built Yahoo and Google and Facebook and they hop around from place to place and they hop on the next wave to add add value. But what we're seeing now is that it's, it's clearly more and more possible to build leaders in their categories that start in places like Perth, like Canva did. It's possible.

Rohan McDougall: 05:07 Yeah. I think the term Silicon Valley can be overdone in government settings. There's often agendas about 'we want to create the next Silicon Valley here or there' or ... Silicon Valley has a particular set of characteristics that that enabled its establishment. You see major investment from the department of defense and establishment of a couple of companies, some great universities, that that spurned the tech industry that's around there. I think other regions probably have to look to what benefits they have and what space they have to grow industries and new markets. And I think, as I said earlier, we do have some big companies that are based here and have really the need to invest locally. We should use those as a base and look at some of the technologies that they need, like autonomous operations, like remote operations, like robotics and and artificial intelligence and use that as a base to grow.

David: 06:10 And Bill, would you care to elaborate on what you mean by the, what you mean, by timing?

Bill Tai: 06:17 Yeah, I think of course, markets form at ... there's kind of a sequential building of technology waves on top of prior waves. And of course, you know, there are many different industries, but the one ideal, and it was really founded around moving electrons around - the Silicon wave - and then on top of the creation of silicon chips, products like routers and switches and hubs and communications gear were built out of those little Lego blocks. And then internet networks were built around ... off of those boxes. And then I think we've moved recently into a newer wave of user interfaces on top of that network and the data science that is involved in trying to figure out growth, revenue, engagement of different products. And depending on what you want to build, you need to be kind of at the right place at the right time. You know, building something from prior wave. If you wanted to start a Silicon company right now, it's pretty hard. You know, it's possible to get traction around one particular little product, but to try to build a foundational company, very difficult and very expensive, because there's a lot of competitors in the market. And I think what we've seen in the newer era is when there was a shift from things that moved atoms to things that move bits, it enabled kids in dorm rooms to create the foundations of monsters like a Mark Zuckerberg in his dorm room at Harvard. And so, I think as people think about what they want to do, you want to be paddling on your little surfboard on a wave that's coming, not trying to swim up the back of one that's already done with giants on it.

David: 08:03 And that's why, for example, Facebook has succeeded. Google plus didn't quite ...

Bill Tai: 08:09 I think ... I mean, a headstart makes a ton of difference in technology because things change really fast and the ability, but particularly in a market like that where there are network effects, cos, you know - think about Facebook as a sort of a stock market of people, so to speak - if you think about a securities exchange where you're buying or selling a share of a like, you know, say a big company like IBM, once thousands and thousands or maybe millions of buyers and sellers of a share of IBM coming to one place establish that as the place - the New York stock exchange, for example - it's pretty hard for somebody to make a market in IBM at the ASX to get traction because everybody else is where everyone else is. And so I think once Facebook got going, because marketplaces have network effects, they build a barrier that's a natural barrier that's really hard to break. I mean, Google had that benefit as well in the ad marketplace where they had just so much traffic that the rates that they could offer to sellers and buyers were better than everyone else's.

Rohan McDougall: 09:25 You could also be too early though, because if you think about Myspace, for example, perhaps they were too early - people weren't as inclined to enter or to use devices or they weren't as accessible, to have the content and photos and information that you could share with your peers. So people used it but just not at the same scale.

Bill Tai: 09:49 True. Well, and I think and you know, Google wasn't the first search engine.

David: 09:53 There was AltaVista, there was Yahoo.

Bill Tai: 09:56 Yeah, there were several, I think Google might have been the seventh major search engine. I mean, there are many other attempts to become, you know, prominent, but from other companies. But the big ones were, you know, whether, you mentioned, you know, Alta Vista or Yahoo or Ink2me or Overture, there were, there were a lot of them. You know, Netscape and X-ITE had a partnership too. And Google just had a slightly more efficient way of categorising and indexing the pages. And they weren't the earliest, but they were still relatively early on the wave. And as the wave was still building, it's a, it's just a lot easier to get your share of a market when the market is growing and expanding versus already mature and you're fighting it out with with well-formed companies.

David: 10:45 Can you think of any innovations which have, which are around now or which had been around ... you mentioned Myspace ... which perhaps were a little bit, or are a little bit, ahead of their time? We're not quite ready for them yet?

Bill Tai: 10:59 Well I think, you know the whole cryptocurrency blockchain space is a, it's a really interesting technology that does I think have a lot of applications that are going to be useful. But it's still a little bit on the early side in terms of commercial acceptance attraction.

Rohan McDougall: 11:23 I concur with Bill - that seems to be the area there. A lot of people are playing with 'where's the application for that fundamental technology?'. And I think people are casting the net pretty far and wide. You hear in some of the programs we run at Curtin, people will have a blockchain for everything. And I don't think blockchain is the answer to everything. So it's going to filter down to a couple of core applications where the, the fundamental features of blockchain really align very well with the business model. And I, it will, we'll see some successful companies arise from that.

David: 11:55 Rohan it's your job to take an idea out of the journal article - out of the laboratory - and into the real world. How does commercialisation work in the university sector and why is it so important?

Rohan McDougall: 12:06 Well, most of the things that we see from a commercial perspective are quite early. So they may have had some proof of principle in an academic or research model, but they haven't really gone through the rigorous and robust sort of testing required for release into the wild, or release onto the public, as it might be. So what we do is take what's being developed and then put it in front of industry and investors and try and get advice as what's required to take it to this, to the next stage to get it into the marketplace. And what hurdles might there be, what regulatory steps might need to be taken, what sort of scale up is required? And we look at trying to take it through a stepwise process of undertaking that pilot, trialing, prototyping, proof of concept, regulatory approval, partnership with industry to get it to a point where it's ready to be released into a product or service. It can take quite a long time - it's five to 10 years from where I a research idea may have been generated to getting it into a product or service that can be used by the community.

David: 13:11 And how are our universities going with respect to commercialisation?

Rohan McDougall: 13:15 Well, there's probably a general consensus that we could be better at it - that there should be more industry and university collaboration. Australia doesn't rank well in innovation types of rankings, but they have a whole range of different measures that look at the amount of patents filed, the numbers of collaborations with industry, the co-publications with industry, the co-applicants with industry on patent applications for example. And we don't perform as well as some jurisdictions on some of those measures. But as I said, it is a long-term process. It does require companies with vision to take a significant amount of risk to go early on next generation products and services. And I think one of the things Bill often says is, you've got to have the right timing to be successful in the commercial market. And often a lot of the research that is undertaken at universities is pre the stage that the market's at. And so maybe a little bit early on this on the cycle and it needs other sorts of infrastructure to catch up perhaps, so that some of these new innovations can be implemented.

David: 14:32 We hear a lot about the the innovation economy, usually in annoying and ubiquitous government ad campaigns. But a report from Harvard University recently ranked Australia 93rd in the world for economic complexity, which is essentially has sophisticated our exports are. Rohan, we mainly export rocks. What problems does this pose and how can we improve this?

Rohan McDougall: 14:58 When I moved to Perth, I probably had a similar view that I thought that it was a relatively unsophisticated industry base, the mining industry and oil and gas industry. And my previous career had been biotechnology and I was a little, a little bit despondent about the level of activity in that market in Western Australia. But I think, I've changed my view on that, that the mining industry is a big driver and adopter of technology. If you think about the autonomous operations and remote operations and robotics and artificial intelligence, it's being applied to these companies, which are essentially just big logistics businesses. They move stuff from place to place and make sure that it meets customer requirements. There's a lot of technology that goes into that process. And I think the advantage for somewhere like WA is that we have massive customers who are interested in that sort of technology, then we can use them as a lighthouse customers for new developments in a whole range of different technology areas. And that's a focus of a lot of the sort of activity that we have here, is 'use what you have'. You can't necessarily change some of the fundamentals about a place like Perth and we do have a lot of advantages. So that's, I think, the benefit that we have.

Bill Tai: 16:21 Yeah, I think, you know, I, I agree. I think if you think about the wave that we're on now, a lot of it has to do with AI and data science and things like that and the logistics component of all of these massive companies exporting rocks and other things - those present an amazing opportunity for the modern data companies to apply their skills to optimise and make those things more efficient. And by the way, there are also the, you know, there are a lot of rocks, but there are also some interesting new companies, you know, if you think about what's happened with at Atlassian, or Github or you know, the emergence of a company like Canva. There are quite a few interesting companies that are making an impact at a global level.

David: 17:13 Github's an Australian company?

Bill Tai: 17:14 Started with a couple of Australian guys, yeah. Yeah. Microsoft bought it for 7 billion I think.

Rohan McDougall: 17:21 I think the thing that you've often said, Bill, is that it's changed from the wave that you talked about ... is that the low capital requirement for getting some of these businesses started means that you can start them anywhere. Really it's the idea and the code required to get some of these businesses up and running is, is not onerous and can be done by a couple of individuals and only a few hundred thousand dollars. It's when you start getting to scale that you need to think about where you might co-locate or set up different establishment so you can build the engineering base to really get to the significant market level.

David: 17:58 Do you think there's a risk of companies being perhaps overcapitalised? We've had WeWork, for example. That turned into a bit of a calamity and that was, well, that was adored by investors in the US.

Bill Tai: 18:12 Yeah, I think, you know, we're in a short-term aberrant market, I think, in terms of the capital market ...

David: 18:21 Don't say the b-word.

Bill Tai: 18:21 You know, there's always a bubble somewhere, and the bubbles move around, and I think where we are today - just one person's opinion - you know, I think we have, because of the interest rate environment, and the push for growth, and the effectively the printing of money by so many governments ... as that money tries to find a place to stimulate, you know, either spending or what have you, to drive economic growth, it's pretty hard for that capital, to find a home. So it's working its way into the capital markets, inflating asset prices, and with interest rates where they are, when you look at the choices, if you're trying to put capital at scale out there to earn a return, pretty hard to get a big number on bonds, at, you know, negative rates in some cases. And ...

David: 19:24 Bank accounts going to be getting, well, not even going to keep up with inflation.

Bill Tai: 19:29 Sure. And there are some bank accounts - like some countries have bank accounts - where if you have over a certain amount they apply a negative interest rate to the, they take a little bit of it away every year just for saying thank you for putting all your money here, you know, and so I think, you know, it's hard to put it in cash, it's hard to put it in bonds and stock prices - in terms of a multiple of earnings - are at levels this world hasn't seen before. So with those markets kind of fully priced, a lot of the money is trying to find its way into private equity. And late-stage venture capital - seed capital a little bit too - but you know, it's very hard to put a lot of money to seed projects, so the late stage companies that have momentum are able to attract capital at or up until last month. These companies, a lot of them, have been able to track a lot of capital on the thesis that if they have network effect or can become sort of natural monopolies, that capital is a weapon. And if you can force that thing to grow to become the leader in its category, by definition, if it's a big category, you're going to have a big outcome and I think that's kind of what SoftBank I think was thinking as they put money into the Ubers and into the WeWorks and things like that.

Bill Tai: 20:54 And you know, it's not an irrational idea, but I think it presumes that companies are like machines and they're not really, you know. Companies are basically made of a bunch of people that have you know, I think subjective views on what they want to do with capital and I think a lot of capital injected into a company takes away their discipline and it might lead to cultures that just are not able to earn a profit. And I think that is part of the issue. You know, the losses that come with a lot of capital have, have made investors in the public markets, after the high value private markets, shy away from the companies and the valuations because they look at the trajectory of cash-on-hand versus cash burned every month and they say, oh well this is going to need another financing pretty soon, and it's going to do with my shareholding. So it's making these prices in the public markets less than the private valuations. And with that correction around WeWork and a few others like Uber and some of the big giants that people had high hopes for, I think an adjustment is starting to occur in the late-stage private markets.

Rohan McDougall: 22:15 Yeah. I mean this is really interesting, because I think I remember asking you in 2009 when you came out about the bubble then, because there was companies like Twitter and Facebook that were going to IPO and they would have these massive valuations and no profitability. And it just seemed crazy at the time, but they've steamed on since since then. And it's really about the ability to lend money and bet on these companies, is banking on the future. And if you're positive about the future, you continue to put money in and you continue to be able to borrow if something happens that changes your confidence in the future, the whole thing kind of shifts.

David: 22:53 So Bill, you're quite heavily involved with the blockchain and the cryptocurrency sector. Pretty much every man and his dog has has their own fork of Bitcoin these days. Do you see cryptocurrency replacing or augmenting traditional currency anytime in the future?

Bill Tai: 23:19 You know, I guess it's when you say 'anytime in the future', that that is quite a long horizon. I, you know, I think it's not going to happen in the next few years. I think over a longer term, which - I don't know if that's 10 or 20 years, but I think it's probably in that range - do I think that most currencies will be digital? I think absolutely the case. I think, will they be accounted for or ledgered by things that look like blockchains? I think there's a very high probability that they will be, because it's a lower cost way to handle the the accounting part of keeping track of those things. Do I think there'll be wildly open worldwide currencies that no one manages or no one sort of governs? I don't know. I think that one's going to be a harder one, because I see a lot of companies, ah sorry, countries, at this point in time working on their own digital versions of their own Fiat currencies and a little bit of -a lot - of institutional resistance of course, to things that threaten governments' ability to control the flow of monetary units in their economy. So, I think as long as the governments are not really comfortable with it, there's going to be a significant part of the population that isn't going to want to go there. So I don't see it happening like very soon, but I think the long-term, the application of the technology, absolutely. The existence of worldwide universal currency, they will also always exist, but it will be a question of how broadly they're used.

David: 25:09 Rohan, West Tech Fest has is going to see teams of entrepreneurs pitching their ideas, has anything caught your eye so far?

Rohan McDougall: 25:18 Well, this year we've changed the format slightly and it will be a pitching session sponsored by the US state department and the local Perth consulate on Rotto tomorrow. And they're companies that are aligned with the UN sustainable development goals. This is part of the work that Bill's been doing on shifting global competition and needs to be involved in extreme tech challenge towards the UN sustainable development goals. And there's a couple of companies in that that I think are interesting. So there's one technology out of Curtin, which is a future thermal battery technology. So one of the limitations on use of renewables on the grid large-scale is being able to store energy when it's being produced during the day and used in peak periods. And some of the inhibitors to large-scale battery use are the cost of doing it at scale. And this team at Curtin's come up with a low cost material that can be used on a large scale to manage renewable energy generation at grid level. There's another one, a smaller business, that I'm looking at called Climate Clever, which is looking at educating people about climate management and schools in particular about ... so it enables schools to manage their own power and electricity and energy use, but at the same time teach kids about more effective energy use. That's an interesting one too. That's from a Curtin adjunct Vanessa Rauland.

David: 26:52 And Bill, have you noticed anything?

Bill Tai: 26:55 In terms of of the sustainability ...

Rohan McDougall: 26:57  I don't think Bill's seen them yet!

Bill Tai: 26:58 Yeah, I haven't, I've not seen them yet, but I, you know, that the general discussion about a shift towards companies that have an element of sustainability - that, I think, is a very important thing for this world today. Because I think you're, you know, of course in my opinion, you have the newer companies represent the future of where this world is going in terms of both productive economy and the way things, the customs by which, people handle the use of natural resources and the output and the byproduct. And I, you know, you think back to the glamour and glory of the creation of plastic. And, you know, I don't know how many of you in the listening audience have seen the movie The Graduate with Dustin Hoffman. It's a quite a famous film, I think from the 50s, where the Dustin Hoffman character is a young graduate from university and he's trying to figure out what to do in life. And he's he kind of hanging around with his family, you know and there's some other colour to that, which, you know, people that watch The Graduate, they'll understand - and the man of the house puts his arm around young Dustin Hoffman and says, you know, one word - meaning the future - you know one word: "plastics". You know, and if you think about, you know, you remember all that, like the cartoons and things from the fifties, sixties, that you might've seen, like little clips of, plastic was seen as this thing that was just amazing and totally positively changing the world. And you know, even Disney had, I think it was Disney or Epcot Center, had little displays of, you know, whole houses made - everything of plastic - you know, and because it was this new science fiction-like material that was cheap and durable, it would last forever. And you know, it was kind of like the future of the world was going to be built with these things. Man could conquer molecules and make things that were wonderful. And 40, 50 years later, that shit's around in the ocean. You know, a sperm whale just washed up on the beach somewhere. I saw a headline that they cut it open there was a hundred - was it a hundred? - kilograms of plastic in it. You know? And so nature has not evolved. Nature takes a long time to evolve. You know, the Darwin theories, they seem to work, but they don't happen in, you know, a couple of years unless they're insects that are breeding with short cycles.

Bill Tai: 29:40 But I think the the challenge that this the world's environment has to ingest the things that man has made. It's, it's a big problem. And so, and finally, I think the last three years, the awareness of issues like this, not just plastics, but you know, carbon - people have been concerned with carbon for the last 20 or 30 years - but I think all of these things are coming to the forefront now. And I think technology is one of those things that can be used to solve problems at scale. And to the extent that entrepreneurs today can do things and apply their energy and talents to fix the issues that we have created for ourselves for the last hundred years. It's time we have to do that.

David: 30:26 Well, I think we'll leave it there. Thank you very much, Bill and Rohan, for coming in and sharing your knowledge on this topic.

Rohan McDougall: 30:32 Thanks for having us.

David: 30:33 You've been listening to The Future Of - a podcast powered by Curtin University. If you have any questions about anything we've covered in this episode, please get in touch by following the links in the shownotes. Bye for now.