Ireland risks sending a dangerous message to its innovators

10 Apr 2017

The Old Library at Trinity College Dublin. Image: EQRoy/Shutterstock

In the 21st century, it will be the innovators that generate the jobs and wealth. They need to be encouraged, writes John Kennedy.

On a sun-showery spring day in 1999, I had a conversation with an academic at UCD Business School in Blackrock. It started pleasantly enough, but set alarm bells off in my mind. He said that “tech transfer” – the conversion of academic research into industry and, ultimately, businesses that create jobs – at that time in Ireland was virtually non-existent and that most research projects just gathered dust on professors’ shelves.

This contrasted with the US where tech giants such as Cisco had emerged as campus companies, only to become industry giants laying the plumbing of the internet. Around this time, people were starting to use Google for the first time. The company was founded on the campus at Stanford University in California by two PhD students, Sergey Brin and Larry Page, just a year previously in 1998.

‘The world is changing and higher education is facing a disruptive revolution, and we need to make sure that we are ready by pushing the boundaries and creating an integrated ecosystem, where civil society, industry and academia collectively participate in the process of economic development’

It was a surprise revelation by the professor because at that very time, Iona Technologies – a company founded on the campus of Trinity College Dublin that bootstrapped itself most of the way –was the darling of Nasdaq, and inspired other tech founders to pursue the IPO dream.

Remember, this was four years before Science Foundation Ireland (SFI) was created and given a war chest of around €1bn to correct the anomaly, whereby the Irish academic landscape was a cosy, sleepy career path for lecturers, and PhDs pushing boundaries were in the minority.

In 2003, SFI came onto the scene and laid the foundations for a turnaround that can only described as miraculous, if such a word can be used in the scientific community. In the intervening years, thousands of PhDs have been created in Ireland. Proof of the pudding, if there were such metrics, can be seen in the continuous cycle of breakthroughs from various research centres around Ireland.

Another way of examining how battle-fit Irish PhDs have become is the €80bn Horizon 2020 programme from the EU. Irish research organisations had been aiming to secure a total of €1.2bn over the six-year period of the programme and so far, 588 Irish research projects have secured €251m in funding.

According to Enterprise Ireland, the higher education system accounted for €157m of the total funding, while companies based in Ireland made up a further €72m.

The key thing is that in just 14 years, Irish researchers have been conditioned to be among the best in Europe, vying with the world leaders in the industry.

From every corner of Ireland, good science should be celebrated

For students to become academics and achieve a PhD qualification, it requires extraordinary commitment and personal sacrifice. It is a long road fuelled by the passion of discovery and the love of science and technology. It is one that ultimately leads to rewards, either in the form of peer recognition, or the successful sale or spin-out of a company.

For the local economy and the academic institution itself, the birth of companies that scale and are either acquired or go public leads to recognition and the creation of local jobs.

In the case of Stanford University, a 2012 study noted that companies founded by the university’s alumni generate $3trn in economic impact every year, credited with creating 5.4m jobs.

It might seem like news to some, but in the south-eastern corner of Ireland, Waterford Institute of Technology (WIT) and its TSSG research campus were working to emulate Stanford and other celebrated innovation hubs such as MIT in their own way.

And it has been succeeding. The campus has spawned numerous spin-out companies such as Immersive VR Education, which just raised €1m in funding.

In the wider hinterland, businesses formed by graduates such as NearForm are creating 100 jobs in Tramore.

The jewel in the crown was the sale of FeedHenry, a company originally created by professors at WIT, to open source software giant Red Hat for €63.5m in cash in 2014. FeedHenry, which makes software used by mobile networks, recently announced a €12.7m investment in Waterford that will result in 60 new jobs. This is in addition to the 100 people already employed at FeedHenry’s Waterford and Dublin offices.

I have remarked in the past how the WIT/TSSG model has become a kind of template for academic and start-up success, and ought to be emulated in other regions in Ireland to boost reputation and create jobs.

According to WIT, the research and innovation model has contributed €600m to the local economy over the last 10 years. WIT has signed 34 intellectual property (IP) licenses; works with more than 200 multinationals, start-ups and SMEs every year; has spun out 10 companies so far; and supports 600 jobs in the local region.

Diamonds in the coal

Traditionally, academia and business are like oil and water. But when someone builds the right engine, it purrs. And when it purrs, jobs are created.

Any Stanford university professor worth his or her salt would recognise the model at WIT and TSSG as one not too dissimilar from their own way of working.

The key here is understanding the knowledge economies of the 21st century and how IP translates into business success.

So, it was a surprise recently to see the fracas that emerged following the sale of FeedHenry, which resulted in the president of WIT, Prof Willie Donnelly, being hauled before the Dáil’s Committee of Public Accounts.

Local Sinn Féin politician David Cullinane, TD, was only doing his job when he asked why, out of the almost €64m sale price of FeedHenry, just €1.3m was returned to WIT.

It transpired that at the time of the acquisition, WIT held just a 3.1pc share of the company. Donnelly, one of the company’s founders who created the IP through the course of his academic research, held a 2pc share of the company.

By 2014, FeedHenry had five investors: ACT Venture Capital, Enterprise Ireland, Kernel Capital, VMware and Intel. Just a year previously, in May 2013, Intel led a $9m Series A round investment in FeedHenry.

The key here is to understand how start-ups businesses are built and how, ultimately, shareholding gets diluted as more investors are brought on board.

It would surprise people how little founders of companies actually get, despite the high-profile, high-octane amounts that they have sold for in Ireland in recent months.

Cullinane also questioned if academics or the staff of colleges should be commercially involved in the founding of companies at all and would it not be a conflict of interest?

Such a question would be dismissed in Silicon Valley as naïve, but it is clear that Cullinane is acting in the public interest and Ireland, being a no-show or late to such parties as the industrial revolution, is playing catch-up. He is right to ask such questions.

If any good has come of this, it is the airing of a necessary debate and an important education in how business of the future will be conducted.

We need to encourage our scientists to reach for the stars, not hide in labs

However, it also risks sending the wrong signals to PhD students and other would-be innovators who actually want to build world-beating companies.

Are they going to be penalised for starting businesses? Perish the thought that they should be allowed to gain from their creations.

If WIT is guilty of anything, it is catching up too fast for politicians to grasp, putting Ireland on the international stage, and boosting the reputation and prowess of our researchers and the south-eastern region as a place to build tech companies.

At the Committee on Public Accounts, Dr Graham Love, CEO of the Higher Education Authority, pointed out that there are national protocols on commercialisation of research in third-level colleges. He said that it is not unusual for a college’s shareholding in a spin-out to be diluted over time as external money is invested. A shareholding, he said, could typically fall from 10pc or 15pc down to 1pc or 2pc, indicating that WIT was actually above the average.

In an interview with The Irish Times two weeks ago, Donnelly spoke candidly of the situation, stating that he fully declared his interest in FeedHenry and was not involved in decisions over the commercialisation of the research.

“In research-driven, third-level institutions, conflicts of interest do occur. The important thing is that an institute has a framework in place to manage those conflicts.”

In a democracy, it is only fitting that when an issue regarding the public interest emerges, it is fully investigated and debated. In an Ireland made weary by corruption, Cullinane was right to probe about any potential wrongdoing or to see if taxpayers were getting a return on their investment.

If public representatives had been similarly motivated to tackle a raft of glaring issues in banking and health, then Ireland might be a very different place today.

But it is important to remember that Donnelly and his colleagues were doing their jobs too. They are academics and therefore, they are science whizzes. WIT has the 388th-fastest supercomputer on the planet and its name is Fionn, for God’s sake. Their success should be emulated and used to inspire others.

Since the acquisition, FeedHenry has announced 60 new jobs. If you use the logic that each tech job is responsible for creating an additional two jobs locally, then the impact is manifold. Politicians in the region ought to be appreciative of the achievement.

But Cullinane has hit on on an interesting issue. In the UK, awkward questions are being asked about what happens to IP that emerges from academia and how it can be turned into commercial success or not. The Financial Times recently reported examples of squandered potential including Humira, the rheumatoid arthritis drug, which had its origins in research by the UK Medical Research Council but was commercialised in the US. It is now the world’s best-selling medicine with annual sales of $13bn for AbbVie.

If the FeedHenry case does anything, it will educate the public and clarify rules about how research can be commercialised, and properly exploited, and how those who create and invent can expect to be rewarded.

We should also consider the reputational win, not only for the colleges but the wider region, too. Ireland’s south-east is gaining a reputation for software excellence due to the emergence of companies such as FeedHenry and NearForm. Immersive VR Education has the potential to become a globally recognised game brand thanks to its Titanic and Apollo 11 VR creations. The acquisition of FeedHenry resulted in the arrival of a multinational to Waterford.

And that is something that matters in a region that often complains about being overlooked when it comes to foreign direct investment.

If the matter spirals, it is a dangerous line that Ireland will be walking. We want those who look at the stars to dream, and go further to lay the paths.

The last thing we want to do is diminish what has been achieved in just 14 years, or discourage people from turning IP created in Irish colleges or businesses into global brand names.

Remember: it is up to politicians, ministers and civil servants to create policy. It is then up to the innovators and entrepreneurs to interpret that policy and turn it into something positive.

The last words are from a recent statement by Donnelly: “WIT has created an ecosystem of research and innovation, which is all about collaboration, knowledge transfer, sustainability and impact. We do this by involving industry, funders and policymakers in the process, and this has been demonstrably very successful for the region.

“However, the world is changing and higher education is facing a disruptive revolution, and we need to make sure that we are ready by pushing the boundaries and creating an integrated ecosystem, where civil society, industry and academia collectively participate in the process of economic development.

“This requires new, agile and responsive academic structures based on entrepreneurship, creativity and global connectivity.”

The Old Library at Trinity College Dublin. Image: EQRoy/Shutterstock

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years