Euro-Sante :: Euro-Health

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Considerable public funding goes into research. To the dismay, though, of many, European countries in the main are very poor at commercialising this research, and thus return of this public investment is often zero euros.

Reasons lie in at least two places:

  • EU member states (outside of the ‘anglo’ tradition) tend to ‘own’ their own research facilities, and
  • These countries also tend to classify researchers as civil servant.

This means in the main that the intellectual property becomes publicly owned and very hard to get out of government hands and into that of entrepreneurs. The European Commission has noted the very positive impact of the US Bayh-Dole act of some years ago, which removed state ownership of intellectual property and resulted in a step-change improvement in commercialisation in the US from the 1980s on and which continues to contribute to US leadership. European commentators have lamented the inability of European States to compete, but intergovernmental initiatives around competitiveness have failed to address much simpler and more basic remedies from innovative start-ups.

What we have in Europe instead are:

  • weak access to venture capital/private equity across the industry,
  • difficulty knowing about the research in the first place, and
  • perhaps even overly cosseted academics who see no need to commercialise their work — there aren’t the rewards on the one hand, and why go to all that trouble when you’ve got a comfortable academic job.

Having said that, some countries such as Sweden are shining beacons; the Commission’s Biopolis report for instance is full of praise. However, other commentators see some countries never moving out of last place — French biotechnology is cited as one instance. Another is poor quality research itself, but that is a different story.

The valley of death is what is known kindly as the zone between the end of public funding and the beginning of private equity financing. Start-ups in this zone do or die. Today, with severe credit problems, many start-ups face starvation and eventual failure as their burn rate exceeds their credit worthiness. Short-sighted investors are also partly at fault, but these days, who can really blame someone from protecting what wealth they hav left?

The Commission a few years ago invented the concept of ‘pre-commercial procurement’ [PCP] to create a category of state support that bypassed the state-aid rules. However, do we see much discussion of the pending collapse of the innovations market to put PCP into context? Countries with large venture capital industries (UK and Germany, for instance) will grasp the significance here of failing start-ups and future wealth creation, but seem to be focused on saving the banks (throwing good money after bad?). Smaller EU states generally understand the importance of innovation for their economic well-being. People are distracted by events and looking elsewhere.

While we cannot look to government for everything, we can expect them to show leadership in areas where market-failure is pending. This is happening in the research commercialisation field. If Europe wants to emerge from the recession with renewed industrial capabilities, it should focus on start-ups as they are certainly part post-recession Europe than we realise.

But as the valley of death swallows more fledgling companies and with them healthcare cures of the future, who will now ride into this valley of death? Who will go where angels fear to tread? Where are Europe’s entrepreneurial investors?

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  1. Dear healthblogger
    Well spotted. That is certainly something for the European Innovation Plan that is currently drafted by Commission Services, as I understand. And it has important implications for EU regional development and innovation funding. I have just posted some thoughts on Open Innovation. I am preparing a conference on this and would like to exhange views with you on this. We may know each other (I have a hunch) but maybe we don’t. So please contact me.
    Your I-blogger

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