Australia needs to value intellectual capital and support the deep tech sector
Authors: Dr Michelle Perugini, Dr Don Perugini, and Dr Jonathan Hall
Our South Australian AI medical imaging company Presagen has just raised its first “Seed” investment round of $4.5M. This is a sizable first funding round by Australian standards, but necessary to help us take our first product Life Whisperer to the world and cement our position in the global market as leaders in AI-driven image-based medical diagnostics.
The potential benefits to both Presagen and South Australia can be significant. The SA Government sees the economic and social benefits of investing in higher risk deep technology with an understanding that a mature industry can only be built with significant investment, and the potential upside is enormous.
Of the Presagen funding round, $3 million of the $4.5 million raised was from Jungle Capital Group, an Australian investment group, and 3Lines Venture Capital, a Denver, US based investment firm.
The remaining $1.5 million was matched by the South Australian Government through the Research, Commercialisation and Start-up Fund (RCSF). This is a significant amount of matched investment funding from the Government that provided the private investors a great deal of confidence in the opportunity by ensuring it was sufficiently funded to become a global success. Similarly, it provides confidence to the Government that private investors are willing to back the opportunity.
It is our view that the South Australian model for “investment matching” should be replicated at a national level in order to develop out a strong commercial framework to provide the means for Australian deep tech start-ups to grow and scale globally on Australian soil.
Australia has world-leading Universities and research institutes like CSIRO and Defence Science and Technology Group (DSTG). Much of the research that is generated from these organisations is typically known as deep tech which refers to substantial scientific advances and high-tech engineering innovation. Deep tech has the potential to impact the world and make a positive difference to people’s lives if it is effectively commercialised. A great example of this is the Australian success story Cochlear, whose hearing implants are used by patients all over the world.
The difference between deep tech start-ups and other businesses is that they often require significant investment and longer timelines to fund research and commercialisation of the innovation. Only then can they generate revenue and become financially sustainable. Deep tech start-ups have the best chance of creating new sustainable industry in Australia, and they can provide significant economic returns and global impact.
Importantly deep tech companies comprise valuable intellectual capital, a combination of highly-skilled talent and intellectual property, which the world is willing to pay for. Intellectual capital generates ongoing long-term wealth, and economic and social benefit beyond just immediate short-term job opportunities.
Investment into deep tech companies with a view to building a mature deep tech sector serves to protect and maintain Australia’s significant intellectual capital. All too often we see our best and brightest talent seeking opportunity abroad because a lack of funding to support their ambitions. Not only do we lose the talent but also the valuable intellectual property. Once gone, it is difficult to recruit back or regenerate this talent.
Australia’s intellectual capital has the potential to create a thriving deep tech sector which can provide for long term skilled employment and economic benefit for Australia, and therefore should be considered a commodity worth protecting. This also opens new opportunities in furthering our education and research sectors relating to these highly skilled jobs and industries which are local — and hence improves our world standing in advanced technologies, research and education.
Comparable to other developed markets, Australia has limited funding and a conservative nature towards investing in early stage high risk ventures including deep tech start-ups. Ultimately, this means much of Australia’s advanced and world leading technology will never make it out of the Universities, or will be commercialized outside of Australia, by other countries that are willing and able to fund them.
Presagen and our team faced this challenge last year when we sought to raise funding in Australia. We had significant interest from US and Chinese investors and faced the prospect of having to move our company to the US or China in order to raise capital. Without local capital to fund Presagen, we would have taken this step to ensure the success of our company.
The South Australian Government RCSF provided substantive funding to allow Presagen to stay in South Australia. This funding encouraged global investment into Australia and has allowed us to keep the intellectual capital and highly-skilled jobs right here in South Australia.
The success of companies like ours will serve to fund the next generation of deep tech start-ups and will ultimately help develop a mature deep tech sector that will drive long-term economic and social gain. The question was not about how much the Government were willing to offer as funding, but instead, how much would we need to make this a success. This is the cultural change that is needed at a national level to ensure that funding is available to the extent required to get start-ups to a significant value inflection point, either for future fund raising or to scale globally.
Government has a core role to play in developing out the deep tech sector through provision of funding support that can match and stimulate private investment into high risk ventures, in order to support industry development to the extent it becomes self-sustaining. This will ensure that intellectual capital is nurtured in Australia, and that there is real opportunity for skilled professionals to find work, and for entrepreneurs to build the next generation of globally successful companies.
