Peter Devine discusses his move to research commercialisation
Peter Devine is CEO of Uniseed, Australia’s longest running venture fund which works with researchers, businesses and industry to provide the best pathway to commercialise cutting-edge research. Peter has been with Uniseed since 2003, and additionally in his long career has served as Chair or Non-Executive Director for more than twenty organisations, including many technology and biotechnology startups. In his conversation with Adam, Peter discusses how he started his career as a researcher before moving into the business side of research commercialisation, as well as his belief that while there is a significant amount of funding for early stage software and B2B startups, for those reliant on cutting-edge research, what he refers to as “deep tech”, early stage funding is harder to come by.
Peter on LinkedIn: https://www.linkedin.com/in/peter-devine-4375b94/
Adam Spencer: Hi, I’m Adam Spencer and Welcome To Day One, the podcast that spotlight’s Australian startups, founders, and the organizations that empower Australian entrepreneurship. We go back to the beginning to tell a story of Australia’s most inspiring founders and how they built their companies. You’re listening to a special interview series as part of a documentary W2D1 is producing about the history of the Australian startup ecosystem. On the episode today, we have-
Peter Devine: I’m Peter Devine. I’m the CEO of Uni Seed, which is a venture fund operating out of some of Australia’s leading research organizations designed to not only help move stuff out of those organizations, but then to take them all the way through to exit. And we’ve had some big successes there.
Peter Devine: I’ve been involved initially with the biotechnology industry in Australia, and more recently with more into the startup ecosystem for about 40 years now. And I’ve been in four Australian biotech companies, probably the most successful of those was company called Pan Bio, which was a diagnostics company that was sold to Inveness Diagnostics of multinational, which is now known as Alia. Very well respected and regarded, I guess story and exit for investors there. And initially started in a research career and worked as a R&D manager in some of those companies, but then moved into the business development side, particularly with Pan Bio.
Peter Devine: You know, a lot of the selling was technical selling and training distributors all around Southeast Asia and South America. So that kind of got me out of the lab 20 years ago and into the business side of things. And then also had a stint at Pro Gen, which was a publicly listed company as VP of business development. And from there ended up at Uni Seed, and I’ve been involved with Uni Seed now approaching up to getting close to 20 years. And so that’s kind of my background starting off with research and companies, and then moving into the venture capital side of things.
Adam Spencer: You have a very, very rich history in the research side. I’m looking back through your education and some of your early experiences on your LinkedIn page. And I’m curious to understand what prompted the switch from the research side to the investment running the business side?
Peter Devine: Yeah, it’s an interesting one. I think if anything, it wasn’t a plan … At some point I made a decision to move that way, but being with a company called Pan Bio, we developed a diagnostic test for Dengue fever and it was the world’s first diagnostic test, commercially available diagnostic test for Dengue fever. And in some way we had to go and educate the medical profession and the pathology labs, and that required a fairly technical, I guess, sell and education. And so I, as R&D manager took on that role. And I initially met with the WHO and the FDA and the CDC and the Pan American Health Organization. You know, a lot of the leading organizations that needed to, I guess, accept that diagnostic test or endorse it. And then from there moved on to train distributors in all throughout Southeast Asia and South America where Dengue fever occurs.
Peter Devine: So I took on that technical selling role, and then I guess got a bit of a liking for it and made a conscious decision to move out of the laboratory. And the next job I got after that was with Uniquest, which was the technology transfer arm of the University of Queensland. And from there into a role of VP of business development with a public listed company that was developing a cancer drug. So it was kind of just getting exposure, having a PhD, and at the time when I started to do this type of work, doing an MBA to kind of supplement that and getting exposure to it, and then making a conscious decision that this is really where I want to go.
Adam Spencer: You mentioned you know, your 40 years experience you’ve even been at Uni Seed for coming up on 20 years in a couple of years. That predates what we would, even your time at Uni Seed, even predates what we would understand as today as the Australian startup ecosystem. Most people date the beginning, or as we kind of understand it to be today, the beginning around 2010, 2012.
Peter Devine: That’s interesting.
Adam Spencer: Yeah. Well, why is that interesting to you?
Peter Devine: Well, look, I think you know, I did honors back … Finished honors back in 1982, but went from there after having a job for about a year at the uni, I went to a company called Biotech Australia, which was an interesting, I think at the time it was set up in some ways to be Australia’s Genentech, which is the leading recombinant DNA biotech company in the world at the time. And it was set up by a big mining company, CRA who put up 5 million a year for many years. And that back in those days was a lot of money. And from there I went, this was in the early eighties, and from there, I went to another biotech called Medical Innovations, which was a listed biotech company. So I guess there was a lot of activity.
Peter Devine: There was still a lot of biotechs around at the time. I don’t think there was an active venture capital industry in Australia, but certainly there were companies around being funded either by the public markets or in the case of biotech, Australia by large mining companies, just kind of if you like, diversifying into biotech. And since that time I’ve been involved in biotech companies from the early eighties all the way through to now. So I think the industry goes back a fair way. Fair bit further, perhaps.
Peter Devine: Yeah.
Adam Spencer: And Uni Seed is kind of described as a venture capital fund or firm on its LinkedIn page, is that how it started out as a venture capital?
Peter Devine: No, no, it’s evolved. It’s an interesting story. Initially, Uni Seed was set up in 2000. It was before my time, but it was set up by two universities, Queensland and Melbourne who put up 10 million each and really gave that money to the technology transfer offices to set up Uni Seed. And the idea was it was set up to solve a problem, which was to bridge the gap, this valley of death between an invention at a university and what we now say to a point where something’s investible. So the idea was uni said, we put small amounts of money into these projects and develop them a little bit further. So then they could raise money from the more traditional investment market. I think when I came along, Uni Seed had spent most of that 20 million, and that was only five … Not many years later, but what I think that they’d learned was that they’d lost a lot of money.
Peter Devine: And that model of just seeding things, putting a little bit of money in very important that proof of concept work gets done. So effectively it was a proof of concept fund, but really not a way to make money. So I got involved and we changed the model. We employed a management team to do proper due diligence. We increased the investment limit so we can invest all the way through the whole cycle of the startups life. We beefed up the investment committee to make better decisions and started a new fund in 2016, where we brought in New South Wales uni, and also at the time a Superfund in Western Australia called West Scheme. That fund ran for 10 years and was very successful in that it had some high profile exits in fiber tech, which got sold to Shire a UK pharma company in a deal with over 500 million U.S, Spin Effects, which was a UQ company that got sold to Novartis in a deal worth about a billion dollars Australian and then Hatch Tech, which was a head lice treatment out of the Uni of Melbourne that got sold to Dr. Reddy’s Lab in 2015.
Peter Devine: I’ll preempt something, but I think that period in 2014, 15, when we had those successes really changed the whole landscape and triggered a whole lot of change in Australia which was very positive. So Uni Seed started off as something else, but is evolved into what we call a commercialization fund. And the reason we say that more often than venture fund, we act just like a venture capital fund. But it’s to highlight that part of our mandate is to invest and make money and return the money, but it’s also to help facilitate commercialization of the intellectual property developed by our partner research organizations.
Peter Devine: Yeah.
Adam Spencer: In that answer there, you did mention near the beginning there’s gaps. I just want to drawing on all of your experience today, what do you see as some of the biggest gaps within, I want to say the whole startup ecosystem as you see it, but maybe also more from your perspective as an investment firm?
Peter Devine: If I initially focus on research organizations, I think the problem is there’s a lot of really smart people in these organizations who invent things, but those inventions are just not at a stage where an investor is ready to put money in. And that’s all related to that balancing the risk versus reward. One of those gaps is just getting those inventions to a point where people are ready to put their hard money up. And that often just means some de-risking steps, experiments or whatever. And so that’s probably technically a gap. A lot of those inventions are what I call solutions looking for a problem. They’re really exciting bits of tech, but it’s like, well, what’s the market, who’s the customer?
Peter Devine: And I always like to say, what I’ve learned over the years is to say, it’s got to be something a customer needs, not something they want. It’s got to be a need to have not a nice to have. And so it’s developing up that business plan or really where are we going to focus this technology to make our money? So that’s probably one gap. Some of the others in general, in the startup ecosystem, I think there’s often a skills gap. Finding people who are experienced and this has improved over the years, but people who are experienced and have done it before doesn’t mean they were successful before, but at least they’ve been through the process and can can help drive that company forward.
Peter Devine: I think funding is still a problem. I think at the early stages, funding is difficult, but even getting large licks of money, depending on what it is, there’s a lot of money around for SAS and B2B for IT. But if you’re developing what we like to call deep tech, there isn’t as much money around as perhaps there can be. So finding those big chunks of money to really accelerate development is often a gap.
Adam Spencer: Yeah. When we’re talking about deep tech, is that because the people feel that the risk is higher and also how long it takes to develop?
Peter Devine: I think that’s the time is definitely it. I mean, often with IT, and we’ve had a lot of the success stories, Atlassian and Canva, they’re in that space. You can get massive scale and massive reward fairly quickly. I think with deep tech, it’s a much more challenging problem. First of all, you’re building something often, it’s a big piece of kit, but then you’ve got to go and start selling it and rolling it out. And that sales process is often a lot more difficult and a lot longer than an IT type project. I think that the rewards can be there. I think it’s the time and every bit of deep tech is different. That’s the other thing, it’s not a standard model of how you commercialize these things or how you make money out of them. So you’ve got to figure that out quite often.
Adam Spencer: I am in the next couple of weeks having a chat with a guy named Peter Davidson, he’s one of the founders of Fishburners, and I got a really long email from him with some divisive views in there. He’s got some very strong opinions about where we are today. And I’m just curious to know if you have not necessarily unpopular opinions, but things that, is there something that you just wholeheartedly believe to be true within this space, but no one seems to be on the same page as you?
Peter Devine: Oh boy, that’s a tough one. Because I’m playing down [inaudible] at that early stage, even though we take companies all the way through, as you can imagine, a lot of them fail before they get there. And that’s the whole purpose of our model right? Is to fail early. But I think I do get a little frustrated. I think there’s a little naivety about university or research organization output and there have been some really great successes, but I think the people just think there’s pots of gold in terms of intellectual property lying around that is untapped. And I don’t think people really appreciate the risk and the large number of failures that occur in this space. And I think there’s a lot of people sort of attracted to it a little naively now, perhaps.
Peter Devine: I know the government have recently announced an initiative to look at commercializing university IP, which is great, but I think we need to go into it with a realistic view of the world. And I think also our position in the world, a lot of people would disagree or criticize this point, but I think we’re a pretty small country with 1% of the world market and trying to build a company in Australia to feed that market is really difficult. You’ve got to focus on an international market and it’s possibly a lot easier for companies coming from overseas where in the U.S. for example, their market is right next to them. All the big players are right next to them. And so I think there’s some limitations, doesn’t mean we shouldn’t do it, but I think we have to be realistic about where we sit in the world and a lot of people get critical because these companies end up going overseas and they say we’re exporting IP. But I think there’s a little bit of realism got to come into that. That’s probably sometimes when I get a little frustrated.
Peter Devine: That’s really interesting.
Adam Spencer: Yeah. I suppose, given your role, you deal with founders and entrepreneurs all the time and you see them come and go. This is a kind of a standard question that I’m asking everyone and it’s just interesting to compare answers, but if a brand new founder come to you tomorrow, what would you tell them? What one bit of advice would you give them that would slightly increase their chances of success?
Peter Devine: Depending on what they’re trying to do, but I’m assuming most of them want to raise money. That’s probably the start for them. And the advice I give is to understand the investor and what they’re looking for and then try to tailor their pitch to meet the investor’s needs. I think a lot of them, and I see a lot of inventors and founders out of universities, which is probably even one step further removed, but they’ve got to understand, if they’re looking at venture capital, how venture capital firms work, how these managers are rewarded and remunerated. The reality is they’ve got to show for a venture firm, they’ve got to show a lot of upside. They’ve got to show that ability to return at least 10 times the money that’s invested, because if they are successful, they’ve got to make up for the failures that VC fund has as well as the management fees they have.
Peter Devine: And these VCs only make a lot of money if they’re very successful and they share in the upside. And then again, if it’s a high net worth investor or family office, they might have a different bent on the way they look at investments. So just really it’s old story, understand your customer, right? And so if you’re raising money, well, your investors, your customer at that point in time, too. So if you don’t understand your customer, you’re not going to be successful. So I think that’s the probably advice I’d have. I see a lot of pictures that are just not tailored or that they might focus too much on the technology. These people are in love with the tech because they’ve been working on this piece of technology, but in the end, the technology is possibly the least important thing. The market and the customers that they have and the upside is probably more important.
Adam Spencer: Could we be doing something better as a community? And if so, what area would make the biggest improvement?
Peter Devine: I sort of look at that, you say ecosystem, I kind of like to look at it as an innovation supply chain. If anyone has ever done supply chain theory, one of the central parts of that is that if there’s any bottleneck in the supply chain, the whole chain is broken, the whole chain’s disrupted. And so if you start right at the start, it’s that source of invention and be it the entrepreneur, or be it the inventor. I don’t really know if particularly in research organizations, the culture is there, or the reward systems are there to properly motivate and support these people. They’ve traditionally been supported by the old publish or perish paradigm. But it’s all very well to change the reward system, but we’ve got to give them the people around them.
Peter Devine: So one of the things we kind of suggested in the government review is this idea of having entrepreneurs in residents, who can assist researchers in this journey. And so that’s that initial phase, but then you do need the other people around. It’s finding ways to getting all the systems right. You know, the employee share schemes, getting systems to be able to bring back experience talent, to help companies getting the rewards in there for people to invest money. And I’m not saying there are no systems that do that. We have the early stage investment company scheme now designed to try to encourage investment, but it’s really taking a holistic view, not just saying this is one thing wrong and looking right through that whole supply chain and trying to get the whole chain to be efficient.
Adam Spencer: Yeah. I love that answer that … Comparing it to a supply chain, just to follow up on that, you might have just touched on this briefly, but where are some of those bottlenecks that you see?
Peter Devine: And this relates to things and I didn’t say, but this government policy as well, right? I’m not talking about government necessarily throwing money, but policy, but I think the government should take the same approach. I think some of those, that early stage funding is really hard because it’s very high risk. And why would anyone who’s rational and has money to invest, invest money at a riskier point in time, unless there’s a reward there. So that might relate to tax incentives to do it, which the government has tried to do. And capital gains tax breaks and things like that. But then it’s about having the appropriate skills, but then as we go forward, being able to raise large amounts of money and having the support networks and the schemes to assist that, I think at the moment for me that there’s a bottleneck very early in getting that early funding of stuff, but there’s also when you get later down the track to when you really need large amounts of money, I think a lot of companies look to the ASX because that’s the place they can raise a big chunk of money.
Peter Devine: I don’t think necessary for a lot of them, that’s the right place to be. Because often a lot of them are very early and they end up getting there and they’re sort of getting in limbo, beholden to their share price. And so I think they’re probably the two main bottlenecks I see at an early stage capital and that later expansion, what I call expansion capital when they’ve got a product on the market, they’ve got some customers, they might be in that early million dollar a year revenue, but growing to a 50 million a year revenue company is a huge challenge. And that’s that expansion capital where you need significant input of capital.
Adam Spencer: If I was to open, just open it up now for you to talk about anything, there’s something that you think about on a daily basis, something that you’re really passionate about, just something that you think absolutely needs to make it into this series about the history of the Australian startup ecosystem and the future of the ecosystem, does anything come to mind?
Peter Devine: If I was telling the story of the Australian startup ecosystem, I’d probably see as I said those, and it wasn’t just our exits, but that period of 2014, 2015 are being really pivotal. We go through cycles and we had the global financial crisis in 2008, and after that, the whole, and I tend to look at things a lot about the money, right? The money makes things happen, but the whole financial market’s kind of contracted and super funds moved away from startups and venture capital. The venture industry contracted and I think the industry was in a lot of trouble. And then in 2014 we had the fiber tech deal with Shire, in 2015 Spin Effects deal with Novartis and Dr.Reddy’s acquired Hatch Tech. But on top of that, we also had Star Farmer signing a deal with AstraZeneca worth 650 million, Atlasian did an IPO on NASDAQ, which was the largest float of an Australian company on the U.S. market.
Peter Devine: So we had a lot of really positive things happen. And on the back of that, I just felt the whole ecosystem changed. And so the government then committed significant resources, the medical research future fund in 2014, and that national innovation and science agenda December 2015. Superannuation funds kind of came back to the sector, even universities changed. Historically universities were really focused on research and teaching, which is appropriate, but on the back of that, I think a lot of people started saying, Hey, we can make money out of early stage innovation and universities themselves saw students as a more of a strategic asset and started to put incubators and accelerators into place. And we had programs like incubated Sydney and SACADA innovations and On program [inaudible] but every research organization is now affiliated with an incubator or an accelerator.
Peter Devine: And then on the back of that venture funds started to get formed. The government committed to the bio medical translation fund program, which formed three large managers in the biotech space, but we’ve had over the years now, massive raising from Blackbird and AirTree and these significant funds. So I see that as a pivotal time, something I take pride in as Uni Seed, because I see us having a really important role in that, not the only catalyst for it, but one of the catalysts that I think really changed things. And that has continued to despite COVID, I mean, the venture industry and the startup industry has continued to grow. And a lot of these incubators that have, and accelerators that have evolved have come post that as well. So I think there’s been this real ground swell and growth in this industry. And that might be why originally you said to me, a lot of people see the industry starting, you said 2010, 2012, I think that sort of aligns pretty well with that.
Adam Spencer: I hope you enjoyed that interview. More interviews are on the way, follow the podcast, wherever you’re listening right now, stay tuned for more interviews, with many, many more amazing people from the Australian startup ecosystem. Thanks for listening and see you next time.