by Dennis E. Powell
Start with a few dozen eager college students and a substantial body of cutting-edge intellectual property effectively trapped in an academic environment. Add an imaginative idea to use the students to turn the IP into successful enterprises. The result is Powerhouse Ventures' "Venture Out" program, the winner of NBIA's 2011 Incubator Innovation Award.
Located in Christchurch, New Zealand, Powerhouse sought a method of determining which discoveries made by the 2,000 researchers in two nearby universities and other local research institutions had commercial potential and what the applications might be. Incubator companies could then form market products based on the researchers' discoveries and inventions. At the same time, researchers could be exposed to the incubator and to the idea of turning their academic work into businesses.
The innovative public-private partnership couples incubator staff and services with university research and outstanding students to increase incubator deal flow, expedite commercialization and train the next generation of entrepreneurs. Two separate weeklong boot camps, offered during university breaks, make up the core of the program – a market assessment boot camp and an Innovation Challenge boot camp. Each boot camp typically serves 20 students working in teams of four. Several Webinars and student scholarship projects round out the program. Lincoln University in Canterbury supports the NZ$20,000 program budget.
In the market assessment boot camp, student teams cull through the repository of locally generated IP preselected by Powerhouse and identify innovations suitable for commercial development. In the Innovation Challenge, different student teams develop products from the ideas selected in the market assessment and pitch to a panel of judges selected by Powerhouse. The most successful projects in the Innovation Challenge may win summer student scholarships, allowing the students to further develop the ideas and, in several cases, go on to start businesses as resident clients at the Lincoln Innovation Incubator, one of three incubator facilities run by Powerhouse Ventures (one each at Lincoln University and the University of Canterbury; the third, in central city Christchurch, has been closed since the Feb. 22, 2011, 6.3-magnitude earthquake).
The program aids Powerhouse by increasing deal flow, providing a source of young, energetic talent, and establishing a strong connection between the incubator and university and industry researchers.
"[In the last year] this has led to three start-up companies, attracting a total of NZ$1.1 million investment," says Tim Chapman, venture partner and spokesman at Powerhouse Ventures. "A further NZ$1 million total investment is currently under negotiation for two other companies."
Pre-seed funding of NZ$900,000 from a government fund focused on university research commercialization has also supported projects developed through Venture Out. Since 2008, 122 students – ranging from first- or second-year undergraduates to those in master's or doctorate programs – have participated in 54 team projects. Foreign students are a big part of the program, making up about half of the students involved.
"Students from a wide range of disciplines and facilities at Lincoln University take part, including science, commerce, environmental management, landscape architecture, sports and recreation management, and software development," Chapman says.
During the boot camps and in Webinars conducted throughout the year, the students hear from a range of speakers in the entrepreneurial community, including business leaders, academic researchers and Powerhouse incubator graduates, some of whom serve on the judging panel of the Innovation Challenge.
Between half and three-fourths of the students involved in the market assessment boot camp return for the more rigorous Innovation Challenge.
"Because we only take the strongest opportunities from the market assessment week forward into the innovation boot camp," Chapman says, "we do not look to maintain the connection of student and IP between the two weeks. Though students may participate in both one-week boot camps, the camps are independent, so students will not be on the same teams."
During market assessment, students contact potential customers to determine their needs, desired products and price point. The customers involved are potential users of products derived from the IP, and products are judged based on potential market size and customer satisfaction with current available products. "The students highlight the strongest beachhead market for the IP. We then select the strongest of these opportunities for the Innovation Challenge boot camp," Chapman says. "We ensure that the market assessment information is fed back to researchers whose ideas we do not take forward; this will often influence their research program as they consider how to increase the value offering to the identified customer."
Innovations that graduate to the Innovation Challenge are highly likely to become Powerhouse-incubated companies. In the last two years, seven ventures have resulted from Venture Out. Without the program, Chapman estimates only two would have become incubator clients in that time. These new clients make up about half of the incubator's deal-flow target of six enterprises annually.
"Several of the Venture Out students and students from a similar program we run at University of Canterbury [in Christchurch, New Zealand] have gone on to be recruited and employed by Powerhouse as venture analysts," Chapman says. "Some of these venture analysts have gone on to run investee companies."
In addition to the benefits that have accrued to the students, the successful companies and the incubator, Venture Out can help researchers whose work was not selected refine their ideas. For example, they may adapt research with an eye toward a market identified during the program.
"University researchers have often benefited from the Venture Out students' ability to have a fresh look at where the commercial opportunities lie and how substantial they might become," says Peter John, director of research and commercialization at Lincoln University. "This new knowledge regularly informs the direction of the research itself as well as its commercial application."
The Venture Out model is readily adaptable to other locales, Chapman says. He advises that the boot camp weeks be kept interesting and energetic and the sessions concise and relevant, with additional perspectives added by guest speakers – especially ones who have success stories to tell. "Adding a competitive element between teams throughout the week adds energy and gives teams an extra focus," he says.
While continuing to conduct the Venture Out program, Powerhouse plans to expand it.
"We are currently working on a new initiative with the working name 'Venture-In,'" Chapman says. "Local companies are identified and selected based on the potential for collaborative opportunities with the university. A team of students over the summer break will assess the companies' market position and technology and investigate research and innovation opportunities." This could lead to collaboration between the university and local businesses, resulting in new research and funding, additional student experience and innovations to make the companies stronger, he says.
Christchurch, New Zealand
Mission/goal: To bring together potential technology incubation clients with smart – albeit untrained – students. Starting with a piece of research-based technology that is still inside the university (or research institute), students work on screening then shaping a business opportunity through intensive effort and hands-on guidance, over a short space of time.
Keywords: venture capital, angel investors/network, business financing, youth incubation, capital access
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Fax: (740) 593-1996
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