Innovation Ecosystem Symposium

I spoke this morning at the “Innovation Ecosystem” symposium,  organised by TCD and supported by NAIRTL.

I was asked to talk about some of my experiences of Silicon Valley and Dublin as regards innovation;  how IONA came about,  and my thoughts on a greater engagement between academia in Ireland and the start-up community…  Given the audience,  I also took the opportunity to observe the opportunity and threat to the third level education system in Ireland posed by the internet..

My first ever trip to Silicon Valley was in 1979 as a young TCD postgraduate student. I visited the Computer Science Laboratory at Stanford University, and was impressed by some young postgraduates who had just founded a company called SUN – “Stanford University Network” – Microsystems. The trip however was torturous: a “direct” flight from Dublin to San Francisco in practice turned out to set down in St Johns, Newfoundland, for a re-fuelling stop; and I then had almost an hour-long line to get through immigration on arrival at SFO. Last week, I visited Silicon Valley for the umpteenth time: I’m chair and an investor of Gridstore which is based in Mountain View; and of Sophia, which has a sales office in San Jose. My flight was with Delta, and indirect via Atlanta; and I experienced over an hour-long queue at Dublin’s expensive bright snazzy new Terminal 2, to get through US immigration. Plus ca change.

I co-founded IONA Technologies along with Sean Baker and Annrai O’Toole in 1991. Sean and I were tenured academics at the Department of Computer Science at TCD, while Annrai was a salaried Research Assistant. One of the motivations for forming the company was my own realisation from my first trip to Silicon Valley over a decade earlier, that those who had co-founded SUN had similar backgrounds to ourselves, and that if they could do something like that, then perhaps so could we. However for me, another very major reason was a feeling that my career path within TCD was effectively blocked: as a junior academic in what I perceived as a department having a low priority for its host faculty of engineering,  which in turn appeared to have a low priority within the university as a whole, meant that promotional prospects were likely to be limited until I grew considerably older. I guess I made the right decision: in 1997, IONA had the then fifth largest IPO in the history of Nasdaq; and later IONA became the tenth largest pure play software company in the world.

Fast forward two decades later to today, and I think that the general economy of Silicon Valley is now somewhat similar to that of Ireland. In Silicon Valley, the technology industry is strongly growing in sectors such as green technology, new semiconductor and nanotechnologies, and software including of course social media. But the general Californian economy, especially the public sector, is under pressure: for those outside of the technology sector, wealth remains a struggle. Homes are being re-possessed and in places, property prices have severely collapsed. Public services, including schools, libraries, parks, local policing and emergency services, are suffering diminishing budgets. In Ireland, our technology sector – both indigenous and multinational – is doing reasonably well. However, outside the technology sector, standards of life are generally falling.

For me, there are differences in culture between Silicon Valley and in Ireland. In Silicon Valley, there is a profound fascination with technology and engineering. Many young kids want to understand how things work, and dabble in building their own. From radios, to engines, to model aircraft and rockets, to web sites, and to smart phone applications, there is a deep excitement about building things. It is not really so much about science, because scientists by their nature are detectives, diagnosing and trying to understand what already exists in our world and universe around us. Rather it is about engineering, because engineers by their nature are inventors, creating things which have never previously existed, and trying to do so safely while applying their understanding of what exists in the world and universe around us.

In Ireland, in general there is not (yet, anyway) the same intense interest in technology and engineering. On the other hand, in my view, Ireland has a stronger backdrop in arts and creativity which in turn results in inquisitive kids experimenting with design and aesthetics. In my view, Dublin has a richer arts scene than San Francisco, including visual arts, theatre, literature, and music. And I guess I’m biased,  in that one of my own pet projects is the TCD Science Gallery, which I believe brings technology and art together in inspirational ways, reminiscent of the great natural philosophers of the 18th and 19th centuries.

Interest in the TCD Science Gallery has developed worldwide, and I believe not least because of our internet presence, including our YouTube channel. Recently we hosted our first ever exhibition outside of TCD, when we took “Biorhythm: Music and the Body” to the Chelsea district of New York. It was amusing to subsequently see on the internet, 1TV – a Moscow based broadcaster – cover the event in Russian. The internet, especially social media and online video, is clearly changing the way in which we discover and learn from the world.

I believe one of the very greatest opportunities, but also the greatest threat, to the continuance of Irish third level sector (ie universities and institutes of technology) is the internet, and especially social media and online video. Many of the top universities world-wide are making much of the teaching course content available online, and frequently free. Go to Youtube, or Vimeo or iTunes, and you can find free videos and podcasts of very many academic courses. Stanford, as but one of many examples, has being doing this for over five years, and has both a dedicated website and iTunes presence.  As you can see there,  Stanford has freely available content for business, engineering, fine arts, health&medicine, history, humanities, language, literature, mathematics, science, social science, society, and teaching&education.

If the world’s top universities increasingly are providing easily accessible world class teaching content and quite possibly in due course some form of full degrees, where does that leave the remaining universities in the world ? This is a critical strategic question which should preoccupy the governing boards and presidents of all involved in the Irish third level sector.   Combined with the reliance of the Irish third level sector on greatly weakening public finances, some deep thinking is required on the future value to be offered by Irish universities.

For me, the main value offered by a university should be the nurturing of enquiring and analytic abilities; the skill to diagnose, identify patterns, and apply previous experiences; and the capability to articulate, explain and motivate. There are thus two key skills for academic staff: to teach, yes; but also to mentor, and so to cultivate minds by guidance, counsel and leadership. As more and more of the world’s very best teaching content becomes easily accessible online, the role of mentorship in many universities will surely take lead over that of teacher. Guidance, advice and consultation come to the fore, ahead of enunciation, edification and illustration.

This change in emphasis from teaching to mentorship and consultation creates an intriguing opportunity for many academics, but also I believe for many young companies founded by graduates and students. Many academics are both great researchers and great teachers, but the Irish public finances severely limit opportunities for both their promotion and salary increases. How can academics earn more in the current very difficult environment ?

One obvious way to improve one’s prospects is to start a spin-out, as Sean, Annrai and I did from TCD. However this is clearly riskful and involves a 100% commitment. I resigned my tenure (and all that that implies for job security) from TCD to focus entirely on my start-up company.  I understand that TCD (and perhaps other Irish universities) no longer require an academic founder of a spin-out to resign tenure:  however,  I believe that others involved in a start-up (not least non academic founders,  investors and even customers) will expect nothing less than 100% commitment to the venture.   Clearly, not every academic will want to start a company, and nor be willing to fully commit to being amongst its founders and promoters.

If you as an academic want to improve your financial prospects, an alternative is to direct your research to create commercially valuable intellectual property; to then license this to outside companies and so benefit from a royalty stream. You remain within your university , and your salary is augmented. This route however implies that your research can really lead to commercially valuable intellectual property, rather than general discovery adding to a common body of knowledge. It also almost certainly implies that you become dependent on the Technology Transfer Office concerned,  to find suitable licensee companies. Your intellectual property in effect competes with all the other intellectual property generated within and owned by your university to try and gain the attention of interested external parties. Creating commercially interesting intellectual property may well work for you, but is by no means easy to achieve.

A third well-proven approach to improving your financial prospects is consulting. I understand (from the TCD TTO) that the current policy in TCD is to allow any academic to spend up to 20% of their time engaging with external companies or other parties for consultancy, provided that there is prior written approval from the Head of Department concerned, and – implicitly – that your personal tax affairs are managed appropriately. Consulting is fine, but many young companies and start-ups frequently do not have sufficient capital to pay reasonable consulting fees for any length of time. Enterprise Ireland does have its Innovation Vouchers scheme which helps young companies pay for consultancy, but the sum is limited to €5,000 per company. I also assume that not all of that money ends up as consultancy fees for the academic concerned.

So, I’ld like to suggest an alternative. If you are an academic, and your students recognise you not only as a great teacher and researcher but even more so as a mentor and valued specialist advisor, then you are well positioned to act as a consultant to them in specialist aspects of their start up companies. For your students who start companies, they may well look to you for consultancy, and you may very well be able to considerably assist them. But rather than seeking payment in cash for your consultancy time – cash of which they will inevitably be short – instead negotiate with them for a small and reasonable amount of equity. This can be a specific number of shares; or an option, at your call, to buy a specific number of shares should you wish to do so at some time in the future, for a price agreed now. Receiving equity may also provide a preferential personal tax treatment over cash paid to you as income.

I think encouraging academics to consult and collaborate with the start-up and young company community, and be remunerated for their time by equity, has many attractions for all concerned. For the academic, over time shares (or options) in a portfolio of different companies are accumulated, some of which could in due course turn out to be extremely valuable. Naturally, the more companies with which you engage, whether or not they involve former students of your own, the larger your equity portfolio becomes, and the more chance you will have to receive a reasonably substantial remuneration. For each company concerned, paying a modest number of shares (or share options) maintains cash in the company whilst still enabling a substantial and meaningful consulting engagement to proceed between the founders and their chosen academics. Further, bringing one or more chosen academics onto your share register enables you to be well positioned to re-engage with them in the future for further advice, should you ever need it.

I think we in Ireland have already learnt much from Silicon Valley and no doubt have even more ahead. However, we have our own strengths too, not least a strong culture of art alongside technology. If we strategise carefully, perhaps we can achieve an ever deeper co-operation between academia and industry whilst still preserving the independence of both.

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4 Responses to Innovation Ecosystem Symposium

  1. Tony Owens says:

    Good post Chris especially the proposed resolution of the contradiction faced by many College staff between pressure to teach/research/disclose and the pressure to engage with business, to consult and to invent. Both from the staffer’s perspective and (more importantly) from that of the company engaging with them. One or two template framework agreements might usefully be produced by the TTO’s to cover these sorts of engagements and School heads and staff notified of their existence and of their advantages and pitfalls.
    At the root of this issue of university involvement in high potential companies is the relationship between colleges and business and between employers (including colleges) and their staff. Given the wasteland that is much of Irish indigeneous business and the economic irrelevance of much academic research funding, it is imperative that high calibre innovators and technologically literate people from business and academia find ways to be relevant to each other.
    The best thing the State can do, is to encourage this, not necessarily through innovation vouchers as you say, but perhaps by brokering some form of moderated online exchange for knowledge workers in and out of the colleges where consulting service enquiries, discussions, RFQ’s and offers can be hosted with high signal to noise and a minimum of admin. Also by restraining the pressure some colleges feel to exact rent for ‘external’ use of the superb R&D facilities and meeting and information search resources the State has endowed them with. Finally, by resolving once and for all the bottlenecks on business collaboration attributable to the rather opaque and self-serving policies of certain colleges around ownership of intellectual property in which that college has some involvement.
    Regarding your point about the threat to colleges future ability to charge rent for the awarding of degrees due to proliferating online training materials, I think you have it right. In the evolution of value propositions from commodities through products through services to experiences, colleges need to focus on the high value end i.e. selling experiences both to new UG’s and also to staff and alums. Mentoring and the tutorial system is one part of that, as is consulting. But there is far far more that can be done, (and to some extent is done informally by individual staff members) in colleges to improve user experience and make it transformative. For example:
    1. Many academic staff and most graduate engineers and technologists only acquire solid business, selling and leadership skills after leaving college. (I discount business administration teaching as having little to do with any of these). There would be huge benefit to user experience in systematically involving crusty old consultants and senior businesspeople to mentor, teach and train those interested. Under present and foreseeable employment conditions I suspect there would be very wide interest in this in many colleges. The quid quo pro could be research associate status or a number of other blandishments.
    2. Systematic outreach to alums has been largely ignored by most Irish colleges, apart from begging letters. Given the value of tens of thousands of sleeping and one-time transformative experiences by people who command large resources of money and influence, that seems odd. It is time to professionalise management of alum relations and move from a focus on charitable giving by high nett worth’s to the building of fairer and more engaging relationships.

    And so on.

  2. Chris, I guess you have heard about Bob Noyce’s famous shoebox, which he kept in his wardrobe for years and years, having been an Angel investor for many young startups. I think he referred to it as re-stocking the stream from which he had fished. Noyce didn’t have a huge amount of success outside of Intel, in the Angel investing game. His main project in that line, was a company which wrote software for optical character recognition, and may have been absorbed into Xerox at a stage. I forget the exact details.

    When Noyce was getting on in years, he gave the shoe box to someone to sort out. There wasn’t much of value in it, except for a small quantity of first issue Advanced Micro Devices equity and some other few bits. What they noticed was, how many of the companies had disappeared without either record or trace. In other words, the old shoebox gave a kind of a window into the nature of the economy in Silicon Valley. The sheer turn over of ideas, and companies made around those ideas, again and again, again.

    I suppose we could compare it in Ireland to the number of garage bands that we have created down through the years. Almost everyone I knew in architecture school in Dublin formed some kind of a band, at some stage. The names of them, I won’t repeat here. I think the average one lasted around two gigs, and clapped out. With many musicians still playing for several at a time. We seem to do this without any provocation or incentive in Ireland in areas of culture, as you allude to in your piece above.

    It was interesting during the building boom in Dublin over the past decade, many of my colleagues from the old days, would have started up their own private consultant companies in architecture. One fellow confided in me though, that his architecture company was a way to subsidize his music band project. In other words, even then, even at the height of the biggest economic roll out of building projects in the history of the Irish state, many of my fellow architects still thought of themselves as musicians first, and professional consultants second.

    What can one do about it though, in Ireland? It is a very, very large subject. What you describe about the engineering department and its status with the university – is not all that different from my experience in the architecture department within Dublin Institute of Technology. While we did command the top floor of the college at Bolton Street and all, it became very clear to me, as I attended to my studies there, that architecture lacked it’s champion within the overall system. There simply wasn’t enough influence from the outside in terms of new management techniques and ideas for how to do creative collaboration in this 21st century.

    I listened to some podcasts from the Jim Collins web site recently. He speaks quite a bit about General Electric and is quite keen to point out, that almost ever CEO of GE, from the first one, up to Welsh and up to today – it is always the process that is important. It may be about jet engines, or lightbulbs, or finance depending on what part of the company you look at. But Collins was emphatic on the point about process. It is something I have heard G.K. VanPatter, an ex. architect, and more recently developed management consultant (Humantific in NY) talk about too. The content goes out of date quickly, but it is the process which endures for longer.

    Given the number of companies that Bob Noyce worked through, before Intel and the fact that guys such as Bill Joy is still working with start ups even today, through his VC work – there must be some element to those fellows, which is typically about process, rather than content. If I was to level one criticism towards the recent breed of start ups out of an institution such as Trinity College it would be this. They seem excellently focussed on a particular product or a particular design. I have attended lectures in person, delivered by some of the designers and engineers. But what really impressed me, was not the actual renewable energy technology or device they were working on. But the process through which they brought it through development.

    What I don’t understand, is give our culture of creating so many garage bands and the vast population of creative talent, highly qualified in existence in places such as Dublin at the moment (in particular the variety who use their consultancy to fund their rock band), why some of those Trinity college spin-offs, cannot just set up like a nascent General Electric. We need some one of those CEO’s to become the first Jack Welsh, and to bring some level headed process thinking, to some of the human resources and ideas out there in Dublin, and in Ireland as a whole. BOH.

  3. Chris,

    I would wish to add to the above, an idea or two which I have had floating around in my brain for a number of days, after I wrote the above and also read a few more of your blog entries here. It relates to the subject of cloud computing. During this summer, I held several conversations with David Kanter and his community at Realworldtech, in relation to the idea of the cloud. The thing it always kept coming back to, was the amount of energy consumption at all points in the network, in order to deliver some kind of sustained performance over fibre to a remote user, taking a slice of the big machine as it were.

    I know in Ireland, that we have this very nice idea floating around the place, of wind turbines, wave generators and biomass boilers generating power, that will support a cloud service, which can be exported to whatever user out there in the globe needs access to it. However, it should be considered in Ireland, that if we were to develop a cloud platform, that it may make a lot of sense to also develop financial means to support small start ups. As part of that, we aught to consider the idea of the ‘virtual office’ to be used by the start up company. That is, to cater for group working at that point in the startup’s cycle, where it does not require, nor can it afford, a physical address.

    In conjunction with that, it is perhaps worth considering the notion of a ‘virtual shoe box’. In other words, instead of the Bob Noyce type people today, having a card board box full of slips of paper at the bottom of a wardrobe, it probably is the case, they might have some equivalent, stored somewhere in the cloud. Which could support the virtual office and the startup within it. I suppose what I am referring to, is the rapidity of re-cycling of these small companies, and the staff that exist within them. That’s all I have to say.

  4. Brian Kelly says:

    Chris
    I note and agree with your comments on the need for 100% commitment in a start-up. I’ve come up with a different take on things which I believe addresses this and provides for a much higher quality of university spin-out. (http://bit.ly/vOpKYa)

    Brian

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