Thank you, Madam Chair, vice-chairs and committee members, for the invitation to speak to you on commercializing innovation emerging from publicly funded research at Canadian universities.
To briefly introduce myself, I'm a physicist and the entrepreneur in residence at the University of Ottawa. I was the CEO of Northern Nanopore Instruments, a nanotechnology start-up built from my Ph.D. research that we sold in the fall of 2023. I'm now the author of the CanInnovate blog on innovation policy and, alongside TJ Misra and David Durand, the co-author of the simple agreement for innovation licensing framework, or SAIL, and the co-founder of the SAIL initiative, through which we aim to streamline how new technologies get from lab to market.
The value of research follows a power law distribution, in that a small minority of new technologies eventually create most of the economic value, but it's impossible to reliably predict which ones will succeed or be valuable when the research is transferred to the private sector. Because of this impossibility, it's more important to make sure we don't miss the valuable minority than it is to make sure that every attempt is successful. It follows, then, that the most effective strategy for commercializing research successfully is to invest relatively small amounts of capital early in almost everything. Mostly, Canada doesn't do this.
Attempts to commercialize research have failure rates above 90%, but the successes create more than enough value to offset the cost of those failures. Countries that invest well have three things in common: The public sector funds innovative start-ups before they have revenues, usually favours new start-ups over existing companies as vehicles of innovation arising from research and is willing to let previously funded projects fail when necessary. This approach to funding serves to de-risk innovative companies to the point that they can attract private sector investment and ensures that valuable technologies don't slip through the cracks.
Ironically, systemic risk tolerance in the Canadian public sector mostly prevents it from funding pre-revenue companies in this way. Because of the long timelines involved, Canadian VCs can't address this gap. We have to reframe how we evaluate and manage risk. We have to understand that most investments will fail and that this is acceptable as long as the combined return over time is positive. While it may be true that our public sector has become too risk-averse, I argue that investing in almost everything is in fact less risky, or is at least more likely to produce a positive outcome.
Another element common to effective commercialization elsewhere is harmonized innovation policy. The United States has the Bayh-Dole Act, for example, which guides how universities transfer technologies to the private sector. In Canada, we lack even an attempt at national coordination. Senator Colin Deacon's office recently found 134 different innovation funding programs at the federal level alone, and the tri-council agencies provide no top-down guidance on how universities should manage research IP. As a result, every institution has a different IP policy, licensing negotiations with most research institutions are slow, no two licences are alike and there's no standard for data collection on licensing or on outcomes.
To address these challenges, my colleagues and I developed SAIL. SAIL is a licence framework designed to support harmonized and streamlined Canadian tech transfer from research institutions to start-ups. After consulting with a national community of innovation stakeholders, we based the design of SAIL on six axioms of tech transfer specific to Canada's unique challenges. It asks universities to play the role of first investor in research commercialization and rewards them with a predefined amount of convertible debt in exchange. With legal advice, the framework can easily be amended to support a variety of start-ups more efficiently and effectively than by building a new licence each time.
We're also working to adapt a risk-tolerant funding mechanism that has been highly successful in the U.K., where it created an estimated seven dollars of economic value for every dollar of input. The model uses venture philanthropy delivered through a public-private partnership, combining public funds with private donations and university contributions to create a charitable investment fund that reinvests all returns to ensure that it's self-sustaining. Variations on this model have been implemented at a handful of Canadian research institutions, most notably the UCeed fund in Calgary, and we propose to implement it at the national level.
Policies to promote and grow private sector investment and research can only be effective if we increase the pool of investable, innovative companies. To do that, we have to first build a better bridge from lab to market. I recommend, first, that Canada embrace strategic risk-taking by deploying public funding toward pre-revenue start-ups, thus commercializing Canadian research by trialling venture philanthropy delivered as a public-private partnership with a national scope. Second, I recommend that Canada nationally harmonize a Canada-first approach to management of the IP arising from publicly funded research.
Thank you, distinguished members of the committee, for your time. I look forward to your questions.