This is a transcript of a podcast episode featuring Peter Devine. Listen here.
Thierry: Peter, welcome.
Peter: Thank you. Yeah, thanks, Thierry.
Thierry: I look forward to this conversation very much. But let’s start with a celebration. What are some of the successes in the last 20-plus years that you’re particularly proud of?
Peter: First of all, you know, just the longevity of the fund, but not only that, the growth of the fund. It started off late 2000 as just a small proof-of-concept fund, an A$20 million fund for two universities. And now we’ve grown to have superannuation fund support and 10 research partners, and we’re managing about A$200 million at the moment.
And part of that getting to there has been another thing we’re quite proud of, you know, having a number of large exits. I can go into detail later, but particularly around 2014-15, Fibrotech, Spinifex and Hatchtech, which were fairly high profile exits, which had a big influence on the whole Australian innovation ecosystem. I take a lot of pride in the impact that Uniseed’s had on Australia. And then as part of that too, the number of people that the fund has influenced.
Thierry: Yeah.
Peter: Not only, you know, tech transfer staff by giving them exposure to deals and pictures and upskilling the staff. And, you know, we’ve had over 70 members of tech transfer offices as members of our investment committee, as well as numerous observers. But also, you know, we have an intern programme, which is focused on taking young female graduates, most post their PhD, who have probably decided they don’t want a research career and then giving them that opportunity to get into STEM. And, you know, it’s very parental, but, you know, seeing them end up now in amazing careers, doing incredible things, you take a lot of pride in that.
Thierry: Yeah. Yeah, I’m sure you do. Yeah, I don’t think I had a question about how you’re working with interns. So I’m glad you brought that up because I think you were possibly also one of the first to do it in quite a systematic way as you have done it. And I think it’s a really laudable and worthy initiative raising this next generation of VC managers.
Peter: Yeah, like one of them is the head of private equity at a superannuation fund in Australia now. And, you know, a couple of others have gone on to other venture funds and having or had great careers in those. So it’s just, you know, we’re a small part of it, but it’s really nice to kind of watch their careers and see where they end up.
Thierry: Yeah. A few of the people that were on your investment committees over the years have gone on to run different university funds now. There’s Hun Gan at the University of Melbourne’s Genesis Fund, Ben Phillis at the UniQuest’s Extension Fund, Geoff Waring at the University of Sydney Pre-Seed Launch Fund. Is that just a natural career evolution as this ecosystem matured or did you have this sort of dream / vision in the back of your mind from the beginning?
Peter: Yeah, I’d like to say I did, but no, look, I don’t think I can claim that I did have that vision. Chris Nave is a managing partner at Brandon Capital and he was also on the Uniseed Investment Committee before he even left the university to go and start that career. So there’s been a number of tech transfer people come through the Uniseed Investment Committee that have ended up now running venture funds.
And I should say right up front that all of those individuals you mentioned and I just mentioned are all highly talented and experienced people in their own right. So I can’t say that, you know, Uniseed made them into investment managers, but I think the experience they got from Uniseed certainly would have helped them…
Thierry: Yeah.
Peter: … in regard to those roles that they’re now currently pursuing, you know. Being a part of the investment committee, seeing pitches, watching startups operate after they’ve been funded and seeing the highs and the lows of that. I think, to be honest, when we started, I don’t think in our wildest dreams we imagined we’d be around this long, or I didn’t imagine I’d be here this long — or have such an impact.
You can dream, but having been around so long… it’s interesting, you know, now when you think about it a lot of these funds now are being run by people that are an alumni of Uniseed in one way or another. So, that investment committee process, as I said earlier, is a great training ground I mean all of those people were more senior people in the tech transfer offices to start with but it’s a great training down for many people to get just exposure and experience in venture. So, I hope out of that a lot of the younger people just get better at putting pitches together and putting technologies together. So, it’s a kind of a snowballing exercise. That’s kind of how I see it. It’s fortunate that we’ve given that opportunity and I think they probably all look back on it fondly, but I definitely don’t want to claim that we were the cause of them getting those jobs. It just probably didn’t hurt that they could say, well, I’ve done it.
But certainly with the example of Brandon, they started the MRCF, which was actually in collaboration with another guy called Paul Cheever, and from the Uniseed model, which was the, you know, really only fund of its type operating, Paul Cheever, who was an advisor to a superfund, Westscheme, came up with that idea of the MRCF, which is a fund for medical research institutes, as well as another fund, the Trans-Tasman Fund, which was a different group of universities.
So, from Uniseed, people got ideas and spawned other. And it made sense for someone like Chris to be involved with that because he was part of Uniseed at that time.
Thierry: Yeah, maybe not taking credit, but the Uniseed experience definitely helped in their journey.
Let’s go sort of all the way back then to the beginning. Is there something that you wish you had known when you became CEO in 2006?
Peter: Yeah, wow. Well, hindsight’s a great thing. So, I think something I probably didn’t appreciate, which would have been better to appreciate, I’d come out of four startup companies before I joined Uniseed and, you know, being part of four startups and one of them was very successful, I kind of appreciated the risks and the highs and the lows and the journey is not linear. But Uniseed as a concept was one of the first funds of its type, not only in Australia, it was the first one in Australia, but it was one of the first funds of its type in the world. And so it was new to universities. And I don’t think that, you know, university executives really understood risk.
And the problem with most funds is that the failures often come before the successes. And it took a long time for us to get to those blockbusters. So we did have a lot of failures and we went through a GFC. And to be honest, we went through a lot of pain before those big deals eventuated, which… and by pain, I mean, people doubting us, questioning us — at one point, I think Uniseed went very close to losing the support of the universities.
Thierry: Okay…
Peter: And so I think what I probably wish I’d spent more time doing or wish I even understood that was just that need to be constantly educating people about risk because people come into this with a lot of hubris. I think hubris can be a problem. It’s good to be positive but, you know, they’re expecting everything to work. We’ve had exits that have returned, you know, 1x or 1.2x our money,, which at the time were a good result because at some point we thought those companies might get written off. But when we did those exercises, people were disappointed because it was like, oh, I thought we’d make 10 times on them. That’s one thing.
And probably just one other thing, it takes a while and experience to get to this point. But as a new CEO, and I was a lot younger then, the importance of backing yourself and believing yourself because I’ve come out of startups and I understood the tech. I understood it better than probably any, if I can say respectfully, any of the directors of the fund. And there were times when I think Uniseed could have made a lot more money…
Thierry: Hmm.
Peter: … and we didn’t. And there were times I made recommendations or wanted to do things which weren’t accepted. And one of them was we had a publicly listed company called QRx, which had gone through phase 3 trials and actually was waiting for FDA approval for a pain drug. But I actually recommended we sell down some of our shares, get rid of 50% of our shares, take some money before that decision. But, you know, everyone said I was crazy because it was going to be worth so much money when they got approval. And it didn’t get approval. It was a very political product because of an opioid product. As time went on, opioids became a very political issue in America. So the FDA knocked them back and just kept raising the bar. And in the end, the company could have gone back and done another phase 2 and a larger phase 2 and gone back. But time then becomes your enemy in terms of your patent life. So that was one.
And another one is Spinifix, where at the time, Spinifix, I thought was a great opportunity. And I really wanted to put more money into the final round and wasn’t able to. And if we had, that final round returned about 20x the money invested. So looking back on it, I wish I’d stood up more, you know, because as a younger, a newer CEO, you know, you’re trying to find the right balance. But I think you’ve just probably got to back yourself if you believe in something and with venture you’ve got to swing for the fences. You’ve got to get the really big wins to pay off to cover everything else. So, that’s probably something that, you know, if I had my time again I might have been a bit more bullish, yeah.
Thierry: Yeah. That makes sense, actually. It’s sort of ironic that you say you’ve got to swing for the fences in the case of the opioid drug where the directors maybe wanted to swing more for the fences, whereas you were slightly more cautious…
Peter: I made a tactical error, because I had a board meeting and had the recommendation to sell. But I made a tactical error bringing the CEO in to give a presentation and he was incredible, he’s American and incredibly charismatic, very Bill Clinton-esque, and they fell in love with him and… and so I kind of shot myself in the foot but even so then i should have said no. Because, I think, it’s again… it’s about understanding risk. I mean about 10% to 20% of drugs that get to the approval stage don’t get through. It’s not a no-brainer. And there was a bit of politics at the time, but the CEO obviously didn’t want us to sell because they’re a public company. He wanted to keep us in there. So yeah, it was an interesting one looking back on it.
Thierry: Yeah. And it wouldn’t look good if Uniseed suddenly sold 50% of its shares before approval. Everyone would have thought, what do they know that we don’t?
Peter: I look back and just think if we had that extra A$20 million on the books it would look really, really good. But, you know… So, they’re the things that I kind of look back and probably I wish I’d known, but you probably got to learn that stuff. Hopefully others hear this and take something out of it.
Thierry: I’m sure they will. As you said, Uniseed, the story is one that’s so long and it’s been around and it survived a GFC – a global financial crisis – you even survived the dot-com crash, because that was sort of at the beginning. Covid, obviously, shutdowns, government changes and then also shifting views of what a tech transfer office is and a boom in spinouts over the last maybe even just five years. You’ve outlived countless other funds in Australia, around the world have come and gone. There was even, at one point, a discussion about merging with a new fund called the Trans-Tasman Commercialisation Fund which then didn’t happen – and I think that fund got wound down anyway. And as you said, it took 14 years for the first blockbuster exit with Fibrotech’s sale to Shire.
What is the secret to making it through all these difficult periods? Is it the belief by universities, although you said that at some point universities also stopped believing in the Uniseed model?
Peter: They certainly… they did. They were questioning it, put it that way. That was particularly after the GFC, you know, when we wrote off a couple of big companies, that was a tough period.
Thierry: Okay.
Peter: Because we had one company that, you know, was ready for an IPO. It had a broker-backed prospectus. It was a medical device company with an incredible board out of Cochlear and ResMed, two of Australia’s sweetheart companies. And the GFC hit and it kind of all fell over. And then raising money, we were trying to do a backdoor listing and it was just too difficult at the time.
And there was another company we lost as well that was manufacturing in the States. It was moved to America and raised US money. But when they get big, their cash burn is so high…
Thierry: Hmm.
Peter: But coming back to your question, I think there’s a bit of luck and timing involved. I often hear my colleague John Kurek say, “it took us 14 years to be an overnight success”, you know. But it’s important we did have exits before but I think the key word is the blockbuster.
Thierry: Yeah.
Peter: So, we had a number of times we did exit and sell companies they just weren’t those 10 to 20 baggers. But I think from a history point of view, Uniseed started in 2000, but originally it was a proof of concept fund run by two tech transfer officers at universities. And it’s interesting, there’s a lot of those funds now being set up, a lot of these pre-seed funds, both in Australia and I know overseas in the UK. But the first exit, that fund that was set up in 2000 as a proof of concept fund, actually had an exit in 2005. A company called Vintela got sold to Quest Software for A100 million – $75 million.
And what actually happened, the VCs that followed on, because at that stage, being a proof of concept fund, they just put a small amount of money in to seed the company and then let the VCs come in and run with it. VCs made a lot more money. They made about 6x and the Uniseed fund made about 1.5x back then. So at the end of that five-year period, proof of concept fund, they pretty well used all the money, but the fund wasn’t in… and to be honest, it wasn’t in a great financial position. It probably had half of the investments that did fail.
But there are a number of factors. That exit, I think, which was within five years, I think despite being not highly profitable, did show the possibilities for those unis. There were still a number of companies, probably about 10, that were still active. There were some good companies there and actually another three of them went on to do deals. There was a superfund that had shown interest, this fund Westscheme. And so I think there was that opportunity at the end of the five years to do something that could then be bigger and get some superfund money in.
The other thing, and probably the real kicker, was the unis… because these companies were very early, being a proof of concept fund, pretty well what most of these companies would do would spend most of their money that they’d raised back at the university doing research. And so, the unis, they got more back in research funding from the companies than they’d actually given to Uniseed. So, they got tremendous leverage because those companies times brought in other money and grants and then that money flowed through the uni.
So, I think the unis looked at it and said, well, even though from a capital point of view, it’s not looking great, we’re actually ahead because of all this research funding and all the activity that primes, you know, the people that get employed and the outcomes of their work. Back in those days, people would publish papers from the work, even though we would contract research from a company, you know, they’d end up being able to publish stuff. So, I think the unis decided with all of those factors, let’s go again.
And that’s kind of when I came along and we did change the model and it morphed into this, what we termed a commercialisation fund, which is a very commonly used term now. But the idea was, you know, from the Vintela exit, we learned, well, you’ve got to follow on. You’ve got to play in every round. There’s an old saying, if you’re not at the dinner table, you’re on the menu. VCs that had been in that exit Vintela, through liquidation preferences or different terms, had found a way to kind of water down the ordinary shareholders which was the universities or the early round investors like Uniseed.
So, playing in every round, hiring a team to do due diligence – because tech transfer officers weren’t taking a fee for the original fund so it didn’t have a huge impact in that regard – and we changed the model and the superfund came in. It was almost like an option play to them: they put in the tent, but they could then follow on into these deals. That was the way they really structured it. It was all about following on directly and then getting a greater exposure to these de-risked companies, but having the opportunity to do that because they were part of Uniseed. That’s kind of how it all evolved.
And I think why we’ve been around so long is we finally got those blockbuster deals. Fibrotech got sold to Shire. It was $75 million up front, plus milestone payments about $500 million. And then the next year, we had two more. Spinifex got sold to Novartis. It was $200 million up front in a billion dollar deal and Hatchtech got sold to Dr. Reddy’s lab. So, it was just about, fortunately we got to those deals and we always knew we would. That was the problem. We knew these companies were good and we kept saying, we’ve got really great companies, but it’s keeping people patient. It was really hard, but we were lucky we got there. And once we did those exits everyone wanted to throw money at us, it was quite funny.
But first of all fund one was a proof of concept, fund two was because of that leverage, but then fund three we expanded and grew because of those exits, yeah.
Thierry: I don’t think we should go too much into it because we have a lot of questions and there’s so much of Uniseed, but I think it’s quite interesting to mention as well that you had this superannuation fund come in – which is Australia / New Zealand’s version of a pension fund – which iIthink also made you, with Uniseed and Australia, kind of one of the firsts where pension funds got this strongly involved in early stage university commercialisation. I know in the UK, they’ve been talking about changing… well, they have changed the rules now, but they’ve been trying to get pension funds more involved. Maybe it happens to some extent in the US, as well, but I think it’s noteworthy that for Uniseed this happened in that 2000s already.
Peter: 2005, we started to get interest and they joined the new fund in 2006. The trick is, and I say this to everyone, pension funds or superannuation funds, they don’t like paying fees. That is a real negative for them. And with the model, we ended up with the first fund, Westscheme, which became AustralianSuper. AustralianSuper took them over. It was all about… they were paying fees in the Uniseed fund, but then because they were following on directly, they weren’t paying fees on the follow-ons. Their overall fee structure became very low. And because Uniseed’s grown with regards to our latest superfund, UniSuper, which is a A$150 billion fund in Australia, it was the same thing about the fees.
There was also some synergies because UniSuper is the superfund for the universities. So it made sense to get together, but they pay… effectively, the universities support the management team and the superfund has a very low fee structure. I don’t have a problem with that because we want the superfunds to make money. So they keep putting money in. And the universities get tremendous benefit out of having the superannuation funds there because they get exposure to that capital.
So, I think it’s quite a synergistic relationship. But I do say to people fees… I remember speaking… the first time I met the chief investment officer of the superfund, he said, “you’re the first venture manager” – and they’d never done venture, but obviously been spoken to – he said, “you’re the first venture manager who doesn’t come in here and start talking about how much your fees are”. So, it’s a kind of interesting message. And I think that’s where perhaps governments can support and stimulate pension funds or superfunds to play more in that space by perhaps the governments can supplement the management fees and, you know, help the super funds get across the line.
If you’re not paying fees, you’ve got a better chance of making venture returns as well. So that’s the key to me. There’s so many people that the first thing they want to talk about is how much it’s going to cost, what they’re going to get paid. It’s a bad signal.
Thierry: Yeah. That’s quite interesting. For a pension fund, paying someone else fees is just money thrown away. They might get the blockbuster returns, and hopefully they will get the blockbuster returns. But until they get there, they’re just draining money. Yeah, it’s a hard sell.
Peter: And, you know, a fee structure, a typical one is – we’re not charging it – but it’s 2% per annum, especially for the first five years. So, out of $100 million allocation, that’s going to be, it trails off… It’s probably like $10 to $20 million in fees. It’s a lot of money. If they don’t pay that, they’re happy. If it’s all going into investments, they’re happy.
Thierry: Huh. Very interesting. I hope people in UK government listen to this because that is a really good piece of advice, actually.
Peter: From a government perspective, I think it makes sense because they’re putting people on the ground. They’re building skills. It’s a story you can make to government. And if the government support people, then they’ll bring in the capital.
Thierry: I wanted to dive into the Fibrotech story a little bit more because everyone would think, you know, blockbuster sale to Shire, that’s the end of it for Uniseed. That’s done, that’s Fibrotech is sold now. It’s not in this case. Shia halted development in 2016 because there was a wider restructuring with other acquisitions. But then in 2018, they set up Certa Therapeutics to relaunch the work that Fibrotech had done. Can you tell me a little bit more about what happened here and what it has meant for the ecosystem?
Peter: First of all, what that shows, especially with biotechnology, is the unpredictability of biotechnology. In that all biotech deals are structured as an upfront and a milestone payments. And the headline number of the total deal value is always massive. but not many of them get to all the milestones. And in fact, with those three big deals, we didn’t get all the milestones for all of them. They’re all profitable deals. So I think that’s really important. So get as much money you can up front, even if you trade off the back end. Don’t worry about the big headline value. Get the money up front in the bank because often those milestones might be 10 years away anyway.
But Fibrotech had developed a novel drug with a novel target where the drug hit to treat fibrosis, which is a thickening or scarring of tissue in chronic inflammation or after injury. And Fibrotech was actually not our biggest deal. It was $75 million upfront as opposed to $200 million with the Spinifex deal, but it was Uniseed’s most profitable deal because we had a big share of the company. That was because we did that deal at the end of phase 1, which is what they call safety studies in humans. And it’s unusual because most pharma companies want to see that the drug works, an efficacy study, which is phase 2.
But because of the novelty of the target, and I think the good science, we were able to get a deal done. We actually had three companies with term sheets.
Thierry: Wow.
Peter: And so we were able to… initial term sheet was probably, I think, $20, $25 million, and we got it up to $75 million by using that competitive tension. But I think Fibrotech was good for us because, for example, with Spinifex, they raised $70 million to do the phase 2 study. So, there was a lot of dilution of Uniseed in Spinifex in that round. So, we didn’t have to go through that. And being in US dollars at the time, in 2014, the Australian dollar was very weak. I think the Australian dollar was only about 50 cents to the US dollar. So we doubled that value. So that was good.
So yeah, Shire did this a year after they did the deal with Fibrotech. They made an offer to back sell… effectively do a merger. And they eventually completed the merger, which was a $3 billion merger in 2016. They did a massive restructuring and dropped 100 clinical assets and Fibrotech was one of these. It was a bit of a shock. And we did get some other milestone payments after the upfront, but it was a bit of a shock when that came through. And you’ve got to remember what happens is Shire, they bought the drug. They owned… they bought Fibrotech, the company. They bought the shares. We sold it. So they own the drug. If they want to drop it, that’s up to them. And so we had no rights on the drug. It was their drug. They paid over $75 million for it.
So, it was actually the two investors originally in Fibrotech, Brandon Capital and Uniseed, we negotiated with Shire to get the drug back. And so there are a couple of conditions on that. One of them was Shire receiving equity in the new company. And the second one was us raising a fairly significant amount of money to support the new company. And we were able to do both of those. So, in 2018, we started Certa with Shire as a shareholder, but a passive shareholder, not at the board level, but they had equity. So, if we did have a commercial success, they would get a second return on that.
And as a postscript, Takeda acquired Shire in 2019. So it sort of shows the farmer industry… And people leave, that’s the other big problem. You can’t rely on things happening in the future, but now Takeda hold that equity in the company. And so Certa’s completed a phase 2 study since then in a condition called scleroderma, which is an autoimmune disease. And it demonstrated improvement in more than 60% of patients after just 12 weeks. So, it was a small but really exciting study. And now the company’s trying to raise further funds to complete a larger trial, which on the back of that, we would hope would lead to a deal again. So, I’m hopeful that Fibrotech pays out twice.
So, it’s an interesting story that we were able to get that back. I mean, credit to Shire because they could have just stuck it in a drawer but it was great that they were open to that and they let that happen.
Thierry: I suppose from their perspective they didn’t have anything to lose because they already shut the drug down and having it in a drawer doesn’t make them any money so it’s a relatively small risk on their part. But still, yeah, being open to selling a drug back to the investors is quite an unusual move I think. It’s a very cool story.
Peter: It was exciting for us to get it back because we believed in that drug and the target is really novel and it had a great team, a great CEO who was the inventor, Prof Darren Kelly, and so it was great to reinvigorate that and start it again.
Thierry: Do you count as a serial entrepreneur if you do the same company twice?
Peter: That’s interesting. We’ve had a few of them that have been through, you know, sometimes up to three of our companies – we’ve got a number of them. But, you know, I’m not sure, I’m not. If he does a second deal I’ll call him that.
Thierry: Let’s look slightly towards the future then. What’s a piece of advice that you would give to your successor Alastair Hick, who starts in January, or have actually maybe even given him?
Peter: Yeah, uh… It’s an interesting one. I’ve just met with Alastair this week, we’ve done our sort of – for want a better word – handover and we spent a few days together and including, you know, going out to dinner, having a couple of glasses of wine and that was probably our most productive of the whole week.
You know, I wasn’t just passing information. A lot of the advice I probably can’t repeat, it was fairly frank conversation. I think one thing I’d say is Alastair was on the board of directors of Uniseed…
Thierry: Yes.
Peter: He was the commercial director of Monash University for 20 years. So, I think that was really beneficial because he already knows the organisation and he’s probably already formed a lot of his own views on it. And I thought actually during the handover I was lucky that he had that experience because it would have been really difficult, 20 years of history, passing that onto someone from outside.
But like any CEO, I think Alastair will make some changes. He’ll put his own stamp on Uniseed, have his own ideas. I think we shared some, but I’m sure he’s kept a lot to himself. And I kind of said to him, I’ll tell you up front, I’ll give you my views and you can do with them what you want. It doesn’t matter. But things we talked about were the future direction of the fund. How can it grow? How can it improve operationally in terms of making quicker investment decisions. Who are the stakeholders involved and how are they different in their needs or their, if you like, personalities? And I’m talking about university personalities, not necessarily people…
Thierry: Yeah.
Peter: … or their cultures, I guess. But I don’t think I gave them a lot of advice. I’d call it opinion. I was pretty conscious of that. And it is up to Alastair to decide the direction.
The one thing I did talk about is what I said right up front about managing expectations and constantly educating and re-educating people. And, you know, telling them something, but meeting a vice chancellor, telling them the story, but don’t think they’re going to remember it in six months time. Tell them again, keep telling them what Uniseed’s about, why we’re different to a venture fund.
It’s important to say the Uniseed fund and the UniSuper fund run very differently. The UniSuper fund is pure venture fund designed to maximise financial returns. The Uniseed fund is there to operate under a financial discipline and certainly make money, but it provides a whole lot of other benefits. So it’s those other benefits – that’s reminding them about that, because I think the danger people make is giving that perception that with a, particularly, a university fund, an early stage fund, that they’re going to make huge, massive returns. I think you need to sell the other benefits of the fund. And if you make huge returns, which you can, great. But if you made modest returns, that’s still okay, because there’s all these other benefits you add on.
And uhm, I’m going to digress, but I do – under a chestnut – but there’s a lot of pre-seed funds. Every university now has a fund in Australia, and there are a lot of other funds. It’s amazing how many more funds have evolved or started to focus on the output of universities now, which I think is great. And I think Uniseed still has a role. A really simple example is early stage investors would rather do two $500,000 investments and share it with someone else than do one $1 million investment. So I think there’s room for all of us. And I think we’ve got to work collaboratively to make the university venturing industry successful.
But I do worry about sometimes that hubris again. Having been through it after the GFC, you know, people can lose their faith very quickly. It’s really important to educate them, not over-promise, but over-deliver, you know, under-promise and over-deliver. He probably already knew that, but that’s probably the main thing that sort of stands out to me.
Thierry: That is good advice. Particularly, I know Alastair has known the organisation, has been on the board, but it is different selling what you’re doing to one VC at one university as it is to, well, it’s 10 stakeholders now, 10 research institutions that you have. And they all have their different opinions and their different views. And the vice chancellors have a ton of other things on their agenda.
Peter: Yeah, they all have a different view of commercialisation, which is incredible. It’s interesting. There is a lot of diversity in how different universities think about it, which is interesting, yeah.
Thierry: Bigger picture then, do you think Australia is on the right path or are there things that governments, maybe state or federal/country, still get wrong or could improve on?
Peter: Look, I do think they are on the right path in that I think what’s happened in the last five years, certainly 10, is governments have put a lot more focus on the output of universities or publicly funded research and so that’s been a real positive because it was always about the old publish or perish paradigm you know and commercialisation wasn’t that important. But I think they’ve realised, you know, Australia has great research and they’re supporting universities and putting a lot of money in but we don’t rank that highly on those commercialisation metrics. That’s one real positive that they’ve put a lot of, first of all, a lot of emphasis on it.
But secondly, they’ve actually started to put their money up and put programmes together to support commercialisation of university research. And there’s massive programmes. There’s a Medical Research Future Fund, which is a A$20 billion commitment, which has a whole lot of programmes hanging off that. There’s a number of quantum strategies now with funds associated. There seems to be a much more structured and targeted approach.
Governments have to be careful they don’t try to become the venture capital arm. And we’ve had in Victoria, the government group called Breakthrough Victoria was set up, which made some direct investments in startups and also was a fund-of-funds to a number of those university funds, which I think was great.
But they had very high profile failure and come under a lot of criticism and have actually lost the support in the budget recently. And they’re going through a pretty significant restructure, which is a shame. So that’s part of that getting it right and positioning yourself. We also have a A$140 billion commitment, the National Reconstruction Fund, which is for more later stage focus on building manufacturing capability. But that’s another great initiative of the government.
So, I think they’re getting it right. I think commercialisation is becoming far more important. It’s not a dirty word anymore. They’re going in the right direction. I’m always just nervous. You know, as I said, the Breakthrough Victoria issue is only a recent one. And I know the Queensland government up here have given A$130 million to the Queensland Investment Corporation to act as a fund of funds. And they’ve supported about 10 venture managers. So things are moving the right way. There’s certainly, to use a cliché, chalk and cheese, of where we started to where it is now. It’s amazing.
Thierry: Yeah, yeah.
Peter: I think our problem now is that expansion capital. At that early stage in unis, we’ve got a lot of capital. But it’s: we get them out then they need to grow, they get products on the market. That’s probably the next problem for Australia, finding that capital.
Thierry: It’s… Victoria, I think, is going to be quite an interesting case study once the Breakthrough Victoria restructuring has happened because I know they’re also disestablishing LaunchVic and some functions are being integrated into Breakthrough Victoria, which has been quite controversial, I gather, in Victoria and maybe Australia more broadly. Because LaunchVic has done so much good work.
So, yeah, it’s going to be interesting to see where that lands. a
Peter: And I think the problem is, it’s that risk thing again and the failures before success.
Thierry: Yeah…
Peter: And when it’s government capital, there’s always people jump on it and the newspapers jump on it and politicians don’t like criticism. I’m hopeful we can ride that out and get those successes, you know. And we’ve had some great startup successes in Australia but now a lot of that’s using government money, which is interesting.
Thierry: One thing that strikes me, and maybe this was a blessing in disguise, but Uniseed has never had direct financial government investment. You had, I think, a couple of bids in the 2000-ish period where you were trying to get money. It didn’t come through. Were you ever tempted to try again? Or did you think that maybe the headache isn’t worth it in the long run?
Peter: I’d say up front, the reason that, you know, we did make a couple of bids to get government money and we weren’t successful. And I think the reason for that was that we are not a national organisation in terms of all our university members are on the east coast of Australia. And I think that worked against us. So, I think, in time, that possibility will open up because I can see one of the things perhaps that Alastair, the next fund, can do is bring in more members and make us a truly national organisation, which might open that up.
And despite having the largest unis in Australia, which are all on the east coast of Australia, and despite having over 50% of all the commercial output covered, that didn’t resonate politically. Do I give it to a fund that has five partners or at the time, five biggest unis in Australia, when I’ve got 70-odd research organisations, so there are going to be a lot of people complaining? People like the MRCF, which was a medical research commercialisation fund, which was national, they did get some government support. And so I think it’ll open up, hopefully.
From Uniseed’s point of view, you said it might have been a blessing. I would hope that I don’t think government support would be an impediment. It would probably create another level of administration. But as long as the government lets the managers manage and do what they’re good at and not try to be investment managers, I think it would be fine. You know, to be honest, I would love to have had government support for those fees, not necessarily for investment capital, but for the fees, just to have a bigger team or even just reduce the fees depending on who the investor is. I think that would have been great for Uniseed. Because seed investing is so hands-on. It often surprises me how much more work it is for us, as a seed investor – we do follow on – the companies grow, they get CEOs and boards, and we’re on the board. It becomes easier. But yeah, in those later stage ones, as I said, there’s often a good board, a good CEO driving the business. But early on, it’s almost, we’re like an interim CEO just getting these companies off the ground. So that’s a lot of work.
So, I don’t think it would be a bad thing if we got government funding. I think it’s disappointing we haven’t, but, you know, I think it’s good we’ve made it without it, I guess. It’s probably made us work harder and helped us be successful.
Thierry: Final question, sadly. I really enjoyed this conversation. But what is next for you, Peter?
Peter: A lot of people use the R word, which is, you know, that retiring word. I’m not retiring. I’ve been with Uniseed for 20 years. And I actually told the board 18 months ago, I can’t sign up for another 10 years for a fund, so. But I do want to continue being part of the industry and supporting innovation and startups. But I think the best capacity for me now is to do that as a board member or an adviser in those companies. I think I can help young entrepreneurs raise capital or – not by me doing the work, but just even simple things like helping them get their pitch right and plan right.
And also I’m open to supporting other funds, which may be in their own capital raising efforts or even at investment committee level. So they’re the sort of sweet spot for me. I don’t want to be a consultant where you have to be a jack of all trades and master of all trades. You know, you have to pretend you know everything, which you don’t. I think it’s important for me that I can contribute by using where I know I’ve got expertise and I can add some values. So that’s what I’d like to do. I don’t want it to be a full-time job or even a few board roles to be a full-time job. I want to find a balance. I don’t know what that is yet, but I’ll wait till next year and try and figure that out. At this stage, it’s just having a bit of a break.
I feel good that this fund is actually in a really good position. We’ve had about four exits and we’ve also sold down part of the portfolio. We’ve returned a lot of capital to the unis already. The fund’s in a positive position. That includes fees to the unis. It’s actually in the black. And we just got another commitment this year from UniSuper who topped up their commitment. So I think the fund is in a good place, which is great. And we’ve got a really great portfolio. I can see some of those blockbusters coming through in the next year or two.
We’ve got a number of four companies in phase 2 trials at the moment that we expect to read out next year. There’s risk, but hopefully it leads to a deal or two.
And we have big tech companies, deep tech companies like Morse Micro looking at doing an IPO next year. So I feel good about where I’m leaving the fund. It’ll be very satisfying for me to watch it and hopefully see it go on to bigger and better things under Alastair’s leadership.
Thierry: Yeah, I’m sure it’s in very safe hands, having known Alistair for quite a long time. He’s done really good work at Monash and I’m sure he will lead the fund to ever bigger and greater things.
Well, Peter, thank you so much for taking the time to chat with me. This has been great. I look forward to hearing more about where you land in the new year once you’ve had some time to rest over the Christmas break. Yeah, thank you so much, Peter.
Peter: Oh, look, thank you. And I just want to say thank you for supporting the university venturing industry because we need the support like you give and raising the profile. So, you know, we’ve met a number of times over the years and I think it’s important to take time to say that. So thanks for the interest in Uniseed and letting us tell the story.
Thierry: Thank you, Peter. It’s this industry, if that is the right word, this community does have a way of drawing you in and never letting you go again, as I’m sure you know after 25-ish years yourself. Yeah. Awesome. Thank you very much, Peter.
Peter: Thanks, Thierry. I appreciate it.