News

Issue No. 34 - April/May 2007

Success is a creature of habit

Articulate, trenchant and visionary, Silicon Valley savant Dr William Miller came to Adelaide recently to share his knowledge of high-tech business.

Sponsored by the SA Venture Capital Board and tour-managed by Slattery IT, Dr Miller told listeners the key to success is a balance of academic, business and venture capital cultures that create the perfect “habitat” for start-ups.

Now in his 80s, ‘Bill’ Miller helped set up IT venture capital icon the Mayfield Fund in 1969 and started the influential Office of Technology Licensing at Stanford University. And he is still a ‘player’ himself, having recently founded a nanomaterials company, NanoStellar.

Dr Miller says 21st Century universities are under intense pressure. They are expected to contribute economically and come up with solutions to society’s problems. Enrolments are increasing and globalisation means universities have outreach programs to other countries.

Universities have been very successful, he says, and “now they have to adapt to the consequences of that success” by balancing present demand and future need.

“Universities are for the future,” Dr Miller says, “and they have to keep in balance. It’s a tough trick but an important one.”

That’s because next to skilled workers, ideas are a university’s most important product. As an example of an idea-generating engine, Dr Miller offered Purdue University’s Discovery Park, founded in 2001 to transcend boundaries between academic disciplines.

“Students go where the action is. They get their basic training in a department then they apply to Discovery Park,” he says.

This draws recruits to work in science and engineering by providing a pathway straight to the exciting problems of the day.

In 2002, US universities collected royalties on intellectual property totalling $US1.2 billion — from $US60 billion in product sales — underpinning 400,000 jobs. Reformed US IP law makes this possible. Dr Miller was a key lobbyist for what became the US Government’s Bayh-Dole Act of 1980, a piece of legislation that lets government-funded institutions such as universities keep the commercialised profits of their IP.

“I remember (the government representatives) said, in effect, ‘If we allow this, what’s in it for us?’. I said, ‘How about a better America?’”

Under Stanford’s IP policy the university takes 15% of royalties and the inventors get 33%, as do the department and the school where the work took place. Dr Miller says the arrangement is not there to make money, but to effect technology transfer for society’s benefit and encourage private investment.

Stanford has about 2200 active disclosure agreements — inventions that may make money. Annually, about $US1 billion of the university’s $US2.6 billion operating budget goes to fund research. With royalty income amounting to about $US50 million per year in 2004-05, commercialisation is no get-rich-quick scheme. Only three out of 6000 inventions have made Stanford big money.

“You can’t use royalty income to build research income. It’s the other way around,” Dr Miller says. “Silicon Valley is not about technology, it’s about turning technology into business. Innovation and technology turn into something else (that’s valuable).”

Dr Miller says efficient commercialisation needs the right “habitat” – the right business, social and political environment – to flourish. Inventors need to have access to technology, resources and opportunity.

“If you don’t create a favourable habitat, the talent being developed will go somewhere else to work,” he says.

Commodities booms don’t last forever, he warns: world markets adjust. A successful community depends on innovation, private enterprise willing to develop it, and smart money.

“You learn from failure – it’s a great learning experience,” Dr Miller says.

During his years in business he has invested in 23 ventures – 12 of which were complete failures. Four he calls “miserable investments” and three were big successes that brought returns of more than 10 times the invested capital.

“But if you asked which (ventures were going to succeed) I couldn’t tell you,” he says.

This points to the need for “knowledgeable venture capital” in the habitat.

“The risk profile is high and technology investment is different – there is nothing left (ie no assets to be sold off) when a high-tech company fails.

“Venture capitalists need to know how start-ups work. In California most venture capitalists come from the (IT) industry and know how companies work – and can help.”

Innovation occurs this way, in networks, and in the globalising world you need international networks to succeed.

Dr Miller points out that the large number of migrants to Silicon Valley pumps up the number of startups – some 29% of ventures get started by migrants. They then begin exploiting their overseas links to generate export dollars.