来源：钛媒体
BEIJING, January 29 (AsianFin) -- From "best partners" a few years ago to the ones harboring grievances against each other now, the change in the relationship between Chinese scientists and venture capitalists didn't happen overnight.
"Not all the people in the academic community are nerds. Some of them are very smart, and know what investment institutions and the market need. They have not only acquired the skills of dealing with VC, but also begun to demand an exorbitant price," said an investor surnamed Qiao.
A typical line used by scientists in raising fund goes: "My junior alumnus started a company and raised 100 million yuan in Round A financing. I’m his senior, how could you just give me tens of millions of yuan? I’m expecting a similar amount at least."
"The current shortcut to make an investment is to target cutting-edge technology and unknown hard science. Regardless of whether scientists are cut out for entrepreneurship, the most important thing is to ‘lobby’ them into starting up a company. Once the project gets off the ground, investment institutions will have operating space. In the end, most of them will be crowded out during the process of the company’s growth," Ke said. This is the thought of most investment institutions, and it's not something that can be openly discussed with scientists.
Following the phenomena of " frequenting the Chinese Academy of Sciences" and "courting laboratories for scientists," investors have become disillusioned with the so-called "scientists".
“Common Weakness” of Scientists
"Only a handful of scientists can start up a business and become entrepreneurs. Scientists and entrepreneurs live incompletely different worlds," said Ke.
Scientists are professionally engaged in scientific research. In other words, those who spend most of the time on scientific research can be called a scientist, including associate researchers, associate professors, and other scientific and technological professionals.
"The favorable national policies, mounting international tensions, and the hype in capital market have prompted some researchers to start their own businesses, but they are not necessarily good at it,” said Qiao. Upon graduating with a Ph.D. degree in medicine, she joined the VC industry to look for high-quality medical projects. She can communicate with researchers and clearly identify their shortcomings.
First, scientists typically have a "perfectionist mindset." They always aim to achieve the ultimate in technologyresearch and development to outperform their peers. Such an extreme mentality often causes them to miss market opportunities.
For example, Chinese well-known chip company Spreadtrum had developed a chip supporting mono 64kps when MP3was just available on mobile phones. At that time, the company's technical team opposed commercializing this chip, holding that it did not reflect the company's cutting-edge technical standards, and boasting, "We will develop a 256kps stereo chip in one year."
As a result, while the development was halfway through, MP3 mobile phones using MediaTek's mono, 32kps chips had flooded the market. As such, Spreadtrum missed the early-mover advantages.
"In the lab, scientists always have sufficient time to perfect the technology, but in a business context, taking one step ahead means you can be the first to secure orders," Ke said.
Second, scientists do not have a business-minded thinking. Starting a business involves not only the technology itself but also mass production, quality control, sales, marketing, among other aspects. It requires consideration of costs, racing against time, and competing with rival products. It is the normal case to launch the product on the market when it can be 70% completed, conducting small-scale and pilot tests, and adjusting and upgrading the product based on business scenarios. A perfect product does not mean it aligns with market needs.
"A company needs to take into account costs, while scientists are not cost-sensitive," Ke noted.
Third, scientists can’t let go of pride. In business activities, the project side often acts as the seller party when securing orders and negotiating for cooperation. However, professors are used to playing the role of the buyer party. The coexistence of these two identities often conflicts with each other.
This phenomenon is also evident in communication with investors. Professors always think that investors do not understand technology or prospects as well as they do, and are not willing to accept the business operation suggestions proposed by investors. Instead, they stick to their own opinions, which leads to difficulties in advancing to the next round of financing and loss of orders.
Fourth, scientists lack the all-in mentality. "Don't expect academicians and professors to start a business on a full-time basis… At most, they will provide endorsement for a company and provide technological results from their lab research," Ke said.
Qiao have also encountered a similar situation. He was engaged in a project for half a year, but despite strong technology and initial commercial results, the professor was too busy taking care of both the lab and the company. Investors were eager but didn't have the courage to invest.
Even with full commitment, it is hard to cover the higher-than-expected failure rate.
A U.S. company specializing in technology transfer named Bastille once conducted a survey and found that the failure rate of entrepreneurship among U.S. university professors reaches an alarming level of 96% to 97%. Therefore, Bastille never prioritizes entrepreneurial projects by university professors when selecting partners.
The String-puller Behind the Scenes
"It is the capital that calls for scientists to start up businesses, not the scientists themselves," said Dr. Wang from the Beijing Institute of Life Sciences.
Researchers are divided into three categories: The first kind is academicians and professors with both research capabilities and fame, and can leverage funds for research. The probability of them starting a business full-time is not high unless they have a long-cherished dream of becoming an entrepreneur; the second kind is those with patents but no honors, who might have encountered a "honor bottleneck" and start to consider leaving the research circle to embark on the entrepreneurial path; the third kind is those who are appointed. After a teacher establishes a company, they assign a trusted student to take the CEO position in their company to look after the company's operations and other tasks.
"Researchers focus on R&D and technological breakthroughs, and they view things not from the perspective of market applications, but how to make breakthroughs in cutting-edge technology and build up their influence in the academic circle. There are not many who truly want to realize the implementation of R&D through entrepreneurship. The core reason is that researchers cannot think on the commercial level," Dr. Wang said.
Ultimately, the essence of investment is to make money, not to provide service. It's about transforming a scientific achievement into a commercial product, thus driving up valuation and generating profit.
"If you're lucky, the company can go public. If not, the company will end up being acquired by a conglomerate," Ke said.
"The role of industrial capital is to steer clear of 'middlemen' (financial investment institutions). With the current IPO difficulties, most of the projects invested by investment institutions are looking for industrial capital to take over," Qiao remarked.
Industrial capital have prominent advantages in the era of hard-tech investment. First, compared to scientific researchers, industry insiders are better at identifying opportunities to apply a certain technology; second, startups can be provided with market-oriented validation scenarios, facilitating rapid product upgrading.
"In the early stages, technology is the core competitiveness. During the 'running' phase, yield, production process, cost accounting, and orders are the competitive strengths. If scientists can't keep up, either the CEO will be replaced, or the scientists' shares will be bought back," Ke said.
Sometimes, even the most calculating investors can be screwed up by scientists. "Initially they are confident in the technology and the market. But as the company fails later, the scientists will channel their energy back to the laboratory, leaving a mess to the investors," Ke said.
Is Entrepreneurship the Only Option?
"I think it's about whether a well-established technology entrepreneurship ecosystem has been in place. Withouta good platform and ecosystem, Chinese scientists have no alternative but to get things done independently. When the ecosystem matures, there will be far fewer scientists 'forced' to start businesses," said an investor
The Israeli national innovation ecosystem is composed of government, academia, and industry (or the private sector). The government is mainly responsible for introducing policies supporting innovation, enacting laws and regulations, and providing funding among other things. The industry (private sector) mainly includes manufacturing companies, venture capital firms, crowdfunding platforms, and service providers such as accounting firms and law firms. In addition to technological human resources, technology transfer institution is also an important part of academia .
As a type of intermediary, technology transfer institutions seek scientific research achievements from universities and research institutions, apply for patents, and transfer the implementation rights to companies, then return a portion of the transfer fee as revenue to the universities, research institutions (or inventors).
Take Yeda Research and Development Company as an example. It is the first academic technology transfer company in Israel, with annual sales exceeding $10 billion. Its income is used to feed back to the research institute to further strengthen basic research and scientific education.
About 40% of the financial gains obtained by technology transfer institutions goes to the individual researchers, not to the laboratories. Departments and laboratories can also obtain a portion of the profits, given agreement before the project. Once the project is commercialized, Yeda can get profits, and scientists can also receive substantial rewards, thus forming an effective incentive mechanism.
What supports scientists to start up their own business is a complete mechanism, a positive flow strategy from research to commercialization. They are not willing to sacrifice their research career for the unproductiveentrepreneurship.
Constraints
Chinese scientists, relatively speaking, find it hard to hand over their technology to others. "That's why they themselves take on part-time roles and also send their own students to serve as CEOs in their companies," observed Ke.
"Chinese entrepreneurs and scientists treat their technology and businesses as their 'children,' thinking that entrusting them to others is irresponsible. Therefore, they want to be major shareholders, rather than considering from the perspective of commercialization," an investor said.
Dr. Wang revealed that the stringent criteria for doctoral graduation or professional title promotion is the publication of academic papers in journals indexed by SCI or EI, or in SCI journals with an impact factor above 3.0. SCI and EI are world-renowned scientific literature retrieval systems. It will directly affect an individual’s graduation, personal promotion, funding applications, and etc.
As a result, people flock to the field of basic scientific research that can produce more papers, while there is a lack of motivation for research in technology science that is ready for transformation. "There is zero overlapping between research transformation and paper publication."
Furthermore, the division of patent ownership require attention. "Some professors, due to a lack of legal awareness, carelessly take their service achievements outside for transformation, and the better the company develops, the greater the cost of remediation afterwards. If a scientist has plans to start a business, the first thing to consider is not how to transform, but to clarify who is the owner," Lawyer Cao remarked.
Starting from January 1, 2022, the revised Law of the People’s Republic of China on Progress of Science and Technology incorporated the ownership or long-term usage rights of scientific and technological achievements by researchers into the law, proposing to encourage scientific research institutions to motivate scientific and technological personnel through equity, options, dividends, and other means.
Although it is still in the exploratory stage, it also signifies that the field of scientific and technological achievement transformation is gradually moving towards deregulation and decentralization of power.
"China is still in the early stage of transforming scientific and technological achievements, and the overall technological content of domestic enterprises is not high, without the conditions and capabilities to undertake the transformation of scientific and technological achievements. When the current hard-tech enterprises mature, they can take over the transformation of scientists' technological achievements," an investor noted.
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