Investing in research

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McGill Reporter
February 21, 2002 - Volume 34 Number 11
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Investing in research

A new organization has been set up to shepherd some of McGill's most promising research discoveries into the marketplace.

McGill has teamed up with Sherbrooke and Bishop's universities to launch an independent firm called MSBI that will help commercialize research. An acronym for "McGill, Sherbrooke and Bishop's Innovation," MSBI will manage a $26-million venture capital fund that will be invested in research projects from each institution.

Jan Peeters and Ian Soutar, two members of McGill's Board of Governors, helped transform MSBI from concept to reality over the last 18 months. Peeters, a two-time McGill graduate in mining and accounting, says he immediately recognized the importance of creating MSBI as a new investment source.

"There's a tremendous pool of researchers who are starving for the necessary funding to bring their intellectual property into the marketplace," says Peeters, who will chair MSBI's board of directors. He is also the CEO of Montreal-based Olameter Inc. "MSBI will be a catalyst that will give academic ideas a fiscal shot at commercialization."

MSBI will be Canada's first venture capital firm to comprise both English and French universities, as well as their affiliated research hospitals, which include the McGill University Health Centre, the McGill-affiliated Jewish General and Douglas hospitals, as well as the Centre hospitalier de l'Université de Sherbrooke.

MSBI, which will be headquar-tered off campus at 2000 McGill College Ave., has been mandated to provide seed and early stage venture capital to commercialize discoveries in biotechnology, pharmaceuticals, bioinformatics, software/communications and networking technologies.

Working closely with the technology transfer offices of its partner institutions, MSBI will be offered a right of first review of approximately 100 research innovations per year. Of these, MSBI aims to invest in and support the development of approximately 10 research innovations annually.

Average MSBI investments will range between $250,000 and $500,000, but exceptional projects could receive up to $1-million in financing. "Without MSBI," Peeters says, "an awful lot of innovations wouldn't get funding and make it out of the gate."

Vice-Principal (Research) Pierre Bélanger says that while they will collaborate, the roles of McGill's Office of Technology Transfer (OTT) and MSBI will differ significantly.

"The goal of MSBI is to invest in research innovations that will make money," he explains. "The OTT has never possessed the necessary funds to invest in the commercialization of research. The OTT's role is to persuade other groups to invest. With $26 million in funds, MSBI will be able to take research much further."

MSBI partners and their researchers, of course, will have the freedom to decide whether or not they wish to collaborate with the firm on any specific project. Similarly, MSBI will carefully select the projects it funds. MSBI's objective is to ensure its research investments are eventually licensed to an existing company or to new business spin-offs.

The creation of MSBI was made possible through a $15-million grant from Valorisation-Recherche Québec (VRQ). Founded by the Quebec government in 1999, the VRQ's mandate is to help promote the commercialization of research generated by educational and research institutions for the betterment of society and to create jobs. The remaining $11 million was raised through MSBI limited partners.

Gilbert Drouin, VRQ president and CEO, says he hopes that "MSBI will encourage the scientific community to create more research spin-offs."

MSBI's initial $26-million seed fund is scheduled to last for 10 years. The firm will act as fund manager, mandated to make investments for the first five years. Over the following five years, MSBI will monitor the progress of its investments and seek to exit from them.

There is a strong possibility that MSBI may launch other seed funds in the future. "If MSBI is successful in making money, it is practically guaranteed that the firm will launch a second venture capital fund," says Mark de Groot, a Canadian physicist and businessman who was recruited as president and CEO of MSBI.

He is taking the helm of the firm after developing expertise in research-based companies, including University Medical Discoveries Inc., which he helped found in Toronto.

De Groot says MSBI aims to demonstrate "that investing in research is advantageous to society and that research spin-offs can be an engine for economic growth."

Among Quebec universities, McGill already ranks first in the number of spin-off companies created from its research, with 33 established to date.

Bélanger says MSBI will serve the research community well. "Not only will MSBI help us recruit and retain some of the best researchers," he says, "we also expect MSBI to generate income for its partners, which we can then reinvest into further research."

As the Canadian leader in research licensing revenues, the Université de Sherbrooke promises to be a dynamic part of MSBI. Last year, Sherbrooke received $15.8-million in revenue from licences -- 10 times more than any other research institution across the country.

"The combination of McGill, Sherbrooke and Bishop's universities will make MSBI an extremely vibrant and competitive venture," says Edwin Bourget, vice-rector of research at the Université de Sherbrooke. "This edge will allow MSBI to create jobs that will ultimately employ students from each of our institutions."

While Bishop's is primarily a teaching institution, joining MSBI will allow the university to raise its research profile and gain expertise from its sister institutions. "MSBI will increase collaboration between university researchers," says Jonathan Rittenhouse, Bishop's vice-principal, whose portfolio includes research. "MSBI is really a win-win situation for us, since we're joining a consortium with considerable experience."

Regardless of which university they originate from, says Peeters, all MSBI innovations will be pushed beyond university and hospital campuses. Indeed, the hope is that MSBI projects will be marketed beyond Quebec and Canada: "MSBI spin-offs will have no geographic boundaries," he says.

McGill holds the majority of MSBI shares, with 53%. The MUHC has 19% of the shares, Sherbrooke has 14% and the Jewish General Hospital has 8%. Smaller amounts of shares are held by the Centre hospitalier de l'Université de Sherbrooke (3%), the Douglas Hospital (2%) and Bishop's (1%).

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