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Academia (vs. Industry)

Startup Culture, Starting

Many readers of this blog work in the biopharma industry, naturally, and of those, many are in and around the (few) locations where a great many of the companies in the industry are born. I myself am in the Boston/Cambridge area, famously thick with companies large and small, and then you have the Bay area in California, the original Cambridge back in the UK, San Diego, and so on down the list. But that list is rather concentrated in the US, and there are some scientific and technologically prominent countries where it’s most definitely not concentrated.

One of those is Japan. This recent item in Nature was titled “Japan’s Start-Up Gulf” and they have a point. I remember having a talk with a Japanese professor visiting Cambridge a couple of years back who had an interesting discovery, and I asked him if he’d formed a company around it. “Not in Japan”, he said. “If I want to do that, I should come here”.

. . .analysts point out that, despite years of effort, blockbuster academic–industry collaborations in Japan are still far from routine. “Everyone talks about PeptiDream because it is unique,” says Suga. He believes a large part of the problem is the old-fashioned view among professors that commercialization efforts will taint the quality of their academic work. “Researchers engaged in industrial applications are less respected than those involved in basic science,” he says, though that attitude is slowly changing.

Others point to an incongruity in the competencies of scientific and industrial fields. “The pharmaceutical sector is not very strong,” says Jun Suzuki, a science and innovation policy analyst at the National Graduate Institute for Policy Studies (GRIPS). “The consumer electronics industry is quickly shrinking. And there aren’t many good researchers in the artificial intelligence and computer fields.”

This is not exactly in line with the popular/lay picture that many have of Japan, but I think it’s unfortunately accurate. There’s strong research there, for sure, but not quite as much (in some fields) as you might suppose, and Japanese industry is the same way. Remember William Gibson’s early science fiction in the 1980s? One the big, shadowy corporations in the Neuromancer world was “Mitsubishi-Genentech”, which combination now sounds sort of quaint.

Around 100 new university-connected startups were launched in 2017 in Japan, as opposed to around a thousand that year in the US. And this is after several years of regulatory and financial encouragement of that sort of thing by the government. The article quotes the president of a technology transfer office working with the University of Tokyo saying that when he started in the area in 1996 that most university professors had no interest in filing patents on anything at all. As mentioned above, PeptiDream is a rare exception in the Japanese biopharma space, and the article also mentions Vedanta – but notes that they couldn’t raise money in Japan and had to come to Boston to do it.

Some of this is cultural, naturally – a startup requires taking on a good deal of scientific, professional, and financial risk, and that takes getting used to. I would add that it also takes a certain attitude of “Hey, you other guys are doing it wrong, check this out” which is not, from what I’ve seen, a big part of Japanese society. Overlaid on these, honestly (and on top of everything else in Japan) is demographics. The country is aging; their demographic pyramid has been inverting for many years now. On its current course, Japan is just not going to be a “What are those young creative types going to come up with next?” sort of place. I know that there’s been a small boom the last couple of years in “Japan turns it around” articles, and I hope that they’re right, but I’m waiting for a more data because that’s a big vessel to turn around.

Another country that hasn’t had as much of a start-up culture is Germany, with another Nature piece taking a look at the situation there. That one might well be taking off, though. Investment in start-up firms nearly doubled in 2017 from the year before, the article says, as part of a ten-year funding and organizational effort at both the national and Länder (state) level. I’ve generally been baffled when I go to European meetings and see the acknowledgement slides with their blizzard of acronyms and logos for various consortia, partnerships, agencies, institutes, and alliances that crisscross the EU research funding landscape, but people definitely have the incentives to learn to navigate them. Not that there aren’t still some cultural factors:

Bringing in business talent is essential, because the majority of German researchers lack industry experience. “Most researchers have never had the experience of working at a company, let alone running one,” says Jasper Emeis, a business-school graduate who is working with Schmitt to get Grown Valve off the ground. “They’re totally overwhelmed by the business part. . .

. . .And there’s a lingering cultural bias against researchers commercializing their own work. “Many medical doctors and researchers want to be entrepreneurs, but don’t feel comfortable with the way business is done,” says (Shari) Langemak, who trained as a doctor before earning an MBA. “They struggle to communicate why this is a great product.”

That’s a step up from the Japanese situation, though, where the desire to be an entrepreneur may often be lacking as well. The article mentions that the number of people coming in to the German university system from places with more established start-up traditions (the US, UK, and Israel specifically) have had an influence. The missing part of the system might be the number of investors who are willing to step in at the different early stages, and that’s one of the ways where the places with longer histories have a real advantage. There’s a lot of investment money sloshing around Cambridge these days, to be sure, but one good part is that a lot of has, so to speak, been around the block before and is being handled by people who have experienced the risks. And they can also call on a workforce, from the bench up to the boardroom, with that same sort of experience. There’s a critical-mass effect as well, with people being more willing (at all those levels) to take a chance on Startup Company X when they know that there will be several Startup Company Y candidates around if things go wrong.

But you have to start somewhere, and I really hope that the Germans make a success of this. Giving new biopharma and technology ideas a better chance to get tried out in the real world is a good thing, and (speaking as an American) I think that the experience of doing more of that will also be a good thing for the German research community. For a long time now, the choices there have too often been (a) try for an academic job, (b) work for a really large company, or (c) move to the US or UK. And as much as I appreciate the influx of German (and other European) talent into my own country, I’d be happy for them to have a wider range of opportunities.

24 comments on “Startup Culture, Starting”

  1. Joe Q. says:

    I worked for the R&D branch of a big multinational for many years — full of chemistry / physics PhDs. Our corporate partner in Japan had its own R&D branch, but with almost no PhDs — the explanation given was that in the Japanese “scene” PhDs were not at all interested in working in industry, and so industrial R&D operations were primarily the domain of bachelor’s-level people.

    1. Frank L says:

      Is the labour market for phD’s different in Japan than the U.S? is the demand and supply more or less matching up? Is there just not that much pressure for “excess phDs” to go into industry?

    2. Anonymous says:

      I think the Japanese adopted the German model of the PhD as strictly a university teaching degree and never changed.

      1. Sparsh Makhaik says:

        moreover there are a very few japanese students who would pursue a PhD as the entry level jobs for master’s are good enough. PhD is totally academia based.

      2. Kent G. Budge says:

        Doctor is Latin for “teacher”. The original definition of a doctor, well before the Germans, was someone qualified to teach at the highest levels.

  2. anon says:

    It would not be a bad idea to have Robert Langer write a book on how to spinoff and how to churn some postdocs who can do the same!

    The problem is that most of the academicians are happy as long as they can publish and get one or two grants to run the lab to test their ideas out. Spinning off start-ups require another layer of translating those basic research findings in to applications if they are already not tackling the market/need based research which is key for patenting and licensing out. And to do so, one needs unrestricted grants.

    1. ChemMS says:

      What’s the issue with restricted grants? Do they require that grantees assign IP? I’m an MS chemist on the industrial side so I’m largely unfamiliar with how academic granting works.

      1. VTJ says:

        Most major grants have restrictions against using funds to support for-profit ventures. In other words, as soon as a professor starts a company centered around a certain part of her/his research, those grants can not be used to support any aspect of that research (i.e. paying researchers working on that project, buying chemicals, etc.) If done correctly, that usually means that the research moves completely out of the university lab, since those restricted (mostly federal) grants are used to pay for university lab overhead, instrument maintenance, etc. In practice, this separation doesn’t always happen and can open the university up to lawsuits.

  3. Wavefunction says:

    In contrast to the sparse startup culture in Japan, Japanese VC firms and conglomerates are plugging unbelievable amounts of money into American startups to get a piece of the pie. Softbank which just gave $400 million to Relay is a good example.

  4. tlp says:

    Once I asked a Japanese colleague if he could reference me for application to his drug discovery company. He answered “sure, if you’re OK with working there for the rest of your life”. Can it be that their famous adherence to 100-year development plans and lifetime working contracts is making working at startup very undesirable career option?

    1. PhotoDeTox says:

      Could be indeed. I’ve heard from med-chemists working in Japanese R&D companies that reorganizations and lay-offs are quite uncommon. Quite a difference to the rest of the world where many people lose their jobs in big pharma and then have two options: work in start-ups or leave the field altogether. That is probably a reason for the uprise of start-ups elsewhere among others.

  5. EasyPeasyVC says:

    The vibrant entrepreneurial culture in the USA is primarily due to our capital gains-friendly tax laws…and the fact that the stigma of failure is next-to-nonexistent here. If Theranos had imploded for normal reasons (technology failed) rather than outright fraud, Holmes would have had no problem raising cash for her next venture – in more staid cultures she would have been finished after her first failure. But the main reason for the vibrancy here is a combination of tax laws and the fact that the US is considered a safe harbor for all that surplus savings sloshing around the world…

    1. Emjeff says:

      I agree that is part of it, Easy, and a large part. Also, contributing is that in the U.S., you can actually make money in the drug business. I suppose that’s good or bad, depending on your point of view, but there’s no question it drives innovation.

      1. John Wayne says:

        One of my favorite terms for this is ‘failing up.’

    2. Anonymous says:

      EZ PZ – “the stigma of failure is next-to-nonexistent here.” – Nicholas Negroponte has said something like, “I don’t invest in software, I don’t invest in hardware, I don’t invest in ideas. I invest in people.” Which, in context with examples, meant that if you BS your way into NN’s good favor that you would be launched to stardom. You could fail repeatedly, but still get opportunities and investors to help to spew your next stream of … waste.

      “How do you become a MLB Manager?” Become an MLB Manager (or NBA Coach or NFL Head Coach …). That is, once you get your first gig, you can destroy a franchise but still be hired again and again (because it was always other circumstances that led to the losing seasons). The same can be said of biotech CEOs (and, to a limited extent, Big Pharma or Forbes 500 CEOs: “I’ll trade you my disgraced CEO for your disgraced CEO.”).

      Disclaimer: If I was a “have”, legitimately or by having BSed my way there, I probably would not be of this opinion. I am not a “have” and can only describe what I have seen and heard of many times: the success of failure (and of liars, cheats, and frauds who can snow the powerful NN’s of the world).

    3. Ron Richardson says:

      Could you clarify “Capital-gains friendly tax laws”? Capital gains rates in the USA are pretty similar, sometimes higher, than European peers–see https://taxfoundation.org/us-taxpayers-face-6th-highest-top-marginal-capital-gains-tax-rate-oecd/

      Also, Switzerland is an interesting counterpoint here–very capital friendly laws and culture and a fairly high startup rate per capita. Belgium and Netherlands too.

  6. Steve says:

    Germany also has a large number of technology-oriented, family owned, small- and medium-sized businesses that complement large corporations, and which can be very effective at bringing new innovations to the market, e.g., when corporations are too slow. This family owned business culture can be attributed in part to German tax laws that provide exceptions to inheritance taxes for businesses with continuing operations.

    1. simpl says:

      True about taxes, though I am not sure to what extent biotech occurs as a family business!
      The German case has also a strong geographical basis, and the Nature article rightly highlights Berlin as a creative centre in many areas, fueled by the melting-pot of East and West German ideas, modelled on the success of biotech hubs like Boston, and supported by the accessibility of capital intended to develop the capital city.
      There are at least two other biotech clusters in Germany, one around Munich, Bavaria, the other round the chemical hot-spot in north Baden-Württemberg, see link. These two wealthier southern lands have traditions of independent industrial research. Germany is not BioTech terra incognita: I’d suggest that the speedy downsizing of the Pharma industry in Germany has meant that, given the lack of home-grown Venture Capitalists, less ready money was available to advance BioTech.

  7. hn says:

    I’ve been told by Japanese colleagues that companies prefer to hire students right out of college and train them internally instead of hiring academically trained PhD level scientists. Many young Japanese scientists would be happy to work for companies but the positions aren’t there.

  8. Anonymous says:

    I read something many years ago about the early days of biotech in the US vs England, Germany, and elsewhere (1970s – 1980s). Discussing it recently, someone told me that the following simplified view is incorrect. If any financial folks with a good sense of history (70s-90s) can chime in, thank you.

    Back then (70s-80s), the US Rules and Regs regarding investments from high wealth individuals or funds were (are?) quite loose. A prospectus could promise pretty much anything without requiring much of anything to back it up. In England, the Rules practically forbid raising investments for a pig in a poke. For example, if a company wants to raise capital to produce a machine that can perform 100s of analytical tests on a single drop of blood, they would have to have some non-zero physical proof that it can actually be done. Similarly for Germany and some other countries.

    In the US, you can raise money for a perpetual motion or “unlimited money” machine if you find gullible investors. The safe harbor of The Forward Looking Statement (q.v.). Not so elsewhere (70s-80s). Once they saw that they were missing out on investing within their own countries, the rules and regs were relaxed to allow for greater investment in new, risky startups.

  9. Vader says:

    I first read that as “starter culture”.

    Which may also work.

  10. Andy Extance says:

    Interestingly, my understanding is that in both Germany and Japan there is an economic culture of structuring large companies in networks around banks – something like GE in the US. Keiretsu is what they call it in Japan, and Softbank, mentioned earlier, is one of the newest, see: https://www.sciencedirect.com/science/article/pii/S0263237300000669 I wonder if these formally-constrained financial relationships have held back investment in startups in these countries?

  11. DTX says:

    Years ago, the Wall St Journal had an article on the time it took to create a new company if various countries, i.e., how long it took to get the various forms thru all of the different government agencies. They discussed this in regards to start ups. The US had one of the shortest times and this definitely fostered start-ups.

    More recently, a Chinese business colleague noted it was much easier to start companies in the US from a regulatory perspective.

  12. DTX says:

    I just remembered a comprehensive source on how easy/hard it is to do business in different countries: World Bank, Doing Business 2019
    http://www.worldbank.org/content/dam/doingBusiness/…/DB2019-report_web-version.pdf

    It’s notable that 5 of the top 10 nations are the UK and its former UK colonies. And all of its former colonies rank in the top 25 (except India & South Africa). China wants to promote innovation, but it ranks at #46.

    In a recent policy discussion on Brexit, EU colleagues noted that one negative for the EU will be the loss of the UK’s administrative and law writing skills, including its practical approach to law administration (not that the UK is perfect, but generally better than other nations). Hong Kong & Singapore combines the industriousness of the Chinese with the administrative skills of the UK.

    The report is 311 pages long & gives much insight into how a country’s policy & culture impacts “doing business.”

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