Gemma Milne : Scouting for deep tech and science start-ups
Podcast transcription - 6th February 2019
Alan Cowley: Welcome to The Invested Investor podcast. This week, I've got Gemma Milne sat opposite me who is a tech and science writer. She's an entrepreneur and she's also an innovation specialist. Gemma, let's hear a little bit about your background please.
Gemma Milne: Awesome. Thank you for the invite. Yeah, I always actually find it very difficult to explain myself, because I do a lot of very different things. I guess at the crux of it is this idea of promoting, helping move forward and helping invest in deep technology.
My background's kind of strange. I studied Maths at St Andrews, so I guess I'm a nerd by training. I ended up in investment banking, as most mathematicians end up being lured into. Didn't like that, ended up in advertising, the other slightly questionable industry and realised that wasn't for me either. I actually ended up in the Innovation Team in Ogilvy & Mather, which is a large advertising company.
My job was essentially as a start-up scout and as innovation consultant within the agency. My job was essentially finding start-ups that might be of interest to the world of advertising and to all the clients we had at Ogilvy. Essentially go find interesting stuff in the world was my brief, which was obviously super broad, but very interesting.
Alan Cowley: Sounds pretty, awesome.
Gemma Milne: Yeah, it was pretty, awesome. I was essentially the person people would come to like, "Oh hey, Gemma. Can you go tell American Express why they should care about AI," or something. I'd be trotted out to go do that. Did a lot of public speaking and writing and all that jazz as this innovation person, was called a Tech Innovation Strategist. Then, in 2016, they decided to shut the Innovation Team. I was made redundant, and I became a freelancer which I guess is what I am now.
I do various different things in my work as a freelancer. I do a lot of writing about the world of science for BBC, The Guardian, whoever. I do a lot of branded stuff. I do a lot of work with Siemens. I do consulting, with small start-ups, do a lot of public speaking. Then, I also am now doing a lot more in the world of, I guess, investment advisory is probably the best word to put it, helping investors work out what's going on in the world of deep tech.
Alan Cowley: Do you think that you've guided your own route to where you are?
Gemma Milne: The love of science, tech and research has absolutely, always been there. That's my passion at the end of the day. I'd like to think that what I'm doing now is a culmination of everything that's come before but, no doubt, it'll change in a year. I'll say that that's what I should have been doing.
Alan Cowley: That can be my last question.
Gemma Milne: I think the work I'm doing, my side project is probably the best way to put it, is Science: Disrupt which is our podcast and community organisation. That really comes from a place of passion, although I suppose it's now a company and kind of growing faster than we can keep up. I suppose there is an element of control that's gone into what I'm doing. I think, also, just frankly being exposed to so many interesting things, particularly as a scout for Ogilvy, really made me realise that I probably wasn't thinking big enough in terms of my career. It's probably a combination of passion and just generally my eyes being opened.
Alan Cowley: Science: Disrupt you just talked about there. Can you elaborate a little bit more about this?
Gemma Milne: Sure. It basically started as my boyfriend and I having loads of conversations about science. He is a scientist at UCL. He's a computation biologist. We had loads of conversations about the world of science. I was really frustrated that science wasn't communicated well. I really wanted everyone to love maths as much as I love maths. He was really frustrated with the actual day-to-day life of a researcher, how things are quite inefficient and so on and so forth. We used to just talk about it a lot.
I got an opportunity to do a talk at South by Southwest about how we could change science? I just thought it would be a bit of fun, to be honest, to do this talk. It got a really good response, people were coming over saying, "Oh do you have a blog? Do you have a company? What do you do?" I'm like, "Nothing. I work in advertising." We thought, actually let's try and do something about this.
We started a podcast, very similar to this, where we just interviewed people who were changing science. Instead of complaining about what was wrong with science, we wanted to find the people who were trying to do things better, interview them and give them a platform. We started that in 2016. We've been going ever since. It's either weekly or biweekly, depending how busy we are.
We have also, as a result, started running events in London. We realised there was a big community of people interested in science start-ups and asked ourselves, how do we make science more open? Or how do we change the structure of PhD? All the questions that weren't really getting asked in mainstream media. We now do a bit of consulting and we have a big community of people. It's kind of become a bit of a, I guess, a one-stop shop for the idea of, how do we change science? Yeah, I guess we're both media and community and little bit of consulting thrown in.
Alan Cowley: How does this link up with start-ups then?
Gemma Milne: The idea of a science start-up, it's both very new and very old. What I mean by that, is, I think the idea of an SME, a science SME, is kind of normal in the circles of Cambridge and Oxford. Spin-outs, is probably a better word for it. This idea of science start-up is quite new. This is less about people within a university making some kind of discovery, going to Tech Transfer Office, negotiating as hard as possible to keep as much of the company as they can, and then either licencing or spinning out.
Science start-ups, a lot of the time, are now people with skills in science, young post-docs, maybe even PhDs who have left, who go, "I really like being a researcher. I love being able to do all the stuff, but I don't want to stay in academia because of X, Y and Z. There are many, many reasons why I want to go and create a company which, comes up with a new agriculture technology or comes up with a new fake meat, a lot of that comes from the world of science start-ups, new materials etc.
Sometimes it's not always about, taking the IP from a university and then creating something from it. Sometimes people are creating stuff from scratch. This world of science start-ups and the world of science SMEs, it feels like it's starting to have a bit of a revolution, in the sense, that it's looking over at Silicon Valley and tech start-ups and TechCrunch and going, "Oh we should probably do some of that if we want to actually sell stuff and be a growth, scaling company."
Obviously it's a very interesting space, because a lot of the SMEs within science don't need all that stuff. They're B2B most of the time or they're wanting to just be acquired by a pharmaceutical company or something like that. You're also seeing this big shift in a lot of, data and AI being used too, I don't know, analyse DNA for instance. Those kind of companies have to act more like a Silicon Valley digital, tech start-up as opposed to a biotech SME, spun out from university.
There's a bit of a revolution happening in this world of science start-ups. It's changing the way people are doing science. Research is happening within companies. Young researchers are getting more and more frustrated by academia. In the past, people who were frustrated by academia would go work for a pharmaceutical company or they'd go and work as a quant for an investment bank, or they'd use their skills somewhere, but not directly doing the research.
Now, there's an opportunity where you can be an entrepreneur. There's much more funding available for this. There's schemes available for this. The appetite, is greater, for this kinds of investor. Obviously, angel is a big part of it, but even VCs are starting to look at things like biotech that they hadn't really looked at before.
Suddenly, you've got this other option for researchers that wasn't always there before, particularly if they weren't in the life sciences. There's a real revolution happening in science. Part of that is the entrepreneurial option, but even the entrepreneurial way of thinking is more, How, can I make science better from within? It all links up.
Alan Cowley: What are the largest barriers for these scientists to start a company?
Gemma Milne: That's a large question. There's quite a lot of barriers. I mean one of them is the university. IP negotiations is always really, really hard.
Alan Cowley: Is this people that are not using the university as a stepping stone?
Gemma Milne: There's both. For instance, say, you go out of academia and don't take your IP and then you want to do a science start-up. How do you prove to people that you're credible? That's a big problem. You don't have direct IP already, because you have to develop, you need the money to develop, but investors wants IP in order to invest.
You have this vicious circle, how do you get the money, to then, get the IP. So that's why a lot of people end up staying with the university, negotiating with the Tech Transfer Office and losing a lot of their equity as a result or being tied into contracts that aren't always great. That's not all universities, just some. That credibility thing can sometimes be an issue.
Funding is always an issue. As I'm sure all of your investors who do anything to do with life science will know, or any kind of deep tech. You need a large amount of upfront investment to allow for research and development without any income at all. It's very different from, say, a digital start-up where you can, create something very, very quickly. You can immediately get customers. You can immediately get people opting in, so you can get an idea of the size of your market or your audience, your return happens much faster.
The difference in deep tech, or science, start-ups is, you're going to need to invest for many more years before you get your return. The difference is the amount you invest is held in the company, it's directly going into R&D. It's not getting wasted on marketing or whatever, right? Totally held in R&D. That then obviously increases in value as the R&D gets better and better and more patents are filed, more, I don't know, clinical trials are done, whatever it is that you need to do.
Your price of exit is probably going to be a lot higher. You just have to wait much longer. That's a huge barrier in a sense of how, do you convince an investor really, early on, without very much data to prove and maybe without very much, inherent value already in the company, that it's going to be of huge value in 10 years’ time. That's a really hard thing to convince, particularly, if you are not sitting on, 20 years' experience as a professor at Cambridge, or you're not sitting on a whole lot of patents that you've not already spun out. The third final one, software challenge, I would say is also around community because, and yet not to plug science, but that's kind of why we now do more than just a podcast.
Alan Cowley: That's all right, plug away.
Gemma Milne: But that was the insight we had, there's so many resources, events, services, around the Silicon Valley Tech start up, right? There are a trillion events, every night in London, Cambridge, Oxford, particularly if you're in one of those spaces. Maybe if you're in Manchester its slightly different.
But the point is, there's lots going on in this space. But if you are, I don't know, a biotech funder, you can't just rock up to any event and expect people to understand your challenges in the same way. It just doesn't work like that.
So you end up with kind of these gutsy biotech entrepreneurs or science entrepreneurs who think like Silicon Valley people, but they don't necessarily have the folk around them who also understand, to learn from and whatever. So this idea of community is lacking and going back a couple of steps, the community for being a researcher and feeling like you want to be innovative, where do you go? You're sitting in your lab, and you're like, "This is great, but I'd really like to do something on the side, or I'd like to do this." Where do you go for that? You can go down the usual routes of, how do you do an Instagram shop or something? There are loads of resources on how to do that, but where are the resources that tell you to try and get funding and start a company, that like ferments meat for example, that's just not there.
And so the community, the support services, even just the Googling of stuff is not quite as rich in the world of science entrepreneurship. But that's changing. I mean there's a lot of, particularly in the hubs like Boston, London, Silicon Valley, Golden Triangle probably I should say, as opposed to London. It's definitely there but you know, a perfect example Bristol. Good friend Harry up there, he's a science entrepreneur, but he also started a space for life science, and material entrepreneurs. Bristol has this incredible chemistry department, but they don't spin out anything, because, they don't have a facility, and as much community, and as much help, in trying to create companies out of the incredible research they're doing.
So, he has created a co-working space. Open labs, he has got all the great equipment, he is such a hustler, he has acquired it from, all these crazy places. But he's got amazing spectrometers and other devices. They are now spinning companies out faster than they have ever done, in Bristol, just from two years of having this space, or however long it's been, it just goes to show, if you have that little bit of extra support function, you can do amazing things
Alan Cowley: Do you think that having the business support as well as the business knowledge and the business support, is paramount to this?
Gemma Milne: Absolutely, because, a lot of researchers fall into the trap of, not knowing how to negotiate equity, licence deals or, how to hire someone or start a company. Because they have not had to do that before. They are used to being in the research context.
Admittedly, the skills you're using as a researcher are very similar to an entrepreneur. But, let's put that to the side for one second. They're going to their tech transfer office, and tech transfer officers are going, "How can we make the most profit from this idea? Do we spin it out as a company, or do we licence it?" Then they are looking at how much percentage of the idea, the university wants and how much should we give to the researcher. A lot of time the researcher doesn't have the knowledge to negotiate, or even the knowledge that they can negotiate.
Harry's a perfect example of this, he asked someone, "How much equity should I get for this idea?" And they said, "Oh, you would be getting, quite a large amount." He then went to, the tech transfer office, and they offered him, less than 10% or something ridiculous, he thought, "Absolutely not, you are going to lose the idea, I'm not going to spin that out." But he knew that he could negotiate. A lot of people don't know that. So ideas are lost a lot of the time.
It's the same when someone says “how do I hire someone, who's not a scientist? Like that's not something a scientist normally has to think about. They normally think about how do I hire people into my lab? How do I do finances? How do I raise money? How do I apply for a patent? How do I go through the FDA? How do I try and get a CE mark?
These are things that you are not taught as a researcher unless you're spinning out. So, just getting that information and getting that help is what is needed for more of this stuff to happen.
Alan Cowley: I know you're very close to another type of funding. A lot of our podcasts are to do with equity funding, angel investors and VCs. But let's talk about Horizon 2020. What do you do? What do they do?
Gemma Milne: Yes, Horizon 2020. So, basically, it's European money. The European Commission have this extremely large pot of money, that they give to deep technology and science.
Horizon 2020 covers lots of things, from research grants to actually, doing programmes where they partner with existing science entrepreneurs, or SMEs, to create something, to go to market.
They have a programme, I think it's called the Executive Agencies for Small and Medium Enterprises, that comes under the European Commission. Their job is to essentially, accelerate the growth of SMEs and start-ups in the world of deep tech.
They have various, different types of funding. They have got funding to do like a feasibility study, is this idea worth pursuing? All the way through to early stage funding, SME One I think it's called, it's up to 500,000 Euros. They have, SME Two, which is up to two and a half million Euros. Almost everyone asks for the full amount, although you are required to say what you need it for. But up to two and a half million euros, unless you have a you know, crazy good reason for asking for more. It is essentially about, how do you get to the point of commercialization, for example.
They have various, different, juries that cover different expertise. They have an agriculture jury, you'll have a communications networks jury, people doing 5G research. They have people specifically, doing medical devices, so it's all deep technology; stuff that needs to have a research element to it, or it is going to require a lot of help to come to market.
Alan Cowley: The juries you're talking about, it sounds as though they are pitching to them, to get the funding?
Gemma Milne: Yes, sorry I didn't explain that very well. Okay, so, I'm a start-up, I would like some money from the European Commission.
Alan Cowley: A grant?
Gemma Milne: A grant yes. Equity free. They give you a coach, and you need to do work packages, but it's equity free. You need to fill in a huge proposal, one of these big proposals that you do for research grants. Most people are submitting about 90 pages PDF, you know, with a whole load of supporting data.
Then what, happens is that, goes onto remote juries, the European Commission have sourced experts on various things, deep tech. They check the science, if that makes sense, they check the tech. Is this feasible? Are these people legitimate? They do background checks on all the people that apply.
The top 130 for each kind of submission round then, go to the juries, who are in Brussels. I'm a member of one of the juries. The jury decides whether, or not they get the money.
We as the jury, say, "Okay, you've already passed the science test, but we are going to check it again, just to make sure. We are going to check the business, your ability to scale, is this something that's going to change the world? Is this something that's going to be European wide? Is this something that's got a huge degree of excellence? You know, is this something that can be patentable? We have a lot of different criteria, that we need to think about. But really, a lot of it is asking if we think it is worth funding, using public money?
What's interesting is, each jury is made up of different kinds of experts. There's six people on every jury. On each jury, you'll have for example, two people who are experts in science, I sit on the biotech pharma and medical device jury. We always have two people who know their stuff really, deeply. They'll be, current researchers or something like that.
You'll always have two investors. Normally one angel and one VC, or something like that. Maybe a country investor and also, normally, someone like me, who's a bit more random, knows the space really well, understands the kind of challenges, probably a community person.
Finally, you'll normally have a lawyer or something like that, someone who can understand patents and the process of working with corporates and so on.
Alan Cowley: Do you go on to mentor them, or help them?
Gemma Milne: No, we're not allowed. They get assigned a mentor, depending on what they need, but it's conflict, so we're not allowed to actually be the mentor.
Our job is to read their big submissions that they send in, we then, discuss within the jury our immediate concerns, or, the immediate things we like, so on.
They then come in, do a 10, minute pitch, we then question them for 20 minutes. Then we have a discussion as a jury, we ask, do we want to give them the money? Yes or no?
Alan Cowley: So, how many companies do you see, and how many times a year do you get together as a jury?
Gemma Milne: This is the first year they have had the in-person jury. Before that, they did remote evaluation. The problems they were finding, was that they, were always putting through really, good science, but they weren't always putting through very good teams. They couldn't find a way of assessing if they were a good business.
Alan Cowley: You need to meet them?
Gemma Milne: Yes, so, our job, is less about asking a million questions about research, because most validations are already done. It's more about asking, "What is your strategy over the next five years? How exactly are you going to spend this money? Who are you going to hire? How are you going to go to market? What is your sales strategy?" It's a lot more business focused, particularly, when it comes to clinical trials and if it fails? Who are you working with? What hospitals? This kind of question.
There are four a year. In each of those, they put about 130 companies to the juries. Each jury sees between 19 and 25, depending on, how many are in your area. I would be interviewing all week, which is great. They have found this great, they want us to invest the money, after all. A lot of companies get to the point where they should be going into clinical trial phase II, which would allow them to either start going to market or work with a pharmaceutical.
It costs millions of pounds to do clinical trials. They try and get the money. If they can't, they just have to shut down even if they've got something brilliant. This money is about trying to bridge the gap between, doing the trial and getting to the point where a corporate company, needs to come in and work with you. Or, maybe you're going to need more funding, or, maybe you're going to need to go public?
There is a big gap between getting to that point. This money is there for that. We don't get many applications from the UK. I would suspect it's probably because we have quite good funding through Innovate UK. It's also not advertised very well, this money, which is a real shame.
We get loads of Spanish companies, because in Spain, they make a real effort to advertise this money, mainly, because there is not as much federal funding. It's very interesting seeing what countries we get more of, and which ones we get less of. But there's certainly very few UK, and that's not because they're not getting it. It's because they're not applying.
Alan Cowley: That's interesting, we had Nigel Walker, who's head of lending at Innovate UK. I can't remember the exact figure, but it was something like £4.5 billion pounds that they've invested in companies. So, let's talk about the difference between traditional funding and EU funding or government funding.
Gemma Milne: Sure, part of that, is when you are not giving away any equity. It's not free money, but it is free money in a sense. Particularly, when we are thinking about ownership of your business. That's one big one. The second one is, that you are tracked by the EU and you are given support. It's less about being tracked in order to get value, later-on, but more, about being tracked so that they can support you
The downside, I think, is that there is, an interesting conversation around smart money versus dumb money, so it's not just the money, right? Particularly when you're looking at angels of VCs, but also, looking at their experience. What do they bring to the money? What can they open-up for you? With the EU money, I would argue that, maybe you're not guaranteed the same amount of knowledge, the other side is the process of even getting the money. Having to do grant writing and applying for a grant is quite an arduous process. Yes, it's a long time to speak to an angel and build a relationship with a VC, but essentially having to write a document in a particular way without ever having done it before is quite difficult. A lot of companies end up hiring consultants and so on, which you'd think would be a sensible thing, but the European Commission absolutely hate consultants, so you're at a downside if you're paying a consultant a lot of money, because they can see you have to outline exactly how you're spending it? If you put, "We are paying our consultant 200,000 euros." Well we're not going to like that when we're judging, because we're going to say, "Well, that's quite a waste of a lot of money." So, how do you balance investing all the time and the effort into applying for money that you might not get? So there's different ways of thinking about it.
I think a lot of the time when the start-ups come in and we ask them the question, "Couldn't you get the money elsewhere?" Or, "Why are you wanting this money?" Or, "Was it worth the process of having to apply for this money?" Most of them say, "Oh, it's because it's equity free." And also the stamp approval. A lot of investors like that you've had European money, because they know how much of a process it is go to through to get it, and how many people check it. It's a good due diligence thing, but it is quite a process. It's a yes or no answer. It's quite binary whether or not you get it.
Alan Cowley: It is, exactly what we at the Invested Investor are saying, "It's more than just the money." It's the experience, the connections, everything else that comes with investment. It would be good to see the EU acknowledge that and put it into their mentoring programme.
Gemma Milne: Yes. It's a great programme, they have so many different types of business mentors, they really do keep helping every step when you apply. They check in with you and you get some of it up front. Then, when you hit targets, you get more. They are there and they are there to help. But I would argue, it's probably very different from having an angel, who you have a really close personal relationship with, who has put in their money, who has, both a personal, but also monetary reason for wanting to help you, and probably comes with a lot of experience, that could be super specific.
Alan Cowley: You said your partner is a scientist here in London. Do you think that both of you will move forward and maybe go for some EU funding for your own company?
Gemma Milne: Oh, we're not deep tech enough for that. No, we're a media organisation. There's no research required to make our product, I don't think that's going to happen, no.
Alan Cowley: So, not the next company then?
Gemma Milne: Well, we've talked a bit about, what if we make Science Disrupt bigger? Do we go full time and make it this big venture?
I think a lot of it comes back to, both me being like, "Do you know what? I actually really love all the other stuff I do, Science Disrupt is only part of what I do, I'm a writer, and at the end of the day, Science Disrupt is a podcast. We don't have the same audience as some of the places I write for. So, it's how do you balance what it is you want, versus what you think is really needed in the market, and so on?
I think I'm entrepreneurial, but I'm not sure I'm a founder if that makes sense.
Alan Cowley: Gemma, it's been absolutely, fantastic to have you on the show. We all learned so much about Disrupt and also Horizon 2020. So thank you very much.
Gemma Milne: Thanks for having me. It's been an absolute pleasure.
Peter Cowley: Thanks for listening to another Invested Investor podcast. You can subscribe to all future podcasts via our website, investedinvestor.com or by a number of podcast platforms online. Remember, you can order our book online, and be sure to follow us on Twitter, LinkedIn and Facebook to get the most up to date, interesting, and insightful content from the Invested Investor.