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Thursday, October 11, 2012

How blood analysis ended up checking shampoo for authenticity

Once again, I think about the fundamental gap between an idea and a project. Typically in Russia, this gap is hard to fulfill because the innovators creating the ideas have very little interaction with specific venture managers. What Russia really needs is a new cadre of venture managers. These would be young entrepreneurs which have one leg in the science world (maybe they have their first degree or Master’s degree in some particular science), and their second leg in the field of business where they’ve worked for some years.

In talking to a lot of scientists, they have for years received subsidies from government ministries for their work in specific R&D sectors with little indication of where those technologies should be applied, and with little influence from any business sphere which would say how the project needs to be developed in order to adapt to markets.

There are many examples of a business angel coming across a technology project, looking at it from a business standpoint, and seeing that the innovator has no idea how to commercialize it. I have an example on my mind where a Moscow R&D institute was creating a blood analysis mechanism to check if blood has any particular virus or disease (by cross-checking a new drop of blood and an original sample).

As this is a very cheap mechanism, the institute found few markets in the United States for such a product because many doctors wouldn’t really have an interest to sell that service—they were already making a lot of money from conducting a variety of expensive tests for different diseases. The institute in Moscow had little traction in trying to commercialize this.

An angel investor, however, took a look at this technology and asked, “If you can analyze blood, can you analyze any other liquids?” And they said, “Sure, why not?” They hadn’t thought about it but yeah, if you could analyze blood you could analyze something else.

He asked them, “Could you analyze shampoo?” They thought it a crazy idea: why would anyone use this test to check shampoo? But he asked again, “Can this test analyze shampoo and cross-check any sample today of shampoo compared to an original sample of shampoo?” They replied, “Well, absolutely, and you could see if this is the same formula of shampoo or not.”

Basically what the angel investor discovered was that this was a cheap mechanism for checking if a household liquid like shampoo was an original product or a copy, because any deviation from the original formula would be picked up by this device. So this became a quality control device having nothing to do with medical purposes.

The scientists themselves were shocked at this application but, in fact, they made money; and selling a license for this product brought money to the institute enabling scientists to continue their efforts. So everyone ended up happy; the angel investor found the markets and found the way to license this, and the scientists received further additional revenues for themselves.

So this is just one example of where business angels can help fill the gap between an idea and real business project. What Russian business leaders and community leaders and public service leaders need to focus on is how to replicate this process, and how to build those types of mechanisms to cross-check the commercial application for any given technology. The scientists themselves will not necessarily have any understanding of how to commercially develop their products or what markets may exist at all for their ideas.  Business people may have an entirely different perspective.

Fundamental science gives us breakthroughs. Without it we can’t really advance ourselves in the field of communications, computer processing, supercomputer technology, artificial intelligence, biotech, etc. The problem is that scientists are following their own god instincts and their own methodologies in developing their theories and ideas of cross-checking theory against reality. But business people need to be part of that process, so they could look at those scientific ideas and then pick a part of what they think could be used within business.

Monday, October 8, 2012

VIDEO (Rus.): Kendrick White talking to the participants of a New Eurasia Foundation training program, Moscow

(1 min. 38 sec.)

 “We originally invested in Speech Technology $700,000 and then made a profit of $12m,” Kendrick talks of his prior experience of investing in IT projects with Quadriga, a European fund.