The Ecosystem: start-ups get inventive with proof of concept grants

Proof of concept (PoC) grants are intended to help scientists whose research is backed by European Research Council (ERC) funding to explore the commercial or societal potential of their work. Recipients often go on to form a start-up, or to out license intellectual property, but the funding is flexible enough to serve other purposes.

Take three enterprising academics who received PoCs, and it is striking that each of them has set up companies that are closely connected with their ongoing research work.

Paul Verschure founded Eodyne Systems in Barcelona 2014 as a way to bring his work on neurorehabilitation to patients. He sees the relationship as mutually beneficial, with the company building a community of users that informs further research and also providing software for his group to use. “These tools are much more professional than we could ever produce in a research lab,” he said.

In 2014 he also started an ERC advanced grant at the Pompeu Fabra University, to work on a theory of consciousness that would inform new approaches to neurorehabilitation. This opened the way for a PoC grant in 2019, which was used to extend the capabilities of Eodyne’s rehabilitation gaming system (RGS), initially designed to treat motor impairments after stroke, to assist cognitive recovery too. “We could do this with the relatively modest investment of the PoC grant, because we’d already invested millions to build the infrastructure, the clinical trials and credibility with end-users,” said Verschure.

In this sense, the PoC grant is helping to fill Europe’s venture capital gap. “Venture capitalists, especially in Europe, are not very courageous. They don’t have much imagination and they don’t like risk,” Verschure said. Instead, he has assembled a range complementary public grants that have allowed the research and Eodyne to develop in parallel.

These include a project with the European Institute of Innovation and Technology (EIT), and European Innovation Council (EIC) pathfinder and transition grants.

“The PoC grant allowed us to push the technology readiness levels of this cognitive intervention protocol, and to do a clinical study with it,” said Verschure. This was then generalised and scaled in an EIT Health project called RGS@home, in which a home-use version of the RGS system is being developed.

“We now have three or four projects running in parallel that further advance these interventions, and the company is growing organically by having clients and end-users who buy licenses and support further development,” Verschure said.

Eodyne has a staff of 15, and while Verschure no longer has a commercial role, he is an active founder, working from Radboud University in the Netherlands. The company’s rehabilitation methods are used in around 100 clinics, largely in Europe, and have treated thousands of patients. Regulatory approval has been sought in the US, and partnerships are under discussion with international medical technology companies.

“Of course, we are always talking with investors, but this has not brought us forward,” Verschure said. “What really helped us to develop the product is European funding. And I really believe this should be our European model for innovation and scaling.”

Modelling blood flow

Alfio Quarteroni’s ERC-funded research is also making its way to the market through a pre-existing company, MOXOFF, which he set up in 2010 with two other professors in the Laboratory for Modelling and Scientific Computing (MOX) in the Department of Mathematics at the Politecnico di Milano.

“MOX develops simulation tools suitable to address problems of industrial interest,” he said. “We have collaborations with industry that bring new research ideas into the department, and I can ask PhDs and post-docs to work on those. But sometimes companies require confidentiality, or software that is customised and optimised, and that is not appropriate work for a maths department,” Quarteroni said. In these cases, MOXOFF forms a bridge between MOX and the company, fulfilling the technical aspects of any project.

MOXOFF was the obvious partner when Quarteroni received a PoC grant in 2013 to explore the commercial potential of an ERC advanced grant he held at EPFL Lausanne. His research had created a mathematical model simulating blood circulation in the whole body, and the PoC grant was to explore its application as a tool to assess the risk of aneurisms in the abdominal aorta.

Clinical data were provided by the University Hospital of Milan, while MOXOFF developed the algorithms and software. However, one PoC grant could only take the idea so far. With just a year’s funding, the team focused on simulating blood flow, leaving aside the effect of structural changes that could weaken the blood vessel wall.

When Quarteroni received an extension to his ERC advanced grant, he was able to apply for another PoC grant. “In the second PoC grant we were able to develop the mathematical model for the mechanical structure, combine it with the fluid measure, and to apply it to many more patients,” he said. “We were able to make substantial progress, and that would not have been possible with only the first PoC grant.”

MOXOFF, now majority owned by the Italian software company Zucchetti, is currently working with an international medical technology company to explore further commercialisation of the model. “We needed to have the proof of concept to convince them that what we are doing is potentially relevant for them,” Quarteroni said. And in order to do that work, the researchers needed the start-up as a bridge. “We were lucky to have MOXOFF to turn to, but ten years earlier that would not have been the case and ramping up the project would have been much slower.”

Diagnosing cancer

Glycanostics in Bratislava was not as old as MOXOFF or Eodyne when co-founder Jan Tkáč got his PoC grant, but it was still on its way to the market. He received an ERC starting grant in 2013 for research at the Institute of Chemistry in Bratislava into novel methods of detecting glycans, complex sugars involved in many aspects of cell physiology and pathology. In 2017, together with Tomáš Bertók, his PhD student on the project, Tkáč set up Glycanostics to commercialise the technology for use in cancer diagnosis.

The PoC followed soon after, enabling the company to build on clinical data collected for its patent application. “During the PoC grant we extended this validation study to include more samples, which was essential, and we established collaborations with clinical institutions in Slovakia and abroad. We also worked on our commercialisation strategy,” Tkáč said. This more commercial development was covered by an SME instrument grant under Horizon 2020.

But investment to go further proved hard to find. “When we discussed with investors from western [European] countries, they always said we had to relocate the company, and that was something we didn’t want to do,” said Tkáč, who is chief scientific officer of Glycanostics. Yet local investors were more used to the low cost and quick return of digital start-ups. “We wanted a larger amount of money, and the return on investment, from their perspective, was long-term. We looked for three years but couldn’t find investors.”

In the end, Glycanostics turned to investment and crowdfunding company Crowdberry, which channelled €310,000 in EU structural funding to the company, topping it up to €1 million, with individual investors committing a minimum of €10,000 each. Tkáč attributes the success of this approach to his high-profile in Slovak science (he is the country’s only ERC winner), the appeal of cancer diagnostics and sharing the risk between many relatively small investments.

Another important factor was the recruitment around this time of Eva Kováčová as chief executive. Formerly with GlaxoSmithKline, she has pharma industry experience in mergers, acquisitions and licensing.

With money in the bank, Glycanostics could afford to apply for an EIC Accelerator grant, which requires a 30% contribution from the recipient. Successful in 2021, this will support development of a diagnostic test for prostate cancer. Beyond that, a decision must be made.

“Plan A is to license our technology to a big diagnostic or pharma company, and then focus purely on research and development. Plan B is to develop and sell the products ourselves, and for that we would need a huge investment,” Tkáč said. This is now less of an obstacle. “Getting the EIC Accelerator is a sign that the company is doing very well, and that means investors are now interested in us.”

Mapping ERC start-ups

The ERC has been working for some time to find out more about the start-ups that emerge from its funding. The problem it faces is that there is no obligation to credit ERC support once start-ups get under way. Companies are often shy of discussing their academic origins, and while the ERC is a powerful brand in the university world, it cuts no ice with investors.

In November 2020 the ERC carried out a survey to fill in the gaps, which found 11% of grant recipients had either created a start-up or transferred research results to an existing company, with 51% of PoC grants reporting some kind of commercialisation. Now it is building on the survey results to create a database of start-ups formed from ERC funding.

The count currently stands above 400 companies. Beyond basic information about the location and activity of the start-ups, the idea is to find out how they developed after ERC support ended, where they found further funding, what role the ERC principal investigators play in the company, and so on. This database could then be used to study the impact of ERC funding beyond basic science.

“We would like to create a control group of similar academic start-ups to see if those created by the ERC are more successful, for example in getting further public and private funding, in creating jobs, or in growing,” said Laura Pontiggia, a policy analyst advising the ERC Scientific Council on innovation.

At the same time, the ERC is not trying to prove cause and effect. “We don’t want to say that there is a linear relationship between frontier research, the creation of start-ups, and success on the market. We are very well aware of the complexity of the whole system, but ex-post we would like to show that it is happening,” Pontiggia said.

That would then become another argument in favour of funding curiosity-driven research. “It’s important for us to show that, without directing these grantees, completely bottom-up research is leading to the creation of successful innovations and successful companies,” said Pontiggia.

Elsewhere in the Ecosystem…

• IQM, a cornerstone of Finland’s quantum computing ecosystem, has closed a €128 million funding round, which it claims as the largest by a European company in this sector. The round was led by World Fund and includes part of a €35 million venture loan from the European Investment Bank, announced in April.
• If you crossed paths with the EU’s Active and Assisted Living research programme then you might want to contribute evidence to its final review. Start-up initiatives in the programme ranged from a project on senior entrepreneurship, to business support for grant recipients, such as a start-up academy and market launchpad. An interim review in 2017 found the projects were too far from the market when completed, and that marketable results were lacking across the board. Evidence is requested by 2 September.
• Oxford Science Enterprises has raised a further £250 million to support start-ups and scale-ups based on research carried out at  Oxford University. Recent activity includes participation in series A rounds for smart battery start-up Brill Power and Oxford Quantum Circuits, and a series B round for MiroBio, which specialises in treatments for autoimmune diseases.