Episode 16 – Spinning It Out: The Research to Venture Journey with Dr Victor Pantano – Part 2 Highs and Lows of a Deeptech Start-up

Dec 21, 2022

About this episode

In Part 2 of our discussions with Dr Victor Pantano, co-founder and former CEO of Digitalcore and current Director of Liquid Instruments, we hear about the highs and lows of taking a deep tech start up along the journey from establishment, through market engagement, team building, growth and financing rounds to exit success.

 Building upon our last podcast with Victor, the conversation reinforces our earlier discussions around a risk balanced approach to due diligence, the importance of people and role timing has in new ventures (as we explored in our September podcast).  The dynamic external environment, the changing needs of investors and the hard yards of building business with customers are all explored in this fascinating discussion.  A must listen episode for anyone contemplating or indeed engaged in a tech start-up.


CB: Hello, everyone, and welcome to Tech Transfer Talk. My name is Cameron Begley, managing Director of Spiegare, and we continue our discussion with Victor Pantano today, talking about the journey of Digital Core, where indeed we found he was slaying it and slaying it through the journey. We’re now in the early, early days, you’ve dispatched the CTO, he’s out there shaking the trees, looking for revenue. How are things going? How were those early days unfolding in terms of revenue, in terms of building the products? What were the experiences in the tent?

VP: So, the early days were very interesting. We approached it with lots of enthusiasm at the start and, yes, it wasn’t perfect, but we were still like, this is great, and we all felt great about it. And then, of course, looking at each other saying, we got to get some business. Mark, you jump on a plane and go and talk to some of the industry partners and see if we can convert them into clients with the right hat on, as you said. And then we had a board and the university wanted to put in place a board. And of course, when we were doing the term sheet, the board is the thing we probably fought the most over. And there was me sort of in the middle saying to the researchers, look, I know you want to have control and I know you’re not sure about the university’s intentions, but at some point we need to stop arguing about this. But we eventually got there with the sort of startup board and the board had made a decision that they would go find sort of a CEO. They want to find someone who is experienced. And so, they had recruited a CEO and it was quite an expensive process.

CB: That’s interesting, Victor. They recruited a CEO. So, what was your job at that point?

VP: I was more like the COO, I suppose. I was sort of looking after the operations. And because I had the relationship with the university, we still had most of the research team in the university. And so, I was looking after, I was hiring people that kind of structuring the organization, doing all the finances.

CB: So why do you need to see CEO now? Everything’s going swimmingly. You’re building the company, the money is rolling in. I assume the frequent flyer points are building. Why do we need a CEO at this point?

VP: Well, money wasn’t really the money was coming in, but in little bits because the contract was much more. But I guess the board wanted a CEO because they wanted to get someone in there that was experienced in the industry. So digital core was in the oil and gas industry, and it was an oil and gas services company. And the technology was CT technology. So, a piece of hardware that had been built by the research team, customized, and then code that went around that to take the CT images, reconstruct these images in 3D, and then do a whole lot of static and dynamic analysis on these rock cores that oil and gas companies would send us. And they wanted to know things like how much oil and gas is down there? How can I get it out? And so, we were able to do that digitally, and that had been done for 100 years beforehand in a lab. You had to wait a year to get a result, and you only got one result, and you destroyed the sample. So, this digital technology was quite revolutionary. And so, they wanted someone from that industry to come in and really exponentially grow it. And of course, the business plan had contemplated that there would be a CEO and a board. So, the person was recruited, and he came from a large company. He actually came from one of the largest, I think it is the largest company in the world. And he had worked there, been very successful, and he came in, and so we started working together, and he then started going with Mark on overseas, talking to potential so down.

CB: Now there’s two sets of air fares.

VP: There’s two sets of air fares. And he recognized that, well, the market for this technology is infinite. So, you know, it’s huge. The market is huge. So, we should start going hammer and tong and building. And we’ve got to build and build and build because the market’s there. So, let’s get going. Let’s move out of the university, let’s get our own space. And so, we were building, building, but the money wasn’t coming in at the right rate. And so, we were building, building, building, but our cash balance was going down, down, down.

CB: May I ask, what is it that you were building, Victor? I mean, you’re in a startup. Are you investing Capex at this point, or are you building capacity by way of human beings?

VP: Yeah, it was mainly human beings. That’s right. So, Capex wasn’t an issue for us because, this is a very important point, we did a deal with the university where essentially, we would be able to use their equipment. So, we use their labs, and we use all their equipment. So, we didn’t have to expend any money on Capex. We might have expended a bit of money on Capex buying some equipment, but by and large, we used a lot of the university’s resources. And so, we had an agreement with the university to use those resources. So, it was more people that we were investing in. And because the market was large and we needed to get ready, we needed people, and we needed our own space. So, let’s put out where our digital side of the work takes place. Let’s put that over in the city and we’ll then use our labs will be in the university. So, we’re investing in a whole lot of that kind of thing. And we’re investing probably way more than we should have in the context of how fast the revenue side was growing. And so, we sort soon found ourselves at a point where, you know, things weren’t going that well. The board was getting concerned and there was, you know, there was the come-to-Jesus board meeting.

CB: A new CEO who has I would encapsulate what you’ve said there, Victor, as run the build it and they will come strategy. So, we are going to build capacity, human bodies ready to go because we’re going to get a flood of orders coming in and we’ll be ready to execute. Okay? So, so we’ve had to build it and they will come. And now we’ve arrived at the come-to-Jesus moment from a board perspective,

VP: Just before we get into the showdown. Every startup has this and I’m always very weary of when I meet new startup founders and just before and they say there’s so many customers and everyone wants it, but then when you actually start and actually have to convert them, it’s bloody tough. All the hype and the rhetoric. When you talk to people, it’s fantastic. And yes, they want it, but then actually getting them to sign, particularly when they come Cameron, from very big companies, then getting one signature from somebody is not easy because it has to go through this person, that person, this person. That person has to be part of this budget which has to get approved then, so it doesn’t happen instantaneously. So, yes, we have that meeting, and it was very intense and the board interviewed me and Mark and a few others and then very late at night we got a call saying that the CEO has been let go and we need you, Victor, to step up and we’ll talk to you in the morning.

CB: A good night’s sleep was had by all.

VP: Well, before we went to sleep, Mark and I sat down and I still remember we were in his office in the basement of this physics building which has now been demolished. I pulled up the spreadsheet and we got the latest night numbers and we went through it together and it was one of the most somber moments of my professional life and I turned to Mark, it was about 10:00 at night. And I said, Mark, we’re bankrupt, we got no more. That’s it, we’re done. That’s it, we’re done. And I left. Yeah. I left 20 minutes after that. And I’m driving down, you know, driving down the pathway and thinking, you know, all these people that I got to come and work for us. And I’d made promises to and families and they left and what are we going to do?

CB: And mortgaged houses here. Victor…

VP: Correct. The researchers had mortgaged their house.

CB: This is big stakes.

VP: That’s right. I got home and then my kids were like, tiny. And I walked in, they’re all sleeping, and I hop in bed and I’m thinking F***. The next day, talked to the board and we had been talking to some investors before then and I knew those investors, I had worked for one of them and I knew the other investors. And I rang them and I started talking to them, saying, look, would you still be interested in investing? This is what’s happened. And actually Cameron, they were pretty positive, and they said, yeah, we’re actually still interested in investing. But of course, by that time we had run up a couple of million dollars’ worth of debt. So not only we weren’t at zero, we’d gone past zero.

CB: You’ve got you. Yeah, okay.

VP: Yeah. So, I went to the people we owed money to, which fortunately, the largest of them were our university shareholders, and I said, hey, principally ANU and I said, hey, CFO. Hey, COO. Hey, DVC, do you think you could, I know you’ve invoiced us and you’re going to invoice us. Do you think you can hold out? And I got their agreement to delay payments and I went back to the investors, and I managed to close after about a month and a half, two and a half million-dollar convertible note. And so, we were saved. We had some money. I could keep paying the staff. I cut, cut, cut. So, if you ever talk to any of the staff, Cameron that worked with me, I have a bit of a reputation for being, let’s say, tight. We won’t use the next word, and that’s because when you run a startup, that’s the way I ran things, and particularly at that point in time. And we did a very important thing, Cameron, I sat down with Mark while we were going through this convertible note raising, and I said, Mark. I know we can do everything. I know everyone wants this technology, I know the market is infinite, but we have to focus on three things. We have to focus on three things in the next twelve months or we will not be around in the next twelve months. And so, between us, we did not plan, no business plan. We decided on three things, and they were the three things that we thought that we knew would bring us the most amount out of money that we thought were the most doable in those three months. And we pulled off two of those, and I forgot what the third was, but there was three. We pulled off a deal with a Ramco, as it were. Yes, okay. We did a large deal with the Ramco to establish an operation in Saudi Arabia and we put together a joint venture in Saudi Arabia and we did a deal with I know what the third one was. And we did a deal with Maersk in Qatar, set up another lab in Qatar. And we also did a deal with an Australian R and D organization to fund large, one of the largest CO2 sequestration programs, R and D programs in Australia with us. And combined over those three things, we managed to raise that brought in ten to 20 million of revenue.

Of revenue. And Mark and I became a team. So, we went overseas together.

CB: Right?

VP: This is how startups need. Deep tech startups need to sell like this. He went in, he did the technical sell. Within three to five minutes, we had established technical cred, Mark did that. So, the technical experts in the room were like, yes, these people know what they’re talking about. I did the deals.

CB: Yeah.

VP: And so, we became a team. He did the technical things, he established the work, I closed the deal. In those early days, we did stuff that we could not sell. So, we went in and we sold stuff that we knew we didn’t have. And then we came back here. We said to our team, we’ve just said, we’re going to do this, figure it out. Delivered in three months. You’ve got to figure it out. And we had a great relationship with the university. So, we had the researchers in the university, we had our own technical teams, and we were able to deliver on all of those things. And so, it was an incredible time of innovation, and everyone was so excited, and people would come in on Saturday and they would stay back at work, and there was a buzz, and we were achieving, we were hitting runs and it was one of the best times of my professional life. Is the team vibe, the innovation sitting in these meetings, seeing them all come together, figure stuff out, then go off and implement it. So, we were innovating, we were creating new products, we were creating lots of IP and we were growing. And we got our first commercial order, service order for over a million dollars. And I took that money and I put it in the bank. I had these million US dollars tucked away for a rainy day. I was paying back the university. So, things are starting to move along,

CB: Look up. Yeah, I’m interested that selling approach you mentioned there, Victor, I think it’s terrific the way that you’ve connected that to how deep tech startups need to sell. And in the universe that I’ve come from, that’s called Two in a Box, where the technical and the commercial guy’s side by side into client meetings to do notionally, a joint sales call where establish technical bona fides and then follow with the commercial transaction. So, it’s really fascinating that you live that, and it probably wasn’t called that at the time, but it makes perfect sense in such a fluid environment because notwithstanding you made the comment that you were coming back and then saying, right, guys, we’ve sold this, how do we do it? I suspect having a CTO in the room meant there was some prospect of you being able to do it as opposed to selling, for which you had no prospect of being able to do, and now creating a new problem, which is expectation management. So that’s Two in a Box notion is really interesting, and I guess what. What sits in contrast with the CEO you mentioned who has subsequently let go is there’s your two in a box and now you’ve got your new two in a box. So, then it’s that relationship dynamic and that ability to think fluidly in contrast to coming from a world of operational excellence and then parachuting yourself into a startup culture where those two things, I think, are broadly admissible. If you’ve got a deep background in operational excellence, it’s really hard to do the startup space. And reciprocally, if you’re a startup person, it’s really hard to survive inside environments that are focused on operational excellence.

VP: Exactly right. Cameron and unfortunately, there’s no recipe. Sometimes you can find those people and they’re excellent.

CB: Absolutely. But they’re rare birds.

VP: Correct. And I think one of the things that we need to think about, and this is a current problem, lots of people want to create startups. Universities want to create startups, but there’s nobody to run them, there’s nobody to do. Where do we find the CEOs? Well, sometimes if you’ve got a great technical person by your side, you don’t need a CEO that comes from the industry. You need a CEO that knows how to execute, knows how to build. You can partner those people together. So, it depends what you’ve got already as to what you need. You might not need that person that has 30 years in the industry and has all the right connections. You can get that in other ways. They don’t need to be the CEO.

CB: It’s really interesting, and bears a deeper discussion, of course, is that notion of every startup writes a brief for the CEO seeking affection. Whereas I think the better outcome is thinking about the spread of. Spread of skills you need from the board across the senior offices and then getting that blend right. Don’t try and write the perfect breakfast co that’s going to cost you hundreds of thousands of dollars. Plus, plus, plus. Actually get to think about the blend. Think about how the board connects you into things. So, picking the right board matters as much as finding the one or two people that have the ability to learn. They’ve obviously need a certain amount of depth to start with, but their ability to learn is probably as valuable as their technical backgrounds or commercial backgrounds.

VP: Yeah, exactly right.

CB: So, you’re up and running again.

VP: We’re up and running again.

CB: Things are flying.

VP: We won all these awards, Cameron. We got AFR Awards, we won the Eureka Prize, we won mark won the Eni Award, which is the equivalent to the Nobel Prize for energy. So, we were growing, our revenue was taking off. So, in that twelve months from below, things turned around. And this is the journey of a startup. This is why.

CB: Absolutely. So, at this point, my daughter would refer to you as slaying it. So now that you’re slaying it, what could possibly go wrong from here?

VP: Well, things always go wrong. Always go wrong. But, you know, a couple of a funny story. We actually got sued by the university, so, we were renting some space and there was an accident in the space and the university sort of came after and said, well, you’re liable for it, but hang on, you’re our shareholder, what are you doing? And so, I was trying to contend with that while trying to raise money, trying to explain to investors, well, you’re actually our shareholder. The university is actually coming after us because there was an accident in one of their spaces and I think they’re liable. So, there were lots of things like that. But part of this slaying it journey, we reached what some startups would consider sort of gold, which is one of these very large energy companies decided to put a tender out for this technology, for this product, digital Core Analysis. And why its gold is because when a very, very large organization like that puts a tender out, it’s a signal to the entire market that this technology is starting to be accepted. We’re going to use this technology; we’re going out to tender to market for it. And so, it was a seminal moment. And there were basically three of us in the world at that time. There was a Stanford spin out, so same sort of technology which came out of Stanford. And there was a Norwegian company who’d actually started first, and they had spun out of the Norwegian Oil and gas company, and they had actually had connections with us here in Australia before they started in Norway. So, we knew of them, and we had some history in the past with them. So, this tender came out and of course, all three of us decided to tender for it. And I went in high, and we always had the most expensive. Prices. And that was part of the way that I’d like to price our technology because I thought we have the best technology and so I always went in at the highest price. Anyway, our Norwegian competitor won that tender. And it was at that point that Mark and I talked and said, well, why don’t we go and talk to them and see whether they would like to potentially subcontract us to do part of the work. Because we had a much better technology for one part of the work, and they had a better technology for the other part of the work. So complimentary. And so, we met in Abu Dhabi at a hotel, had great conversation, their CEO and me and their CTO and Mark and we flew back to Australia, and I got on the phone to the chair and I said, I think we’re going to work with them and I think we should think about potentially merging with them. And they talked to us about a merger. So, we went back to Abu Dhabi with some members of the board and ourselves and we started to negotiate a merger with this Norwegian company, and they were in the process of actually raising capital. So, they had found an investor. And so, the merger discussions didn’t start out that well because we had been practically broke twelve months before and they knew that. And so, it wasn’t 50 50, but given what had happened over the last twelve months in those three deals, we managed to make it a 50 50 joint venture. So, we agreed on 50 50 and we merged and we set up a Norwegian company and it was called Lithicon and we had a Norwegian operation and we had an Australian operation and of course I’d done this joint venture in Saudi Arabia and we were setting up in Saudi Arabia and we were setting up in Qatar. So, we had a lot of stuff happening. And then we got this $10 million investment as part of the merger from a European investor to actually set up another operation in the Middle East, our own independent operation. And so, as part of that merger I had agreed for the Norwegian CEO to become the CEO of the merged entity, which was interesting. And I had done that, Cameron, because I was like half, maybe less than his age. And so, you know, out of respect and reverence and he had been in the industry, in the traditional coronavirus industry for a very long time. And so, you know, that’s why, that’s why I had agreed. But anyway, so we, we merged, and it became it was an interesting journey. You know, I thought I thought Norway and Australia. Similar cultures, similar sort of outlooks and things like that. But over time, we found that outlook sort of the same. But they like to reach decision by consensus. Everyone agrees, and they’re happy to take time to reach that consensus. And that wasn’t really how, I guess, we didn’t things. Of course, we want to reach consensus, but if we can’t reach consensus, we still have to move on. So, there was just some different thinking. And I think the other thinking was, again, there was this sort of like, we need to spend this $10 million and we need to build stuff, because if we build it, then…

CB: They’ll come.

VP: Yeah. And so, I remember we had this meeting where Mark and I went to Norway, and again, one of those really down moments where we actually got in a room and we talked about our philosophies, and I said, I’m sorry, I don’t agree with that philosophy. I like the lean approach, the agile approach.

CB: Right.

VP: Let’s do a bit. Let’s see, and then let’s pivot quickly. And if we have traction, let’s build. And so, the philosophies were fundamentally opposing. And again, that night, Mark and I were walking together through streets of this town in Norway, and we’re like, swear words, swear word. What have we done? But we got on well with them, and we’re still friends with them. Fantastic. And trying to manage a company between Australia and Norway is quite crazy because it’s at opposite ends of the earth. So, we’re traveling to Norway every two weeks, which takes forever.

CB: Wow.

VP: And of course, they’re halfway up Norway. Close to the bloody Arctic Circle.

CB: Okay. Oh were they up in Trondheim?

VP: That’s right. That’s right. And there are a couple of other things about the structure that we put in place in terms of how people were integrated in this merger and who reported to who, which I learnt a lot about. You should take those things. Seriously. Not like we’re merging in everyone’s friends, so it’s all going to be okay. I learnt that in the process. In the process as well. But again, as you said, we went from being very down to when we came back to Australia not long after that. We actually starting to run out of cash again because of this. Build it and they will come. And I was quite protective of my cash here in Australia and the Norwegian company needed cash and I wasn’t so open in sharing the cash here in Australia, so that became a bit of a problem because I never wanted to go back to that night where I drove home and thought, I can’t afford to pay people.

CB: You were a man with scar tissue at this time.

VP: Yeah, I didn’t want to go back there, but as luck would have it and it’s all about timing. Your last podcast, it’s all about timing. We had spoken to an American company as Digital Core twelve months before and we spoke to the American CEO and he said, hey, we’ve got lots of cash and we want to buy stuff. And I said, yeah, that’s really nice, but maybe let’s think about how we might work together in the interim. And they had gone away and actually made a number of acquisitions and were looked to me to be setting themselves up as competitors to us. So, I sort of shut down communications with them. But they had continued to communicate with Mark more on a technical level and Mark got a call from their technical person and then um made an introduction to their new vice president. And he rang me up from Portland and said, hey, we’d like to talk to you. And I said, well, we’re not interested because you made all these acquisitions and you’re quite clearly setting yourself up as a competitor to you when we opened the door. So, I don’t think there’s much to discuss. And he said, well, I don’t think you should be like that. I think you should hear me out and we should meet. So, I said, all right, let’s do that. So, we flew to he flew to Brisbane. I flew to Brisbane. We met in the hotel. And he didn’t say these words acquisition, but it was pretty obvious to me that that’s where they were going. And I rang him up the next day, he had flew to New York for their AGM, and I said, look, would you be interested in acquiring? And he said, yeah, that’s definitely on the table. So, at that point, I decided to tell the board and the CEO they weren’t terribly happy about the conversation being had without them knowing, but I didn’t know it was going to lead to anything like that. And so, yeah, we started discussions around an acquisition.

CB: At this point, there’s a little bit of ranker with the Norwegians and a difference in philosophy. And again, this Build It and they Will Come versus Nimble is a really interesting juxtaposition startup world. Everyone talks about agility and being able to move quickly, and yet you’ve been twice through the build it and they will come mentality from people coming from established operational excellence mentalities, rather than the more agile mentality of the startup. So, some interesting, like two data points isn’t enough, but it’s just interesting that it happened to you twice. So, you’re now in a situation where you’re holding money back from the Norwegians because of your allergic reaction to that late evening a couple of years earlier. But how can you, the Americans are looking to acquire both you and the Norwegians or just-

VP: No, we were one company. So, the Australian company was a subsidiary of the of the Norwegian.

CB: So, they’re buying the Lock stock. They’re buying everything. Correct. They’re buying everything, the whole company, the technology and everything. And you know, I would have eventually I would have had to eventually shared the money. I was keeping the money here from the money that we had made before we merged. So, we would have got through that. But yes, the Americans came along and wanted to acquire the whole thing. So, we entered some quite intense due diligence and some quite intense negotiation. The due diligence Bible came back out and of course, we’ve done a lot of stuff in between. There was another massive complication, which is this US competitor, this Stanford company. Now, here’s really interesting lesson for everyone in tech transfer. They had gone out and patented everything in sight. They had patented the equivalent of the wheel and for some strange reason.

CB: Granted?

VP: This one US patent examiner. They had paid for all these expedited examinations, and they had gone to this one US patent examiner, and they were all being granted. And we could not understand how these patents were being granted because they were literally like…

CB: Here’s a wheel, here’s an axle, here’s a wagon.

VP: And so they were building this patent portfolio, and they started to come after us in Australia. And when they started coming after us in Australia, I had to act. So, we had to get US lawyers.

CB: Oh, my goodness.

VP: We started analyzing their patents. And I learned a lot about how to challenge patents in the US. And it’s very complicated. It depends how long they’ve been granted for. So, Mark’s time started going into looking at their patents and finding prior art. And of course, there were even textbooks published in the 50’s and 60’s had the things that they were patenting. But it doesn’t matter, Cameron, because it’s a granted patent.

CB: Yeah. You’ve now got to disprove. Absolutely. Notice is on you.

VP: Yeah. Disprove. And you got to go through the US system, and you’ve got to pay the money, and you’ve got to go through all that, and there’s no certainty. But when they came here to Australia, I had to act, and I went through IP Australia. They backed out of Australia. But I still had this big problem of these patents.

CB: Australia is not your market.

VP: That’s right. So, they have these patents in the US and they were going into other countries and we’ve got this acquisition underway and they’re going, well, what’s going on with these patents? And what are you going to do about these patents? So, I’m trying to try and mount a narrative around what’s going on and trying to actually understand the patents. And a couple of years earlier, you know, I knew it was coming because they had hired a patent manager and no one in a startup hires a patent manager unless they’re going to have a bloody big patent portfolio. And the researchers being researchers, they had spent 15 years publishing, which in one respect was good, because they published great.

CB: There’s all prior art.

VP: But yes, but then you have to use that to actually go after the patents. And there’s no guarantee, just because it was published as prior art, that their patents are going to be overturned. So, you’re actually still at a loss. So, dealing with all of that, trying to do this due diligence with the Americans, trying to put together a deal, and I had established a great rapport with the Vice president, so he was dealing with the board and some members of the board, and then he was talking to me as well about certain things. And of course, then there was the arrangements with ANU and UNSW and ANU and UNSW were the owners of the technology because they were the license. And so, the American company wanted to make sure they could secure the technology, so they had to open up a negotiation with the university, so I had to manage that as well. So, we’re trying to construct a deal with the trying to construct a deal with the universities and trying to sort out all this patent stuff, having this due diligence bible saying why things have been done a certain way. And so, it took us six months. And then as part of the deal as well, the board came to me, which the board would do in a lot of startups, and say, hey, Victor, for every dollar that you make above 60 million, we’ll give you. Above this number, you get an incentive and a group of us would get that. A group of the executive would get that incentive. And so, me, again with the spreadsheets. I was constructing all the spreadsheets, which was my fate for those many years. And so, I was generating these numbers that we, the company, were putting forward to the Americans. But I knew that after the company was acquired, I would continue on, and I would basically be responsible.

CB: You had an inherent conflict around self-preservation here. If you over egg it, you over promise.

VP: That’s right.

CB: Under egg it. No extra marmalade on your toast.

VP: Well, That’s right. As one of the executives, I also have a duty to the shareholders, 

CB: You got a duty to the shareholders. And I sent Victor, I think, an inferred duty to the team as well, who have been there from the get-go.

VP: Yeah, that’s right. So, it was like putting the company together where I was sitting on multiple slides. And so that became quite tricky. And Mark and I worked quite hard on the figures to make sure that we thought that they were achievable optimistic, but, you know, achievable, let’s put it that way. So, the deal happened, it was happened in within six months, and we ended up selling the company for what? Today would be about $85 to $90 million Australian. And that was after four and a half years.

CB: We’re down in the middle of 2010, are we?

VP: No, we’re now in about the end of 2013. We started the company in mid to late 2009.

CB: Okay.

VP: And then we did that. The 80 months of due diligence beforehand, that was for a startup. That’s an incredible journey. It is, I think, one of the most successful Australian commercialization. Contemporary startup, particularly in this, in this space, timing. Cameron, timing is everything. Six months later the oil price tanked, right? And you know, and so when the oil price tanks, energy companies, the last thing they do is invest in R and D and invest in new technologies. So timing was everything. But of course, I was then on the other side working for the American company, having put together these numbers with the market being tanked.

CB: and that didn’t look so good, suddenly.

VP: Correct. Another new journey and an interesting journey of what happens when an American, when a large company acquires a fast-growing startup, whose technology is still being developed. It’s not better down, it’s starting to gain acceptance and how those things are integrated, and the stats are there, 80 plus percent of those things fail and there are various reasons why they fail. So, we could have another podcast on what happened on that front, but that’s a whole new journey. But the investors in Digital Core and Lithicon made a lot of money, particularly…

CB: They made good money.

VP: The late stage investors made an awesome return on their investment. The universities made many returns. Cameron the universities, they not only made a commercial return on their equity and a really good commercial return on their equity, like three to four time return in three to four years, they made an exceptional return in relation to category three funding. Because a lot of the work that we did in the company was actually three-way research agreements where we would go out and say to energy companies, give us some money to do this, the university will develop this, and then we’ll actually operationalize it and deliver it to you. So, we did fantastic. That three-way partnership was a great way for the universities to bring in money. And this is my message to universities today, is don’t think so much when you do startups about the equity and the commercialization return, think about the relationship with the startup and what that will bring you in terms of research income.

CB: That’s really interesting, Victor, and just for those folks that aren’t Australian oriented, category three funding is a leveraging mechanism where the university can wind, can draw more government money into the pot because of those sorts of private sector deals.

VP: Absolutely, yes.

CB: It’s not free leveraging, but it is a bit of leverage that doesn’t sit directly in the line of return on investment, but it is a return to the university of some value.

VP: That’s right. So, there are several categories of return to universities and Australian Research Council funding is notionally category one. There is a bit of category two, but category three is the industry. Industry funding and startups are a great way of bringing category three funding, or that time really interesting back into universities. And it’s a playbook since Digital Core days that I’ve repeated a number of times and universities repeat a number of times. I subsequently went on to work with Daniel Shaddock at Liquid Instruments, and I was a founding director there with Daniel, and he’s done the same thing. Started the company in the university, in the basement of physics for a few years, has spun out, has brought fantastic research income into the university. Will, I hope, deliver a fantastic commercial return. But there’s heaps of benefits to these kinds of arrangements that go way beyond the commercial. I think there’s lots of lessons there in the ways to do things, but that was the journey, I guess, of Lithicon and Digital Core.

CB: It’s an incredible journey. And I think as we draw things to a close, victor it sounds like the joke goes that a Norwegian and American and Australian met in a bar and then what unfolds from there because notwithstanding the oil price tanked, having worked for US. And indeed, a Dutch company, so not Norwegian. But there are demonstrable differences in business culture between Europe and the United States, and I’d even hazard a guess between the countries within Europe, in fact. Pretty much. I think we know that from our own experiences, but the fact that you’ve had to navigate those cultures while going through raising rounds and reorganizations and things makes for a somewhat torturous journey in some respects, but probably nothing unusual in many others because you have to form up new relationships to grow and those relationships are corporate relationships as much as their customer relationships.

VP: Yes, no, that’s exactly right. And tech transfer, as you keep saying Cameron, is all about relationships. And it is, indeed, which is why I come back to what I talked about first, people, and that’s the business. Tech transfer is about relationships first and foremost. And I formed so many relationships in that journey and I still value all the people that I met. They taught me a lot and I have learned a lot through that journey. And I have to say, these days, when I approach that journey, I’m much more relaxed. And a lot of things that people bring to these journeys when they’re first starting out, they tend to value things that I don’t think are so important and so trying to walk them through that journey as to where they should be focused. And let’s not worry about that park that there. And I think that’s the benefit of going through that experience. So, coming back, I’ve been on the three sides now. I’ve been in the university commercializing research and still do that now I’ve been in the VC side actually investing, starting companies, doing that kind of thing. And I’ve actually now started and run and exited a successful startup and I’m still involved in many startups and working with founders, and I enjoy it, I enjoy all of those things. But what I enjoy the most is the relationships and meeting people.

CB: Fantastic. And I think, Victor, that’s a terrific place to end because we too believe that. The relationships drive this for all the other great technology and markets that can be addressed and well written patents and the like. If the people aren’t around it with the relationships, then it is highly likely it’s all going to implode. So I think the relationships is a great place to end on on what has been quite a story and a journey that you’ve shared with us, Victor. So thank you very much for joining us today.

VP: Thanks a lot.

CB: That was Victor Pantano who joined us today on the podcast sharing an intriguing and wonderful story about how Digital Core went up and down and up and down and up and down and eventually up and out. So we look forward to you joining us next time on Tech Transfer Talk. Thanks for listening.

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