G-J van Rooyen, chief executive officer (CEO) of South African startup Custos Media Technologies, knows a thing or two about how valuable the support of a university can be to a newly-founded startup.
Custos, which looks to combat digital piracy by embedding bitcoin bounties as watermarks within videos and movies, was not only founded by van Rooyen, an academic at Stellenbosch University, but was also incubated at the university’s LaunchLab incubator and received its first funding round from Innovus Technology Transfer, the university’s industry interaction and innovation company.
Having subsequently raised a further round of funding and begun acquiring clients across the world, van Rooyen is grateful for the support offered by Stellenbosch University and keen to see other university-based businesses scale their businesses in the same way.
From the C4DLab at the University of Nairobi, to the Bertha Centre at the University of Cape Town, to @iLabAfrica at Kenya’s Strathmore University, entrepreneurship has become a key focus of a number of African universities,with startups led by students and academics reaping the rewards.
Van Rooyen said the concept for Custos was born at the Media Lab at Stellenbosch University, an environment that cultivated high-tech research at the intersection of different disciplines and commercial needs, before moving onto the LaunchLab as the university realised the benefits of incubating fledgling businesses and launching them into the broader commercial ecosystem.
“When the first lab prototype was successfully demonstrated, and early market research indicated that bitcoin-based piracy detection may be commercially viable, the university environment allowed the business to launch by providing resources that would otherwise would have been extremely difficult to come by without significant early capital,” he said.
Here are nine key ways in which Custos benefitted from the support offered by Stellenbosch University.
“The Custos concept was invented early one morning in an informal meeting between researchers. By that afternoon, the disclosure of the concept was written up and submitted to Innovus,” van Rooyen said.
Within a few days the Custos team was meeting with patent lawyers, with a provisional patent filed a few weeks later to allow the rest of the international patenting process could proceed.
“At a university with a high-functioning technology transfer office, inventors can invent, prototype and commercialise, without worrying about the substantial cost and complexity of filing local and international patents,” van Rooyen said.
Great ideas are a dime a dozen, but it is whether they could potentially succeed in a competitive market that is the question.
“After patenting, Anita Nel, the CEO of Innovus, started setting up calls with business specialists and investors, so that the inventors could pitch the business case to a critical audience,” van Rooyen said.
“I remember a phone call with an internationally renowned business leader at a very early stage, who helped us to carefully consider the market options for Custos. A good university technology transfer office allows a startup to draw on business networks that it otherwise simply wouldn’t have had.”
Custos funded its entire first year of operation from a seed-stage grant from the Technology Innovation Agency (TIA), which is part of South Africa’s Department of Trade and Industry.
“This particular seed fund was only available to founding teams at publicly funded institutions, and the university itself was awarded a funding pool from which it could select recipients through a very lightweight process,” van Rooyen said.
“This allowed the inventors to focus on founding and growing the business, instead of trying to raise capital at a very early stage. When Custos later raised an equity-based seed round, Stellenbosch University directly invested in the business, on the strength of the existing relationship.”
For founders who have not started a company before, incorporation can be a daunting and expensive process, van Rooyen said.
“The purpose of a university technology transfer office, however, is to streamline this process. The entire process of setting up a Memorandum of Incorporation, Shareholders’ Agreement and navigating the statutory and CIPC requirements was handled by Innovus and their service providers – at no cost to the founders,” he said.
“In the very early years of the Media Lab, we realised that Stellenbosch was lacking an incubation environment where entrepreneurial teams can nurture their startups in a supporting environment,” van Rooyen said.
“There were a couple of attempts to get something off the ground, and by the time Custos launched, Nedbank’s sponsorship had already made the LaunchLab a reality. The team could easily transition from the Media Lab – where most of the development was done in the TIA Seed Fund stage – to the LaunchLab, where we are currently based.”
He said there is strategic value to the inventors to initially have IP residing with a stable institutional owner, such as a university, and licensed to the startup.
“If the startup fails, the IP remains active and can be re-licensed to a next venture or to a third party. Innovus’ license agreement makes it easy to transfer the IP to the company when the company reaches a certain stage of investment and growth,” van Rooyen said.
In the meantime, the university maintains and grows the international patent portfolio, something which would have been prohibitively expensive for a startup to do.
“In short, if your business plan requires a strong IP play, it would be extremely difficult to execute without ample funding, or a large institutional partner like a university.”
For Custos, being able to say it had commercialised research from a university was a huge boost when it came to speaking with potential customers and investors.
“University branding is one extra credential that can help to convince someone that you’re not just another flash in the pan,” he said.
“When we were negotiating the license deal with the University, and talking about Innovus’ equity, I joked with the other founders that, if Innovus has a substantial stake in the company, I’d expect the CEO Anita Nel to have a seat in the office and get coding,” van Rooyen said.
“I swallowed my words later – Anita didn’t code, she networked. You won’t believe how broad and deep a good technology transfer office’s networks run. We were introduced to new VCs and advisors each day or two. We got our first two pilot customers through her direct introduction.”
For a young startup, simply getting the word out can be extremely difficult, and having a university as a partner can be very valuable indeed in this respect.
Two of Custos’s founders were University staff members, and the other founder was a student at the Media Lab.
“The first two developers hired were made offers while they were still studying at the Media Lab, and started working directly after their studies,” van Rooyen said.
“A close relationship with a university gives a startup a closer link to top talent, which can be very difficult to source.”