Shared risk

Model adopted by Embrapii offers companies funding and cooperation with research groups

Around 210 industrial companies in Brazil have already used an innovative new funding system that offers grants and the support of research groups linked to universities or technological research institutions. The model was created in 2014 by Brazilian industrial research and innovation company Embrapii, a social organization linked to the Brazilian Ministry of Science, Technology, Innovation, and Communication (MCTIC). The investment is tripartite: each project receives a certain amount from Embrapii, which does not have to be repaid, while the proposing company matches or exceeds the investment. Embrapii then coordinates partnerships with 42 accredited research units working in laboratories at universities or technological institutions specializing in industry fields such as automation, intelligent systems, materials, and optical communications, among others. The research units, which develop projects in partnership with the companies, complement the investment—not financially, but in the use of their laboratories and management support.

The format is different to the funding procedures traditionally offered by agencies and institutions in Brazil. Embrapii has no contact with the companies and does not choose the projects that will be funded. This responsibility falls to the accredited research units, which are selected via a public bidding process and agree to meet a series of targets, such as prospecting a certain number of potential clients, contracting new projects, and applying for patents for any innovations produced. Each research unit agrees to work on a certain number of projects and is given total freedom to negotiate with businesses, reporting on the fulfillment of their targets every six months. The research units and companies share all intellectual property generated by the projects. “Some units divide it 50/50, while others allow companies to commercially capitalize on the innovation free of charge, but with royalty payments if they license it to third parties or protection of rights if the patent is not used,” says Embrapii CEO Jorge Guimarães.

One completed project is a dental cement developed by researchers from the Institute for Technological Research (IPT) in São Paulo, in partnership with Angelus, a dental products company from Londrina, Paraná. Another involved companies such as Natura, Boticário, TheraSkin, and Yamá teaming up to develop a cosmetic nano-encapsulation technique that carries active ingredients to deeper layers of the skin (see Pesquisa FAPESP, issue No. 243). The project cost of R$2.3 million was divided between the companies and Embrapii, in partnership with the IPT. In another project worth a total of R$30 million, an undersea robot was built by Senai-Cimatec in cooperation with the BG Group, to be used for deepwater exploration. More than 330 projects have been agreed to date, totaling R$525 million in investment. Between 2014 and 2016, Embrapii allocated nearly R$70 million to the research units (see table). “Companies from São Paulo, which is the most industrialized state in Brazil, are party to 49% of these projects, but there are many industrial sectors and businesses still to be served, and a lot of room to grow,” says Embrapii operations director Carlos Eduardo Pereira.

Brazilian aerospace company Embraer has the most projects cofunded by Embrapii. They have already been involved in 14 partnerships with various accredited research units, including working with the IPT on the development of light materials used in aeronautical structures, with Fundação Certi at a laboratory that specializes in electronic aeronautical systems, and with Senai-Cimatec on solutions to reduce aircraft maintenance costs and automate data analysis and repairs. “These are pre-commercial research and development projects, where the technologies are less mature and the risks are greater. The Embrapii model is interesting because it allows the risk and investment to be shared, and complements other funding methods that are more targeted at the final stages of development,” says Daniel Moczydlower, director of technological development at Embraer. Embraer always strives to develop well-balanced partnerships, and the company is already negotiating four more projects. Moczydlower has just one reservation: the research units, while highly capable in terms of technological expertise, also need to invest in project management. “Some units have already realized that many large businesses have growing demands with regard to transparency and compliance, and are improving their management structures,” he says.

ELDORADO RESEARCH INSTITUTE The Eldorado Research Institute, which specializes in connectivity and microelectronics: average of R$1.3 million per projectELDORADO RESEARCH INSTITUTE

Jorge Guimarães believes the format is attractive because it helps companies on high-cost projects with uncertain returns. “Embrapii was not created to foster industrial innovation at the highest levels of technological maturity. It is more like an entrance exam where companies conceive an innovative new project. The aim is that afterwards, they apply to agencies such as FINEP [Brazilian Funding Authority for Studies and Projects] and the BNDES [the Brazilian Development Bank] for the final stages of development,” he says. In 2016, FAPESP and Embrapii signed a cooperation agreement that establishes the funding of projects conducted at higher education and research institutions in the state of São Paulo, participated in and cofunded by Brazilian companies. The two institutions already work in partnership to support the development of orthopedic prostheses made of niobium-titanium and titanium-niobium-zirconium alloys; a project that also involves the IPT, Companhia Brasileira de Metalurgia e Mineração (CBMM), and the Disabled Children’s Aid Association (AACD), all working together under FAPESP’s Research Partnership for Technological Innovation program (PITE).

Guimarães believes that there is room to expand both the number of projects supported and the number of accredited research units. According to him, at least 10% of the 38,000 Brazilian research groups registered by the Brazilian National Council for Scientific and Technological Development (CNPq) could potentially cooperate with businesses on innovative projects—Embrapii currently works with about 300. “We estimate that there are at least 4,000 groups in fields such as engineering, chemistry, physics, mathematics, geosciences, and biology that are capable of responding to industry challenges.”

The difficulty increasing the number of projects has been attributed to the national economic crisis. The Telecommunications Research and Development Center (CPqD) in Campinas was accredited for optical communications projects in October 2014, but has faced various obstacles. It was initially estimated that each project would involve an investment of around R$3.5 million, but in reality, the average has been just R$1.6 million. The research unit has worked on 22 projects, with a portfolio worth R$36 million. “We have reached our target number of projects, but not the predicted investment values. And this is not unique to the CPqD. According to Embrapii, the values ​​have been below target for all research units,” says Marcelo Fogolin Calori, technical coordinator of the Embrapii unit at the CPqD. “But we are optimistic, given the improvement in the economy. Between January and September 2017, the CPqD increased the value and number of its projects by 20% and 70% respectively.”

The Embrapii model is influencing the way universities and technological institutions fund research and development activities. The IPT is a good example of this: the 110-year-old institution is accustomed to providing technological services to businesses, but the proportion of its revenue generated by R&D has grown from 12% in 2010 to 36% in 2016—the goal now is to reach and maintain 40%. According to Flavia Gutierrez Motta, coordinator of the two IPT units at Embrapii—one dedicated to materials and the other to biotechnology—this change of profile was initially driven by investments from the BNDES Technological Fund (FUNTEC), which also provides grants to partnerships between institutions and companies, but selects and assesses the projects themselves. “As FUNTEC funding has declined, strong recent results can be attributed to the work of Embrapii units,” she says. One IPT project involved a partnership with cement manufacturer Intercement, and resulted in the development of a technological process for treating steel slag, a by-product of the steel production process.

LÉO RAMOS CHAVES BR Photonics Laboratory: partnered with Embrapii to improve the performance of optical systemsLÉO RAMOS CHAVES

The two IPT units received a budget of R$49.4 million for a six-year period. Of this total, they have already contracted projects to the amount of R$25.8 million, and between 2014 and 2016 they received R$3.8 million.

Prospecting for clients helps to expand the model. Laércio Silva, vice-president of business at Fundação Certi, whose Embrapii unit specializes in intelligent systems, has made more than 260 approaches, resulting in 16 contracted projects and investments of R$41 million. “We try to understand the customer’s business strategies and the problems they face so that we can present a relevant proposal that reduces costs, improves productivity, and increases competitiveness,” says Silva. The unit has contracts with companies such as Siemens and Embraer.

Engineer Vanderley John, a professor at USP Polytechnic School and coordinator of an Embrapii research unit that develops eco-efficient construction materials and components, says looking for partnerships with companies is a lifelong learning process. “We are always discovering new demands that often lead us to update our research themes.” He says that this contact with businesses is enriching the university. “We spoke with a construction company whose research needs included the use of artificial intelligence, something we did not work with. In order to meet these kinds of requests, we began working with colleagues from the Institute of Mathematics and Statistics who specialize in the subject. Without this demand, it is unlikely that we would be operating in such a multidisciplinary nature.” The unit committed to investing R$30 million over a six-year period. For now, due to the struggling construction market, it has so far raised R$2.1 million across four projects.

Embrapii units linked to public and private research institutes—which have experience working with businesses and have been establishing partnerships funded by the Brazilian Information Technology Act or the Telecommunications Technology Development Fund (FUNTTEL) for some time—often obtain results more quickly than units linked to universities, which lack the same expertise.

Marcelo Calori explains that accreditation of the CPqD occurred naturally. “Adapting our processes to Embrapii’s reference guide was fairly easy. When the CPqD was privatized in 1998, we adopted a strategy of seeking new markets and establishing partnerships with companies through incentives such as the Information Technology Act, and funding from ANEEL, FINEP, the BNDES, and others,” he says. Some of the unit’s customers, such as optical cable manufacturer Furukawa, had already used the CPqD’s services in the past. But they have also developed new partnerships, with Taggen, for example, a company that develops solutions for the Internet of Things. “With Taggen, we developed Brazil’s first beacon, which is now on the market,” says Calori. The beacon is a device that emits signals using bluetooth technology, offering connectivity for mobile devices.

José Eduardo Bertuzzo, one of the heads of the Embrapii unit at the Eldorado Research Institute, which specializes in connectivity and microelectronics, says that negotiations with companies are usually fast. “Because the investment is pre-approved and the project does not need to be authorized by anyone else, we can begin discussing the product development stages right away,” he says. The unit, formed a year ago, has already contracted nine projects, with an average investment of R$1.2 million per project. One of them is a partnership with BR Photonics, an optical communications company. Researchers at the Eldorado Institute develop ways to improve the performance of optical systems in BR Photonics products.

In July, Embrapii accredited seven new units. The state of São Paulo, which has so far participated modestly in the scheme, increased its interest from six units to 10. One of the new units is the Center for Innovation in Medicine and Chemistry (CQMED), formed by researchers from the University of Campinas (UNICAMP). The group, supported by FAPESP, is part of the Structural Genomics Consortium (SGC), which involves more than 10 pharmaceutical companies, as well as research support agencies and scientists from universities in the UK and Canada, with the aim of creating innovations through the identification of biological targets for diseases and the development of molecules for medicines (see Pesquisa FAPESP, issue No. 230).

“Our unit’s goal is to attract five Brazilian pharmaceutical companies over the next six years to develop molecules for potential use in medicines,” explains pharmacist Katlin Massirer, one of the unit’s coordinators. “It is not an easy task. The pharmaceutical industry is just beginning to conduct research and development in Brazil, and we intend to play a decisive role in this phase of national innovation.”