NSW pledges $150M fund to bridge ‘valley of death’ ahead of state election

The NSW Government has announced a proposed $150 million science and innovation fund aimed at solving one of research commercialisation’s most persistent problems: the valley of death.

The election-dependent initiative, slated for FY2028 if Labor wins the March 2027 NSW election, would co-invest with universities to commercialise research and establish startup spinouts. For now, however, the proposal itself remains subject to the successful commercialisation of a political promise.

The funding pledge responds to the independent Pounder Review of the NSW technology and innovation ecosystem.

“At this year’s Research Australia Health and Medical Research Awards, I put a challenge to the room: Build a national co-investment fund bringing government, industry and philanthropy together, sharing risk, so good science stops dying in the “valley of death” between discovery and commercialisation,” said Nadia Levin, CEO of Research Australia. “Days after we called for it, NSW just proved it’s possible.”

The ‘valleys of death’ defines the space between homegrown research and real-world adoption. It is a system challenge as much as a funding issue, where state and federal governments along with investors play a determining role in whether innovation remains in pilot mode or progresses into patient care.

NSW officials are pointing to Elastagen Pty Ltd as an example of what can happen when university research survives that notoriously difficult transition. The University of Sydney spinout was acquired by Allergan in 2018 following approximately two decades of research, a decade of company operations, A$35 million in venture and grant funding, five clinical trials and a development timeline more commonly associated with nation-building projects.

Elastagen’s trajectory has consequently become a case study in the commercial potential of university research, provided commercialisation is afforded a 30-year runway, multiple rounds of financing, specialist investors, global pharmaceutical interest and, eventually, a place in future innovation strategies.

UNSW Sydney Chancellor Warwick Negus AM said the fund would create new opportunities for researchers and entrepreneurs.

“Universities are engines of discovery, economic growth and innovation. As Australia’s leading entrepreneurial university, UNSW welcomes strategic investment that will create new opportunities for research commercialisation and support new enterprise across the state,” said Negus.

The broader NSW investment landscape provides another pillar for the government’s case. The state accounted for 57% of all Australian venture capital investment between 2000 and 2024, representing US$15 billion, twice the amount attracted by the next-nearest state, despite NSW accounting for 31% of national GDP. Innovative NSW businesses now generate $39 billion in annual economic activity and employ more people than the mining and agriculture sectors combined.

“This is exactly the shift the health and medical research sector needs nationally, not because one state got there first, but because it shows government, universities and investors can be brought to the same table with shared risk and shared accountability. Now imagine that architecture applied across the full health and medical research pipeline, backed by a genuine national co-investment fund,” Levin added.

The mechanics of the proposed fund remain to be determined. Investment sizes, co-investment requirements and the process through which startups would gain access are expected to be developed after the election, through the customary policy process of leaving the finer details for later.

NSW Minister for Innovation, Science and Technology Anoulack Chanthivong said, “The Pounder Review confirmed that NSW punches well above its economic weight in innovation, research and venture capital. The NSW Innovation Blueprint set out our long-term vision to make NSW the best place to innovate, and the Research Innovation Framework is a key step in delivering that vision by helping more research move from the laboratory to the marketplace. Innovation policy is growth policy. Every discovery commercialised here means more investment, more jobs and more of the economic value created in NSW, staying in NSW.” 

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