Editor’s note: This is a guest post by Vivek Wadhwa, an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Executive in Residence at Duke University. Follow him on Twitter at @vwadhwa
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In my last post, I explained the motherlode of innovation hidden in the huge stacks of patents and discoveries backlogged at our universities and research labs. While entrepreneurs in Silicon Valley trip over each other to create the next iPhone app, they ignore the early-stage discoveries which could lead to the next Internet, a revolutionary memory device, or a cure for infectious diseases. Researchers in university labs find vast numbers of breakthroughs which can better the world. Most of their work never sees the light of day. Hardly 0.1% of all funded basic science research results in a commercial venture.
To boost our economy, we need to bridge this gap and improve the university research commercialization system. Many are working on solutions. Unfortunately, things change slowly in academia and those solutions are years off, at best. In the meantime, there are opportunities for ambitious entrepreneurs to do what some smart VC’s do — tap into this goldmine.
To create a guide for you, I did some brainstorming with Barry Myers, a colleague at Duke University who plays the Dr. Jekyll and Mr. Hyde roles of university professor and venture capitalist. A disclaimer on his behalf: Barry would never tell you (unless under the influence of alcohol) to go around the university system but here is our roadmap for finding treasure.
First, pick a field which you are really interested in and spend the time to learn what the science really means. This will be like going back to school. Except you know the importance of what you are studying.
Now let’s be clear about what you are looking for. You will find many ideas in academia, but you want the “propriety ideas” – the ones which VC put in the “proprietary deal flow” category. These are inventions which no one else is aware of (and no one else is bidding on). You need to use your judgment to figure out whether you have one of these nuggets. Ask yourself: If the technology works, will its technical abilities be sufficiently better than anything in the market to make a big impact? If the answer is yes, bet on the technology and run with it. But make sure you have the exclusive. That usually means a materials or biological patent or a process patent that relates to an actual process.
Now let’s go mining. Start by knocking on the front door. All research universities have technology transfer offices which are assigned the task of commercializing research. They manage all of the patents and negotiate licensing deals. Some of these offices are really competent and will help you analyze their portfolio of discoveries. They’ll take the time to explain the value and help you shape your thinking. They will connect you with the inventors and may even team you up with other entrepreneurs and potential investors.
But that’s Fantasy Land. Unfortunately, very few tech transfer offices are like this. Most are staffed by lawyers and bureaucrats whose purpose in life is to squeeze every dime out of a potential licensor while protecting their butts just in case they asked too little and the technology makes it big.
So, you may need to get in through the back door. Universities have departments called “centers” which focus on specific areas of research including entrepreneurship and research commercialization (which are trying to fix the system). For example, at Duke, we have the Center for Research Commercialization and Entrepreneurship (which Barry runs and I am a part of), at Berkeley, Iklaq Sidhu runs the Center for Entrepreneurship & Technology, and at Stanford, Tom Byers runs the Stanford Technology Ventures Program. These centers hold regular events and maintain mailing lists – which are open to anyone. Sign up and attend a few of these meetings. The meetings which feature academics talking about their research can be extremely boring (that’s how researchers are), but just by being there, you will get to meet key faculty and learn what’s going on at the schools. And in most cases, you’ll be the only ones of your kind there (few like you have the time or intellect to sit through these).
If you do hear of some great ideas, ask the faculty if you can learn more over a cup of coffee. Most hard-core academics don’t get to tell their stories to regular human beings and are happy to talk. Go prepared – read all the articles the faculty has written and seem smart. As you start meeting university staff, start asking to find the person(s) who knows everyone at the university and can make things happen for you. You’ll find that every university has two or three people like this. Frequently they hold non-”line” administrative positions (vice dean, associate provost of research, etc.). Find them, buy them coffee and all doors are open.
Students at universities also have entrepreneurship clubs and host events like business plan competitions. The competitions are a total waste – I can’t name one real company which has ever been a winner at one of these. (Everyone cites Akamai, but they actually lost the MIT contest.) But students, particularly PhD researchers, are usually in the know about what’s happening at campus. For example, I met Eli Chait soon after I came to UC-Berkeley and he has been introducing me to faculty and other student groups who are wired into the universities research system. Eli is a senior at the school, works part time at Alsop Louie Partners and heads the entrepreneurship group Startup @ Berkeley (startup.berkeley.edu).
When you do strike gold, then the hard part starts. Negotiating a deal with the tech transfer offices can be painful. They will ask for the world, but be aware that almost everything is negotiable. They will ask for milestone payments, royalties, upfront, patent costs. All of these are negotiable except patent costs (typically $10-50K – earlier, the lower) because this goes into a different bucket and funds further patents. Ownership demands will usually range from 0-5%, and they’ll hit you for around 2.5%-5% royalties. Late stage marketable technologies will draw 10% demand while early stage breakthroughs will only garner perhaps 1%.
If you do find worthwhile inventions, discuss licensing directly with the faculty. Faculty are open to discussion. Don’t encourage them to go around their tech transfer offices — this can create immense amounts of litigation and deferred liability risk. Be honest and open with them and they will generally be honest and open with you in return. They may be protective of their IP but that is natural. They understand the potential value of their work better than anyone else. Protect their interests and guide them through the system (the tech transfer office, term sheets, valuation, options, vesting, etc.).
Become the person who navigates this and they’ll do the world for you. But whether you succeed or fail in your mission, you’ll come out a lot smarter. If everything goes really well, you might change the world. So what do you say – do you want to launch another dumb iPhone app or shoot the moon? I thought so.
Excellent article.
It’d be really interesting and helpful if the author could write another post going into more details regarding the paperwork necessary and how to commercialize the invention.
This sounds like immense amount of legwork for a very slim possibility of gain. And who is gonna do this? I just can’t imagine getting so passionate about a technology i neither invented nor have any personal connection to.
I think we’d probably be a lot better off trying to build and grow the entrepreneurial ecosystem around and within individual universities than go for this needle in a haystack approach.
“This sounds like immense amount of legwork for a very slim possibility of gain.”
Welcome to Entrepreneurship.
And I have no problem with that…if it’s something I’ve created and am passionate about. But I just can’t imagine someone pulling someone ELSE’s idea and vision off a shelf and going balls out to turn it into a reality.
I mean, can you name any successful companies that followed this path?
How about Microsoft for one?
He said successf… oh wait. Nevermind.
I concur – thanks for the informative article. I’ve been working with a local university for about 10 months now, and we always come back to the same question – who owns the technology? A large part of the IP was developed by one professor at both his previous and current university. The other question is to follow gov’t grants (SBIR/STTR) or seek out a client, get a reference, then seek funding.
The “bad guys” in all of this are the tech transfer offices. They’d do so much better if they just had simple, set royalty/milestone rates and had a bias in favor of freeing IP rather than trying to milk every last dollar.
In particular, University of Illinois is terrible – the new President was bemoaning that they only saw $8 million from Mosaic instead of billions from Netscape. He learned exactly the wrong lesson: if they had helped Marc et al “get the hell out” and raise money in Champaign or Chicago, the Valley may well have been a very different place.
See this from the university perspective–they fund the facilities and staff that make the research possible. A university president is charged, first and foremost, for making sure the bills will get paid next month, into perpetuity. To me it doesn’t seem unreasonable that they make some revenue when research done under their auspices is commercialized.
did i just hear dumb iphone app? can we include more dumb twitter apps? entrepreneurship should be taught in grade school. education as we know it is changing. i think the value of a degree will become less valuable. the value will be in how we profile our executed accomplishments online. the new rat race. the “show me” era.
“…the value will be in how we profile our executed accomplishments online.”
I can’t agree with you more
Great article… By the way, there are a lot of good universities/academics/ideas in other countries also. It will be good to know how we can tap into those innovations also.
Living in university towns have long been the secret to success in life. And it is apparently still a secret. I like it that way.
Don’t big tech companies already do this kind of stuff?
http://www.traderbots.com
dude.. the iphone is the moon.
Your disrespect for business reflects bad on you. Besides you missed the downfalls of dealing with academics… as well as the failure rate…
Academics is too much risk.. there are better opportunities out there… besides dealing with tech transfer is pita.
Good article… good job..
Having done two venture-backed tech transfer companies from the University of Michigan (which spent over *$1 billion* last year on research), I’m not sure there are necessarily “bad guys” to blame here, just some very difficult problems to overcome in culture and environment (just stating the facts: startups with PhD founders have the highest rate of failure). That said, we also probably have one of the better tech transfer offices around, although their startup group is relatively new.
The crux of the issue, IMO – large research universities are really built for R, not D, and few have ready access to a startup ecosystem for rapid commercialization. The academic research agenda also tends to orient toward matters of technical interest versus commercial importance, so you often start with a significant gap in product/market fit – technology in search of an application in search of a market. The death valley funding gap for such ventures can be much wider than for your typical lean Internet software startup, and the founder’s issues (ala Noah Wasserman) much more… intense.
Michigan’s made some attempt to address this, both top-down and bottom-up. The state has four magic sectors that have been blessed for investment, incentives, and grants to help offset their high startup capital requirements – life sciences, alt energy, advanced manufacturing/automotive, and homeland security. Programs like http://muci.org provide straight-up grant money for university technology commercialization, and the Michigan pre-seed fund can provide a 2-to-1 match for any money you raise (dilutive, but subordinate). The state has also injected money into local VCs targeting investments in these sectors.
UM’s Office of Tech Transfer and the b-school’s Center for Venture Capital and Private Equity Finance both have programs that build student teams around university tech transfer opportunities (with external mentorship). The engineering school’s Center for Entrepreneurship and b-school’s Zell-Lurie Institute both offer some support, but more importantly, encouragement, for students and faculty to consider entrepreneurship. UM’s also set up a dedicated office, the Business Engagement Center, to help orient external folks looking to engage in commercial opportunities here.
There is definitely an untapped goldmine of university IP, but the challenges in research commercialization are much more than just access and licensing. And these problems aren’t specifically ours (although Michigan’s clearly uniquely challenged in other ways) – see for example, New York: http://bit.ly/3rhbiW
In fact, Michigan is probably one of the easiest (and most promising) places to go on such a treasure hunt if you have the resources and will to go where no entrepreneur has gone before.
Take a look at the list of disclosures in UM OTT’s annual report for a start: http://techtransfer.umich.edu
Happy hunting!
Hi – depends on the culture on campus. Stanford has an entreprenuerial culture. For example, when Netscape was formed (it was initially called Mosaic Communications Corp), the University of Illinois at Urbana-Champaign did not know how to deal with the offer of stock from them. (I was there). UI (after Mosaic/netscape) tried to change its culture, but with limited success.
Academic is not that different from say Microsoft or Cisco or IBM. Some people are happy and content with the security (or perceived security) of the big corp. Same goes for tenured profs.
Entreprenuers (be it from the academia or else where) will do what they want to do – change the world. They will push the envelope.
Obstacles are things you see when you take the eye off the ball – so with or without formal programs, entreprenurial academics will create,
nurture and grow great and lasting companies.
Amazing series of articles.
Thanks for the inspiration.
Thanks for a good read and mentioning Eli Chait & Startup @ Berkeley – I’ve worked with Eli and as part of the group and they’re my favorite entrepreneurial organization at UC Berkeley.
I fully agree with the notion of tapping into a pool of amazing research at our universities. I think you have to attack it from different angles simultaneously. Do what is suggested in this article. Meet professors and researchers. Find grad students itching to make an impact. Give talks and inspire current students to go the startup route. Talk to every interested undergrad you can and make them feel like if they were to start a company *right now* they would have support *right now.* And at every step communicate that it’s not about the IP or the money but it’s about going far, far beyond the classroom and lab and changing the world. This type of innovation and motivation is sorely needed at universities like UC Berkeley.
The inherent problem with school is students have a tough time breaking out of the rhythm of classes and weekend parties. It takes about two years for most kids to figure out (or forced) what they do and do not like.
In order for ideas to truly break free from an academic environment requires a student to risk pieces of their education. The pressures of going to a great school and excelling (and I would know having just graduated from Berkeley) have left students with a certain dilemma in taking “the plunge” with their ideas.
How can we address the concerns of a student trying to succeed in school and trying to educate themselves for the real world? That needs to be evaluated (or integrated into the curriculum) before we can expect these great ideas to escape an academic enclosure.
I’m all for it, though. I think the greatest ideas exist within the minds of students that haven’t diluted by all the responsibilities of being an adult.
It’s time to do away with those entrepreneurship seminars and start having entrepreneurship classes in which students form and build a project they had in mind with real funding. They could apply to take the class and have dedicated time with each other, supplemented by professionals with the experience to help ideas grow. Ventures could use these classes as breeding grounds for the next generation of commercial innovations.
“It’s time to do away with those entrepreneurship seminars and start having entrepreneurship classes in which students form and build a project they had in mind with real funding. They could apply to take the class and have dedicated time with each other, supplemented by professionals with the experience to help ideas grow. Ventures could use these classes as breeding grounds for the next generation of commercial innovations.”
…. I think Paul Graham beat you to the punch by a couple years, sorry.
“In order for ideas to truly break free from an academic environment requires a student to risk pieces of their education.”
Right on. I have worked with MANY potential cofounders as an undergrad. Some of these guys are super smart.
But when it comes down to getting down and dirty, they simply do not have time. There are classes to attend; newspaper work to do; internships to goto; jobs to interview for; parties to attend.
Meanwhile, I’m sitting in my classes coding away my startup. I don’t blame my buddies who have other important priorities. But it’s hard for us to work together with such different priorities.
I like to tell possible cofounders now days “if you’re trying to get As in your classes, we might as well talk about the weather.”
What this your telling something really old just tell it as a remainder there is still money in old and new research and patent laying there for the dust which could lead to breakthrough.
What do you think made Google so succesful its old work in a new coat you just have to figure out or stumble up on it to make something duh.
I read this goldmine dormancy before in Harvard business review magazine and if you search right you can even find this on Forbes.com.
So I can only say this Big Deal.
Very interesting article. One of the reasons why so many people are building iphone apps is because the Company knows how to market well. Marketing is key to creating demand, which is probably even counter to logic.
Great marketing is the spirit behind the Company. Sometimes, it’s about telling a compelling story- one of the oldest traditions throughout history. Great civilizations- albeit written by the few- tell it well.
University led research/innovation can do this by expanding its circle, which will add significant value to a patent filed.
But remember: It’s not just about having a marketing budget in place and making it look “cool”- it’s about knowing the reasons to its value, how does the invention serve society as we know it today, how does it advance forward (hopefully) the betterment of innovation.
Well, when in doubt, why not just put on a tune and toast to all the minds who are atleast making the effort. That counts!
Excellent piece. Mike and team you are doing a great job. Looking forwrad to the next guest article.
A few thoughts immediately come to mind after reading this.
First, most of the funding for academics does *not* come from the universities themselves. The great majority these days are from external funding sources, primarily government grants.
Second, do not underestimate the anti-capitalist bias in academia. Many of these are individuals who are all for taxes to fund their grants. They are philosophically opposed to capitalism on principle.
Third, in the rare cases where the academic is not opposed to money-making, where is the discussion of how these individuals should be compensated? What’s in it for them? Do these technology transfer offices care about anything except making money for the university?
Excellent read.
Soon as I started to read this I remembered a story on 60 minutes in the late 80s, maybe early 90s about how MAGnetic Rails where invented (I think) at MIT and were sucked up by (I think) Germany. The show was about the innovation in universities and how most patents are going to foreign inventors. They accurately billed it as a sort of brain drain.
It has always haunted me.
They talked about banning the practice of foreign investors taking the ideas, anyone know if that ever happened? If so, why the hell did we not wake up, nice read.
Vivek, great series of posts, and we’ve encountered/are working with identical untapped opportunities and ingrained roadblocks at research universities from Georgia, Pittsburgh, and Rhode Island.
One thing you left out is that tech transfer offices often turn down their rights to claim IP from a professor or lab’s work for a variety of reasons. These could include a mismatch between the university’s commercialization focus areas and a professor’s research, a lack of patent $ and resources in the tech transfer office, or clever maneuvering by an entrepreneurial professor.
This doesn’t mean that IP is “bad”, and may come less encumbered that sits in the spotlight of the tech transfer office. Your advice on starting at the edge with professors and grad students is exactly the way to discover these hidden gems.
Sergey Brin & Larry Page had to leave Stanford university because the ‘Office of Technology Licensing‘ (OTL) coudn’t find an investor to Google. They found funds (family and friends), slept near the servers and now we have google.
We have to find the way to do this inside the university.
Universities turning innovation into companies is a rare happening as the innovator needs to find a market, needs to market and sell the innovation.
Innovation for government and army business is much easier: the customer is already present.
See the secret history of Silicon Valley
http://www.yout...watch?v=hFSPHfZ
The same with NASA: the innovation was on demand by the customer: the NASA.
Innovation developed at universities are far away from the real customer.
University competitions a complete waste?? Uh, no–I would not say that after having competed in GW’s “biz plan” competition last semester. More people need to know how to write business plans– especially scientists/inventors if we want to take advantage of more university research. Whether university business plan competitions are good at picking and choosing inventions that are game-changers, I agree they are useless for this purpose. What we do need is perhaps more interdisciplinary partnerships with inventors. Perhaps business students need to team-up with inventors (scientists or otherwise).
The title of the article is completely off base! It contains interesting information on how an entrepreneur might side step tech transfer offices to seek out and find useful IP. But it says nothing about how Universities can turn innovation into companies.
Interesting article. My first job was at Stanford’s TechTransfer office, and ever since then I have been trying to figure out how to get more University IP funded… to no avail. Your approach seems very sound, but it does cut out the TechTransfer office which has interesting societal implications to it.
I have no problem paying the University for IP developed on campus; they deserve it!
Let’s figure out a better way!
Great article. I would like to respond to this sentence by the author: “Students at universities also have entrepreneurship clubs and host events like business plan competitions. The competitions are a total waste – I can’t name one real company which has ever been a winner at one of these.”
Here is a link to some companies that were kicked off at Chicago Booth – the new venture challenge was the vehicle through which these companies started.
http://research.../companies.aspx
Come to the University of Waterloo – not just for Oktoberfest – but for a school where IP is owned by the inventor and a team of professionals help the PI roll out a company – over 22% of ALL spin-offs in Canada come from here.
The Federal Circuit’s decision last week in Stanford v. Roche may have made crossing death valley a little easier.
My firm, MindForce Consulting, has now worked with about 15 tech transfer offices in various ways and, by and large, they do a very good job. Here’s the problem — many of the technologies are pre-investment and need to cross over the “valley of death” with prototype funding. They also need to find dedicated management/venture teams with the passion to turn IP into market-focused businesses.
To this end, I would like to share a funding program to get these great nascent technologies out into the world. It’s called the National Innovation Initiative (3 page PDF linked below) and I’ve been meeting various people in congress and the administration, and the tech transfer community to get them to view it. Perhaps, we can create a team interested in pushing this forward to even more people. I’m sure the program would change, but at least it gets the ball rolling down the right bowling lane.
http://www.mind...ing.com/NII.pdf