Small Business

Universities: Get Entrepreneurial


On-campus innovations aren't being maximized commercially. In today's global economy, more research needs to result in viable startups

University research is an untapped gold mine of knowledge and ideas. To boost innovation and economic growth in the U.S., we need to accelerate the way this research is commercialized and strengthen schools' ties with entrepreneurs. Universities have come a long way since the Bayh-Dole Act of 1980, which for the first time allowed them to own and license the intellectual property they were creating. But this is just a first step in creating the creative/entrepreneurial partnership that was the intention of this legislation. We urgently need to take the system to the next level. Here's why.

According to the latest data available from the National Science Foundation, U.S. universities spent $43 billion on research in 2004. Surveys by the Association of University Technology Managers show that in the same period, there were 598 exclusive license agreements signed with startup companies. This amounts to about $70 million in research for every startup license. Yes, the focus of university research is primarily to advance scientific knowledge—not to create startups. But most researchers would agree that their ideas and inventions could be having a much greater impact on society if the commercialization system worked better.

Professor Donald Siegel of University of California at Riverside, who has researched the process extensively, says that one of the problems is that universities typically focus on increasing revenue from licensing, patenting, and sponsored research. They are reluctant to invest the time and energy in deals that don't produce short-term revenue or to take compensation in the form of an equity stake. This puts entrepreneurs wanting to negotiate licenses for their startups at a disadvantage to larger corporations with deep pockets.

University Bottleneck

A recent report by the Kauffman Foundation echoed Siegel's opinion and highlighted university technology transfer offices as the bottleneck in the commercialization process. It called these organizations "monopoly gatekeepers" that focus on maximizing revenue rather than maximizing the actual numbers of commercialized innovations.

Instead of revenue, the foundation says the objective should be to create the most spin-offs (new companies formed from a university research group) in the shortest amount of time. It advocates introducing competition for the transfer offices by allowing faculty to negotiate their own deals with industry, work with consortia of other universities, and use Web-based networks like its iBridge Network to promote research. Kauffman's most radical recommendation is that universities give up their intellectual property rights altogether and count on loyal faculty to donate some of the fruits of their success back to the university.

After having founded two technology companies and worked in academia for the last two years, I have a different perspective. My view is that technology transfer offices are only part of the solution. Expecting experts in law, contract negotiation, and intellectual property—as tech transfer officers typically are—to mentor faculty in taking products to market isn't reasonable. In the business world, this would be like asking a company's general counsel and legal team to manage sales, marketing, and R&D. You can't have lawyers running the company.

Entrepreneur Mentality Needed

Universities should provide their faculties with all of the business resources that are needed to turn their ideas into products that can be commercialized. What is needed is a large dose of entrepreneurship on campuses.

Bringing academic creativity and entrepreneurship together isn't as easy as it seems. University faculty have a different outlook and different priorities than entrepreneurs do. They do want their ideas to have a positive impact on society and to share in the fruits of their work. But they are usually more concerned about disseminating knowledge and publishing academic papers than creating patents that limit how this knowledge can be used. They worry about the conflicts of interest that can arise when taking money from industry and want to ensure that their teaching activities aren't impacted by the time spent on commercialization efforts.

Another problem is that most university technology is half-baked. As entrepreneurs know, it takes a lot to create market-ready products (see BusinessWeek.com, 5/4/06, "Countdown to Product Launch (Part I)"). University faculty simply don't have the budgets to take products this far.

Tony Stanco, a professor at George Washington University and executive director of the National Council of Entrepreneurial Tech Transfer, believes government and industry should create funding models for university researchers to create complete products, including the formation of university-affiliated angel investor groups. He believes that this will enable universities to become viable centers for research and design.

Putting It Into Practice

Indeed, there are already some experiments under way that are trying new approaches at bringing academics and industry together.

Sycamore Networks (SCMR) Chairman Gururaj Deshpande invested $20 million to help create a center at the Massachusetts Institute of Technology that connects university researchers with experienced entrepreneurs who can provide mentoring and guidance, funding to test concepts, education in technology commercialization, and help with marketing the research to potential partners (see BusinessWeek.com, 1/18/07, "Keeping Research Leadership at Home").

The University of California-San Diego is trying a similar experiment with its William J. von Liebig Center for Entrepreneurism and Technology Advancement. In addition to providing seed financing and marketing assistance, it provides researchers a series of advisory services to analyze the potential of their discoveries, patent inventions, and create first-rate business models and business plans (see BusinessWeek.com, 3/29/07, "USC's New Institute for Innovation").

It is time to take stock of the lessons learned and improve our university research commercialization system. With the rapid pace of globalization, U.S. competitiveness is under threat. Turning university research into viable startups is a sustainable means of defense.


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