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Photo courtesy of Lee P. Thomas WILLING PARTNER: The University of Kentucky works closely with business and industry, says Ed Carter, vice president for management and budget. In the course of an academic research project, you make a discovery that has potential applications outside the laboratory. As you explore the idea further, you become convinced that the advance might form the basis for a new company. But as a working scientist, you know roughly as much about commercial start-ups as you know about the government of Outer Mongolia. So what do you do next? Muddle your way through the process, taking advice wherever you can find it, then learn from your mistakes? You don't have to waste that much valuable time on the way to the market. Some academic institutions are taking some of the pressure off would-be entrepreneurs. Not only do they offer help in such basic pursuits as writing business plans, tracking down investors, and finding CEOs and other key personnel. A few universities even provide incubator space that nurture start-up companies in their critical early months. The institutions don't do it for entirely altruistic reasons. Both public and private universities have agendas that promote the creation of jobs in their local areas. "We will try as much as we can to develop start-up companies and be a willing partner with business and industry to develop new products and services, all of which we will try to keep in Kentucky," explains Ed Carter, vice president for management and budget at the University of Kentucky. And in New England, "Yale is taking a more active role in forming start-up companies in an effort to make sure the New Haven area reaps economic benefits from the university's research," says Gregory Gardiner, director of Yale University's Office of Cooperative Research (OCR). NO QUESTION: Faculty members of the University of Pennsylvania Health System are not allowed to be active managers of start-up companies, says Cynthia Mauer-Sutton, associate executive vice president. In stepped-up efforts to accommodate the commercial ambitions of faculty and graduate students, in recent years, OCR has helped Yale scientists to establish eight public companies and more than 35 private organizations, mainly in the biotechnology sector. This year alone, it has helped to set up four biotech firms based on research discoveries in university labs. Yale hired Gardiner, a one-time chemistry professor at the university and a former executive of New York-based pharmaceuticals company Pfizer Inc., in 1996. The university gave him a mandate to make its research easier for industry to license. One approach was to help faculty create start-up companies in which the university had equity in lieu of licensing fees. "We try to find hotbeds of activity," explains Gardiner. "We talk to faculty about what they can do to improve the 'commercializability' of their work; it's more than disclosures. And we help to put together business plans." Gardiner's office asks faculty whose work shows promise to write one-page summaries on the work's commercial prospects. The most promising among those who comply are then asked to develop a five-page business plan, which Gardiner's staff uses as the basis for a proposed budget. He tells the principal scientists to worry less about such issues as financing and legal advice, and more about planning the direction their research will take en route to commercialization, and explaining the work to interested venture capitalists. NOT ALONE: Avoiding isolation of new companies is one goal of the University of Kentucky's Advanced Science and Technology Commercialization Center. explains Joseph Fink, center director. "They have been great at encouraging the faculty to come to them with worthwhile technology, and in putting packages together," says Ronald Lennox, a biochemist and partner in Collinson, Howe & Lennox, a venture capital firm that invested in polyGenomics Inc., one of this year's four Yale start-ups. "Greg knows the pharmaceutical industry very well. And he's recruited a good group of people who also know the industry." The creation of polyGenomics by researchers in the laboratory of genetics professor David Ward illustrates OCR's usefulness. The company is developing methods of analyzing population genetics to unravel the causes of diseases that involve defects in multiple genes, such as hypertension-associated kidney failure and panic disorder. "OCR was actively involved in thinking what technology might be put into the enterprise," explains Ward. The organization also took an equity position in the company, with Gardiner as a board member and source of business advice. OCR introduced the company to venture capital firms, helped it to make presentations to them, and consulted on its choice among several interested investor groups. Finally, says Ward, "they've been active in helping to find lab space in New Haven." Tracking down affordable space is among the most difficult and time-consuming activities for start-up companies. A few universities now take the problem into their own hands, by sponsoring incubators for new companies created as a result of on-campus research. The idea is hardly new (T. Durso, The Scientist, 10[14]:1, July 8, 1996; D. Morgan, The Scientist, 5[3]:8, Feb. 4, 1991). The University City Science Center (where The Scientist is based) in Philadelphia, a nonprofit organization that involves 29 academic institutions, has hosted more than 250 new companies since its founding in 1963. "We provide space and help start-up companies to obtain access to market and legal assistance," says Vice President Alice Crowell. "We help with the business side as opposed to the technology side." Another example is the Northwestern University Evanston Research Park. Jointly sponsored by the university and the city of Evanston, Ill., it aims to provide an environment tailored to the needs of companies seeking to commercialize newtechnologies. Northwestern University alone runs one component of the park, the Center for Biotechnology. This acts as an interface between science and business interests to provide biotechnology solutions for major problems of national and international significance. The center provided the perfect environment for Oligotrail LLC, a company created this year to develop calibration standards for DNA sequencing. The stimulus for the company was research carried out by Debang Liu and Peter Dau at Northwestern's department of neurology and the Evanston Hospital's department of medicine. They decided to test the commercial waters by obtaining a small business innovation research (SBIR) grant (R. Finn, The Scientist, 10[21]:1, Oct. 28, 1996) from the National Institutes of Health. To do so, however, they needed to incorporate their company. "Here we were, academic guys who didn't know anything about commerce, with a viable opportunity to do something in the world of science," recalls Dau. "We needed to outfit a lab, get permits, find legal counsel, and incorporate." GOOD TIMING: Equine Biodiagnostics Inc. decided to commercialize at about the same time the Kentucky center was being developed, says Jennifer Morrow, an EBI staff scientist. The research park solved their problems. "They had a lab outfitted for us and fully equipped for the kind of molecular biology research we were doing," says Dau. "And the park has advisers who can point you to business leaders, private financiers, and consultants, and give you a little direction." Beyond the physical comforts of the laboratory, Dau finds value in the ambience of the park. "We're surrounded by other companies doing molecular biology research in the same building," he explains. "We're not totally isolated." Avoiding isolation of new companies is one goal of the University of Kentucky's Advanced Science and Technology Commercialization Center (ASTeCC). Occupying a four-year-old building on the campus, "it has 10 for-profit companies and 22 faculty-led research groups," says Joseph Fink, the university's assistant vice president for research and graduate studies, and director of ASTeCC. In the building, "faculty members can start with the idea of 'commercializable' projects and free space," adds Ed Carter. "When the projects are viable, they can pay rent and be incubated in the building." Equine Biodiagnostics Inc. (EBI) represents an early success story from the incubator. Created as a result of research by University of Kentucky veterinary parasitologist David Granstrom, it provides specialized diagnostic testing for equine protozoal myelitis-a potentially devastating horse disease-and other equine conditions. "We decided to commercialize at about the same time ASTeCC was being developed," says Jennifer Morrow, an EBI staff scientist. "Now, we test maybe 12,000 to 15,000 horses per year." The University of Oregon offers its faculty members a three-stage incubation process. "We have a pre-incubation space, consisting of four offices where faculty members can sit and put their business caps on and think about personnel, write by laws, and have a mailing address," says Todd Sherer, director of the university's technology transfer office. "Then we have an innovation center incubator where a new company can do R&D or even make products during its growth trend. Finally, we have research park space, where new companies can grow even further, once the innovation center isn't good enough or large enough for them." Photo courtesy of William K. Sacco LOCAL EMPHASIS: Yale University wants to make sure the New Haven area reaps economic benefits from the university's research, explains Gregory Gardiner, director of the Office of Cooperative Research. Oregon provides more than incubators. "We try to provide as much hand- holding service as possible," says Sherer. "For example, we've had MBA students work together to create a business plan and market analysis for a start-up company. We're also trying to get the law school involved in such issues as product liability." The technology transfer office also has a business consultant, who gives would-be faculty entrepreneurs what amounts to a "start-up 101" course. It covers such topics as how to find personnel and corporate attorneys, and how to deal with issues of equity. "We recognize that not all start-up companies are going to succeed," says Sherer. "But we hope that we can increase their chances of being successful, or at least reduce the time it takes to move to the next step." Not all academic life scientists with a commercial idea want to become involved in the day-to-day, or even month-to-month, management of a company. Recognizing that, the University of Kentucky helps faculty members set up companies in which they have equity but no direct management responsibility. "Our general concern is that faculty members who try to be faculty members and businessmen at the same time have a problem," says Carter. "It's probably a disadvantage to the business and to the role of faculty member." So while the university permits faculty members to take leaves to start companies--or even to become part-time managers of their own companies--it can also accommodate individuals prepared to settle for hands-off ownership. Thus Granstrom, now with the American Veterinary Medical Association, whose research at Kentucky led to the creation of EBI, is a consultant to the company rather than an executive. Some universities make the question of whether to take on an executive role moot. "We do not allow a faculty member to stay on as a faculty member and participate as a manager in a start-up company," says Cynthia Mauer-Sutton, associate executive vice president of the University of Pennsylvania Health System. "They can start up their own companies--but not do day-to-day management." Mauer-Sutton admits that Penn has "been very proactive in trying to address conflict-of-interest issues." Other universities have their own rules that would-be entrepreneurs must address in the early stages of starting up companies. Northwestern University, says Dau, "specifies that tenured faculty members can spend up to 20 percent of their time in a consulting arrangement or other commercial work." However, there are ways around such rules. Liu at Oligotrail, for example, has worked out an arrangement whereby he will spend just 10 percent of his time at Evanston Hospital and the remaining 90 percent at the company. Lennox, the venture capitalist, has a different take on the situation. "The idea of conflict [between faculty and company work] exists only if you still believe in the 40-hour week," he says. "And nobody does." Peter Gwynne, a freelance science writer based in Marstons Mills, Mass., can be reached online at PGwynne767@aol.com.

Universities Nurture Researchers' Business Start-Ups

Aug 30, 1998

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