University Reveals Its Secret Sauce for Startups

CREDIT: Courtesy of Technology Venture Development at the University of Utah View full size image

When you think of research hotbeds that will be the launch pad for the next generation of gee-whiz tech names—and founders' fortunes—institutions such as MIT, Carnegie Mellon and Cal Tech usually come to mind. The University of Utah (U of U) would not be considered a short-list candidate. That's a gross underestimation of what has become a dynamo in academia's startup derby—this year the U of U spun off 18 tech newbies.

This is the second year in a row that the University of Utah has taken the laurels as the U.S. leader in creating startup companies, in an annual survey conducted by the Association of University Technology Managers on commercialization success based on university research. Once again, the Salt Lake City university defeated rival MIT (17 startups) and a host of other institutions such Carnegie Mellon (10) and Cal tech (10).

The payoff involves more than bragging rights or prestige. Startups from the U of U accounted directly or indirectly for 15,767 jobs, $755 million in personal revenue and $76.7 million in tax revenue in 2009, according to a recent study by the university's Bureau of Economic and Business Research.

Startups on a shoestring

What makes this achievement even more remarkable is that the U of U only spent $450 million on research in 2010, one-third of MIT's $1.4-billion budget.

Much of the credit is due to the university's Technology Venture Development (TVD) office, which was created in 2005 to coordinate all commercialization efforts across campus. Since then, the U of U has consistently ranked among the best in the country and, for the last five years, has been one of the top two for startups.

Investability

It all boils down to investability, says Jack Brittain, TVD's vice president.

"We're beating them in getting more startups out of our technology," Brittain told BusinessNewsDaily. "The key difference for us is our understanding that it's a sequence that involves papers, patents and products. And the distance from patents to projects is huge. There's a lot that has to happen. And most universities stop at the patent point."

That was the case at the U or U before the creation of TVD. In the past, Brittain said, the university wasn't actually maturing the technology to the point where it was investable.

The TVD office created a process around startups and commercialization that can be applied to all kinds of new companies. The university was persuaded to create some small grants programs that fund proof-of-concept prototypes to make sure that the technology works.

Papers, patents and products

"Papers and patents are very close—they're both ideas," Brittain said. "Getting to product is the big challenge. This is really the key to investability. It makes it attractive for private investment."

The proof-of-concept grants go up to $5,000, with an average of $1,500, Brittain said. If the technology pans out, the project receives an additional grant of $35,000-$40,000 to conduct further product development.

"It's all milestoning," Brittain said. "You meet the next milestone and you're eligible for a certain amount of money. We're not doing huge money. I'd say that small amount makes a big difference. Our philosophy here is fail fast, fail cheap."

It has paid off big time, Brittain said. Over the past five years, private investors have poured over $300 million into research projects at the U of U.

For the U of U faculty and the 1,800-or-so students who work on the projects each year, the main motivator is not money.

Money not a motivator

"The driver for us is the faculty wanting to make a difference in the world," Brittain said. "Our median payout on a license is only a couple of thousand dollars. The average person is not making an extraordinary amount. We do have some people who have done tremendously well."

That purist approach may reflect the kinds of people who are drawn to what the U of U has to offer.

"We're not one of the top-50 places people are thinking about," Brittain said.

But those who answer the call are imbued with a high degree of entrepreneurial zeal and are undaunted by risk-taking, he said. They like the prospect of taking their research and getting it into application. They are passionate about their research—it's their life's work.

Most of the startups spawned at the U of U fall into health sciences, with some spillover into computer research and bioengineering.

Big gorilla on campus

"Health services is the big gorilla on campus," Brittain said, which reflects the fact that the medical school and health sciences account for 60 percent of the school's budget.

It also reflects a great partnership between the U of U Hospital and the Office of Technology Venture Development, he said.

The success of the U of U and TVD in nurturing startups is also beginning to make entrepreneurship one of Utah's key exports as delegations from more pedigreed institutions and state and foreign economic development boards descend on Salt Lake City to suss out the U of U's secret startup sauce. Last year the university attracted some 80-to-90-such delegations.

Next year, TVD, in partnership with the David Eccles School of Business Executive Educations, will formalize its entrepreneurial outreach by holding two Technology Venture Development Executive Education Seminars. These working forums, one in February 2012 and another in October, will be designed to provide commercialization professionals with a deeper understanding of what it takes to inspire, promote, protect, license and market innovative technologies.