June 21, 2011

Why we do what we do

For the last few months I have shared stories and opinions about university entrepreneurship. I figure it’s time to talk about the “why” rather than the “how”. Specifically, why do we try so hard to bring university technology into the world?

First same background: I spent my career commercialising university innovation as an inventor, entrepreneur and operator across technical, strategy and business functions. I love building technology organisations. That’s the basic motivation. You need to love what you to in order to be good at it.

But why universities? Why not websites or apps – a market that is about as frothy as it has ever been? I am successful serial entrepreneur with dozens of software patents and a PhD in computer science, EE and physics. Until recently I had an office right smack in Silicon Valley. I raised eight rounds of financing from over 50 investors. With that background, why am I not on Sand Hill Road where cheques are currently falling from the sky for teenagers with a landing page? Why focus on universities, an environment shunned by almost all investors today?

Because it’s the right thing to do and nobody else does it!

Technology has to improve lives. I believe that down to my very core. It doesn’t have to solve world hunger but in some form it should make lives easier, better or less environmentally impactful. Some websites and apps do this quite nicely, but creating the 17th Groupon clone to cash in on the bubble seems hardly the right choice. University technology almost always addresses meaningful human issues. It might be misguided in terms of market, implementation and economics but the goal is worthy.

Over 90% of our Nobel Laureates did their work at universities. The vast majority of technical revolutions came out of university labs. University research funding in the US alone accounted for $39B in 2008. That’s 3.5 times more than the entire basic research budget of the US economy at $12B. And almost all of it will have been devoted to solving fundamental life-improving issues.

Yet, less than 5% of all US products and services contain university intellectual property. That’s the other side of the coin. Our universities are exceptional at creating high value knowledge but truly pathetic at getting it into our hands. Unfortunately, technology without users is useless.

This tech transfer inefficiency is the result of cultural, political and economic gaps between university and industry. That leads me to the second half of my statement above: Nobody else is trying to fix this. Venture investors are moving up stream. We have gone from VC partners placing $5M per year on average in 1997 to $35M in 2007. The new Super Angels and Accelerators have re-introduced smaller early stage amounts but virtually all with an exclusive focus on websites. That leaves preciously few resources for university technology transfer.

At TandemLaunch we are committed to bridging this gap. We recognise that traditional investors are moving up stream for sound economic reasons. Giving money to a multi-disciplinary team of business-savvy founders in a frothy market yields better results than giving it to a lone university researcher. So we give more than money. We provide co-founders, team members, facilities, back-office services, industry connections and just about everything else needed to bring the risk profile of a university project in line with that of a traditional start-up (and yes, that includes money as well).

And it seems to be working. My first wave of commercialising inventions from just under a dozen universities yielded a steady 40-60% IRR from 2002 to 2007. Early results from the second wave at TandemLaunch look promising as well. Ultimately time will tell. We might succeed wildly; fine-tune the model; or even tackle the problem with a different approach altogether. But we will keep trying. It’s the right thing to do!

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