State of Development: B-Schools Support Campus Commercialization

What elements support successful university-based commercialization? A look at how the process has evolved at five universities and what the implications are for business innovation.
State of Development: B-Schools Support Campus Commercialization

AT THE WORLD’S UNIVERSITIES, GREAT IDEAS ARE IN NO SHORT SUPPLY. But without a system to make those early-stage concepts commercially viable, few are likely to have real-world impact. Luckily, more universities are opening or expanding technology transfer offices (TTOs) with the sole purpose of incubating, funding, and commercializing their researchers’ best innovations.

In doing so, they address a long-existing barrier to innovation, says Brett Cornwell, associate vice chancellor for commercialization at Texas A&M University in College Station and an adjunct lecturer at the McCombs School of Business at the University of Texas at Austin. “Established companies rarely take on the technical, regulatory, and scale-up risks required to develop early-stage technologies,” says Cornwell. “It is a common strategy for universities to shepherd those technologies through the ‘valley of death’ to a point where it’s possible to sell them.”

University TTOs also give students and faculty many more opportunities to make tangible impact on the world. “A lot of blood, sweat, and tears go into developing these technologies,” says Julie Nagel, president of the University of Kansas Innovation & Collaboration (KUIC) office in Lawrence, as well as KU’s associate vice chancellor for innovation and entrepreneurship. “Faculty tell me that there’s nothing more fulfilling than seeing their life’s work make a difference in someone else’s life. If faculty want to develop a vaccine that will save children’s lives in emerging nations, they’re not going to be able to do that by staying within the boundaries of their universities.”

And as many universities have discovered, it often takes the efforts of a TTO and an orchestrated set of entrepreneurial programs to get such inventions out of academic labs and into the hands of those who need them most. In 2014, technology transfer offices in the U.S. and Canada saw an 11.3 percent increase in patent filings, a 4.5 percent increase in licensing agreements, and a 12 percent increase in businesses created.

UNIVERSITY BUSINESSES

Many universities with active, longstanding TTOs have developed interconnected programs to support tech transfer. These “entrepreneurial ecosystems” often comprise four main elements: the TTOs themselves to manage patenting and licensing; investment funds to support development of early-stage intellectual property (IP); workshops and consultancies to train aspiring entrepreneurs in startup creation; and incubators and innovation parks that bring inventors, investors, and industry together. Here’s a look at how five universities handle tech transfer on their campuses:

  • Oxford University Innovation (formerly Isis Innovation) is a university-owned company that manages IP and tech transfer activity for the University of Oxford in the United Kingdom. In 2014, Oxford’s TTO managed 529 consulting deals, filed 103 patents, distributed £13.6 million (just over US$19.5 million) to inventors, and earned sales revenue of £24.6 million (just over US$35.4 million) from its companies and licensing agreements. Over the last 12 months, it spun out 17 new ventures. The Oxford Innovation Community also includes a startup incubator and Launchpad, a co-working space housed within Saïd Business School. Over the next year, the university plans to open two new facilities—the Begbroke Accelerator, which will house labs and office space, and the BioEscalator for biotechnology. Successful businesses spun out of Oxford technologies include control systems for self-driving cars, 3D printing technology that produces tissue to cover wounds and deliver medication, and a drug delivery method that targets hard-to-treat diseases such as those affecting the brain and immune system.

Supporting these efforts is the Isis Innovation Fund, which has raised between £1.25 million and £1.75 million from investors in each of three rounds over the last three years. Held and distributed by a third-party fund manager, the Isis Fund has attracted more than 160 active investors motivated not just by their interest in early-stage innovations, but also by an attractive tax incentive in the U.K. “The government gives back 50 percent of investments in seedstage innovations, up to investments of £100,000,” explains Andrea Alunni, head of Oxford University Innovation’s new venture support and funding. “If a venture is successful, the investor’s share of the profits is entirely tax-free. Globally, it’s one of the best tax incentives for investors there is.”

Other funding sources include the Oxford Invention Fund, as well as the SBS Seed Fund run by MBAs at Oxford’s Saïd Business School. In 2015, the university formed the Oxford Science Innovation (OSI) fund, which so far has raised £325 million—making it one of the largest such university funds in the world, according to Global University Venturing magazine.

In 2014, technology transfer offices in the U.S. and Canada saw an 11.3 percent increase in licensing agreements, and a 12 percent increase in business created.

—FROM A SURVEY BY THE ASSOCIATION OF UNIVERSITY TECHNOLOGY MANAGERS

The Purdue Research Foundation at Purdue University in Lafayette, Indiana, oversees the wide range of commercialization functions on its campus. These include its Office of Technology Commercialization (OTC); the Purdue Foundry, the school’s incubator; the Burton D. Morgan Center for Entrepreneurship (BDMCE); and the Deliberate Innovation For Faculty (DIFF) mentorship program, which trains faculty in startup creation and commercialization. In addition, Purdue recently opened a new startup incubator, Anvil, specifically for undergraduate students across all disciplines. Commercialization activity is primarily based at the school’s Discovery Park, a 40-acre innovation center that promotes entrepreneurship and interdisciplinary projects.

Last year, Purdue also joined the Innovation Corps, or I-Corps, started by the National Science Foundation (NSF) in 2012 to support startup creation in the U.S. Now one of 36 I-Corps sites in the U.S., Purdue holds a 16-week course for students each semester, based on the I-Corps Launchpad entrepreneurship curriculum. Faculty who want to learn about the commercialization process can take either the 16-week course or a condensed four-week version, offered through the BDMCE.

Purdue supports spinout activity with four funds: the Trask Innovation Fund, Foundry Investment Fund, and Elevate Purdue Foundry Fund for startups in progress; and the Emerging Innovations Fund for early-stage technologies. Each year, the school has 10 to 24 applicants for funding, of which about six are usually given the go-ahead. Over the last year, Purdue successfully launched 24 companies

  • KUIC manages all IP at the University of Kansas (KU). In 2015, KUIC received disclosures for 81 new universty-based inventions and had 50 patents issued—up 32 percent from 2014. KUIC supports commercialization through the KU Catalyst business accelerator, as well as Startup School@KU, a six-week hybrid-format course on startup formation for both faculty and students.

When it opened in 2008, KUIC handled only activities related to patents and licensing agreements, but that role expanded in 2012 when the university unveiled its new strategic plan that placed greater emphasis on building corporate relationships. The university opened a new office of corporate partnerships, which works under KUIC oversight, to attract more corporate sponsorship of its research centers. “We want to have processes in place to make it easier for companies to acquire our intellectual property,” says Nagel. “The more we drive corporate relationships, the more ready partners we’ll have to help us commercialize our research.”

  • Over the last ten years, the Office of Technology Commercialization (OTC) at the University of Texas at Austin has received US$156 million in revenue on licensing agreements and received 786 patents in the U.S. and abroad. In that same ten years, 65 startups have emerged from these technologies, 53 based in Texas. Many of these innovations are related to the biosciences. In 2015, the OTC’s licensing revenue reached $22.7 million, up 33 percent from 2014.

To support and expand tech transfer activities, the OTC hosts events that range from courses in new venture creation and commercialization to annual conferences where inventors can present their ideas to potential investors and mentors. Additionally, each month the OTC invites two to three inventors to its Startup Studios, which are meant to emulate artists’ studios. These meetups give inventors the chance to present their ideas to industry experts and receive valuable feedback they can use to develop their concepts. The OTC also provides Innovation Grants of between $25,000 and $100,000 to help faculty fund everything from prototype development to student assistant support to travel to meet potential customers. To receive a grant, each applicant must apply to undergo NSF’s I-Corps training.

In the first six months of 2015, Global University Venturing magazine recorded 319 university-backed equity investments worldwide worth US$6.5 billion. In 2015, GUV also tracked the creation of 32 new university funds worth $4 billion.
  • In 2006, Jomo Kenyatta University of Agriculture and Technology (JKUAT) in Juja, Kenya, formed JKUAT Enterprises Limited (JKUATES) as a small startup. JKUATES is now a midsized company that spins out faculty innovations through its four divisions: products, often related to agriculture and food science; information and communication technology; enterprise development; and consultancy and training services provided primarily by business students and faculty. JKUATES employs a director, two senior managers, and 35 long-term and 107 short-term contracted employees.

“We are pioneering largely uncharted territory, especially in convincing university personnel and prospective clients that our relationship can be mutually beneficial,” says Winifred Karugu, managing director of JKUATES. She also is a senior lecturer in economics and former dean for the College for Human Resources Development, JKUAT’s business school. “We have plowed our earnings back into our capital base, which now includes two factories, a tissue culture laboratory, greenhouses, and an office building. But we still feel that we are way below where we would like to be.”

Some of JKUATES’ products include a macadamia dehusker and a machine that turns farm waste into wood fuel briquettes; one of its most profitable enterprises is a yogurt manufacturing facility. Even more important to JKUATES’ business model: Many small businesses that originally came to JKUATES for training have now grown large enough to act as vendors that support its future growth. For example, several transportation firms that flourished with the help of JKUATES now supply the company with distribution services, says Karugu. And a milk supplier that provided small amounts of milk when the yogurt factory was still in its testing phase now has the capacity to service larger organizations.

“His production unit has been certified by regulatory bodies, he has trained himself and his staff in best practices, and he has scaled up his delivery to include three big institutions,” Karugu adds. “We value our ability to uplift small businesses—more than 6,000 small businesses have benefited from our business and technical training.” 

“Faculty describe the startup program as a life-changing experience that makes them think differently about their research.”

—MATTHEW LYNALL, PURDUE UNIVERSITY

Such virtuous cycles of growth are pushing universities to greater levels of commercialization, says Alunni of Oxford. An even greater catalyst, he adds, is the fact that society’s expectations of higher education are continually rising. “We have many stakeholders, including the academics who wish to set up new companies and the angels who want to invest their money in successful ventures. But most important, we have the public, which expects the University of Oxford to come up with ideas that will save the world. That’s a lot of pressure.”

TURNING FACULTY INTO ENTREPRENEURS

For commercialization to happen at all, doctoral students and faculty must be willing to see a future for their research beyond publication. No TTO is successful unless it provides researchers with a clear and accessible path to market.

That’s why Purdue created DIFF—which includes a course called Introduction to Consumer Discovery—to enable academics to transition from lab to startup more easily. “Faculty often only think about the time commitment and the disruption this process can have on everything else they have going on,” says Matthew Lynall, a clinical associate professor of management with Purdue’s Krannert School of Management, a founding co-director of DIFF, and director of the Purdue NSF I-Corps program. “After completing the program, many describe it as a life-changing experience that makes them think differently about the impact of their research. They set new priorities.”

For many academics, however, negotiating IP licensing agreements with their universities can be the most daunting part of commercialization. That was the case at Purdue, says Lynall, where obtaining a license could be a lengthy, and often adversarial, process. To remove this obstacle, two years ago Purdue’s OTC created Express License, a nonnegotiable license with fixed terms that can be obtained in as little as six months. Lynall could not disclose the terms of the license, but he emphasizes that each party receives a percentage standard for university-based TTOs. “Faculty no longer must go through a long, uncomfortable negotiating process,” he says. “They can focus on moving their technology forward.”

KUIC recently instituted a similar program for the same reason. Under its Swift Startup licensing agreement, KUIC pays for all patenting costs and shares in revenues if the venture becomes profitable. Any profits are divided equally among the inventors, their departments, and the university.

“I don’t ever want the university to be a hurdle someone has to jump over to bring to market the next treatment for a devastating disease. Our job is to make the process easier and identify the right partners to help faculty develop their technologies,” says Nagel. “We want our faculty to stay faculty. We want them to be chief technology officers and chief scientific officers, and let someone else with management experience run the company.”

BOON TO B-SCHOOLS

The more robust university-based tech transfer programs become, the more opportunities business schools have to expose their students and faculty to new technologies and expand their entrepreneurship programs to more disciplines. Through tech transfer, business students discover that they don’t necessarily have to be inventors to be entrepreneurs, says Cornwell of McCombs. “By working with real university technologies available for license, students are exposed to a world of entrepreneurship possibilities that most never knew existed.”

In return, business schools act as invaluable partners to TTOs. For instance, in addition to its MBA-managed seed fund, Saïd Business School also offers Ideas2Impact, a lecture series that introduces doctoral students in the sciences to the innovation process. “In general, business students tend to come up with idea based companies, and scientific students come up with IP-based companies,” says Alunni. Alunni himself has an MBA and a background in investing and engineering, which he says help him “bridge the gap” between the financial, scientific, and academic worlds. “As we promote more collaboration between students in business and the sciences, I think we’ll see more companies formed across the board.”

The McCombs School of Business has linked its master of science in technology commercialization (MSTC) program closely to OTC objectives. Launched in 1996, the one-year, ten-course MSTC program meets on alternate weekends; each of three semesters begins with a one-week face-to-face immersive experience. Throughout the course, student teams work in person and online to evaluate new university-based technologies and create commercialization plans. The students determine which technologies show the most promise for commercialization and submit those ideas to the OTC for possible patenting, funding approval, and incubator support. Although offered through the business school, only about 10 percent of MSTC students have MBAs—the majority come from engineering.

The OTC provides each group of MSTC students with a list of technologies available for their teams to research. These technologies must be chosen carefully in order to offer the best learning opportunities, Cornwell explains. They must have enough IP protection that students do not need to sign nondisclosure agreements, but be free of complications related to licensing negotiations or contractual limitations.

“It is not uncommon for MSTC students to try to commercialize the technology via startups they create, further closing the gap between commercializing early-stage technologies and moving that technology into the marketplace,” says Cornwell, who teaches in the program. Each year, MSTC teams help launch four to six new ventures.

As part of KU’s strategic plan, KUIC works closely with both the schools of business and engineering, with dedicated contacts at each school, in order to coordinate its efforts more seamlessly across disciplines. Its contact at the KU School of Business is Julie Murray, director of corporate and community engagement, who reports to Nagel and the business school’s dean, Neeli Bendapudi. “My job is to drive research relationships that help bring companies to the university, especially to the business school’s centers of research,” says Murray. She regularly visits companies with direct interests in center specialties; she hopes these relationships eventually will lead to three-year $25,000 sponsorships of center research. In return, companies hold positions on center advisory boards, receive access to student research fellows, attend center programming, and work with faculty on research projects—many of which are likely to become licensing opportunities. Nagel believes she has just “scratched the surface” of what KUIC can do in partnership with the business school, especially when it comes to expanding entrepreneurial programs and finding leaders for new ventures. “I know we can do more with the MBAs, who can be the next cadre of startup CEOs,” she says. “We want to recruit more MBAs who have an entrepreneurial bent, and we have a whole runway set up for them to be the entrepreneurial leads for our faculty’s companies.”

At Purdue, the Krannert School of Management plays a significant role in the activities of the BDMCE and the Purdue Foundry, including providing MBA graduate assistants for the Foundry’s entrepreneurs-in-residence. It also designs entrepreneurship courses and workshops, including an undergraduate certificate in innovation and entrepreneurship and a graduate-level technology commercialization course that attracts students from management, engineering, design, and the sciences. Recently, the Krannert School also established a mentorship program that pairs women undergraduate management students with entrepreneurial women faculty in the process of commercializing scientific research.

Krannert faculty currently are working with faculty in the College of Engineering to develop a minor in innovation and technology commercialization, which will include a “3+2” option. Engineering students who take this option can enroll in the two-year MBA program during their senior year; in the last year of the program, they will pursue a concentration in innovation, technology commercialization, and entrepreneurship.

“These efforts are in line with Krannert’s overall strategy as a business school,” says Lynall. “We’re building on Purdue’s STEM strengths and attracting students with science and engineering backgrounds who are interested in creating technology-based solutions and businesses. Rather than being an insular business school within a STEM-oriented university, our vision is to be a STEM-oriented business school that’s strongly partnered with the colleges of science and engineering.”

NEXT STEPS FOR GROWTH

As ripe as STEM innovations are for tech transfer, however, liberal arts disciplines are poised to become the next area of spinout growth on many campuses. Lynall points out that Purdue’s I-Corps program recently attracted two faculty from history and psychology, and even with Purdue’s heavy STEM focus he expects that trend to continue. “When we think of entrepreneurship, we used to think of Steve Jobs and Steve Wozniak starting Apple in their garage. But innovation has now become a more collaborative and complex activity than it was 20 years ago,” says Lynall. “When we’re trying to solve real problems, the solution doesn’t lie within a particular discipline. It involves scientific disciplines, it involves management, it involves political concerns, and it involves the liberal arts.”

The University of Oxford also plans to focus more attention on the humanities. Alunni is considering forming a dedicated group of angel investors specifically interested in supporting early-stage ideas from the social sciences and the liberal arts. As one example, Alunni points to an Oxford spinout based on the idea of a Greek and Latin professor. The inventor teamed up with a physics professor to create a portable scanner the size of a laptop that can decipher each layer of writing on centuries-old papyri—an important innovation for historians in the field who want to view what was erased and rewritten on papyri at different stages in history.

niversities with the most TTO activity last year: Stanford University, Harvard University, and the University of Minnesota in the U.S., and Cambridge in London, and the University of Oxford in the U.K.

“That’s the kind of innovation coming out of the humanities,” says Alunni. “The liberal arts will also generate many other less IP-rich business ventures. We just need to help faculty from history, music, and other liberal arts create businesses that make sense.”

As TTOs adopt strategies to build more capacity, it’s also likely that more of them will join forces. That’s what’s happening at Purdue, which plans to partner with the I-Corps programs at the University of Michigan in Ann Arbor and the University of Illinois at Urbana-Champaign to form a Midwest I-Corps node. “We’ve just started a program focused on nanotechnology, we’ll host one focused on agriculture at the University of Illinois, and this summer we are hosting one focused on transportation and energy at the University of Michigan,” says Lynall. The Midwest I-Corps Node will become the eighth such regional node of cooperating I-Corps sites in the U.S.

One last overarching goal for all TTOs? Work more closely with policymakers to create regulatory environments designed to accelerate university-based startup and licensing activities. This objective is especially important to Karugu in Kenya, where the state-owned JKUAT is subject to strict government regulations regarding business creation. “We have made submissions to lawmakers,” she says, “but any change we see is likely to be very slow.”

Alunni agrees that if universities are to expand their commercialization efforts they must make it a priority to work more closely with government. “We must ask policymakers to make this space friendlier to entrepreneurs, so we can ensure we have more job creation. The more we can shape policy that helps entrepreneurs develop new ideas, not just here in the U.K. but farther afield, the better.” With university campuses so replete with innovative ideas, and a world so ready to receive them, it makes sense that TTOs will only continue to grow in number, size, and scope in coming years. If that trend continues, business schools that limit their involvement in campus-based tech transfer could be missing out on a myriad number of opportunities, say these TTO directors. On the other hand, those business schools that align their programs with commercialization initiatives could find themselves at the very center of business innovation.

To learn more about I-Corps, visit www.nsf.gov/i-corps. Read about the I-Corps program at the University of California, Berkeley, in “Bringing Ideas to Market” in BizEd’s November/December 2013 issue at www.e-digitaleditions.com/i/201447-novdec2013/32.