University Start Ups: We Can Do It Just Show Me The Money
To those of you who are familiar with Tech Transfer and university start-ups you know there are more opinions and technology than there is a money. See the article below that says universities are blowing opportunities to leverage their scientific talent. As if universities are in the Venture Capital business and have millions on the sidelines in money market funds looking for deals. State governments are dealing with $175B in deficits and looking for cuts in education and R&D. University budgets are strapped and even the most endowed schools are barely recovering from the 2007-2009 meltdown, a period where capital was misallocated to the most arcane derivative plays and real estate investments. Most VC’s are still whining about the lack of capital. There are success stories where entrepreneurs and regional VC’s have funded specific university projects but the real issue has been lack of funding for early stage investing. Here are some key points to provoke discussion:
1.) Many very successful companies have come out of university licensing but the VC’s and entrepreneurs had the vision and business plan for the technology and the start-up deal was pre-sold prior to any “auction”. The best deals happen when the inventor scientist already has a following with investors.
2.) Most universities do not have the management nor the charter to fund start-ups. Certainly they will nurture and encourage investments and do participate in any success through royalties and milestone payments.
3.) VC’s routinely meet with university technology transfer organizations to seek inventions and start-ups but it is very difficult to select winners among thousands of inventions.
4.) According to a Nacubo-Commonfund Study of Endowments there are $346.5B in assets in 2010 among 850 colleges and universities up 11.9% over the previous year. Some of this money could presumably be invested internally on inventions.
5.) Many billions were thrown about in TALF and TARP and certainly some funds should have been allocated to start-ups and job creation but I do not have the data. However, the new budget realities would not support this type of government funding.
I will send this blog out to various university licensing individuals to get more input and ideas.
As a case in point Caliper Sciences (CALP) was mentioned as a success where UPENN holds only 1%. But CALP has raised $310M since inception at various prices and it is highly unlikely that UPENN could have ante’d up additional money even if they picked the perfect investment window over a 10 year difficult market.