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Enabling Factors for Successful University Spin-offs
Charles Eesleyon 19 June 2011
Transcript of Enabling Factors for Successful University Spin-offs
Prof. Chuck Eesley
Management Science & Engineering Dept.
Stanford Technology Ventures Program
NUS Mon. June 20, 2011 Experiment, Fail, Iterate Setting the Table, Creating the Ecosystem Startups are like seedlings/plants Case Examples: A123 and Myomo A123
Illustrates the formal and informal roles of the TLO in helping new companies to be created and MIT technology to go to market.
Workings of the overall MIT entrepreneurial ecosystem.
An example of SUCCESS springing from FAILURE How to think about a Startup?
MIT and Tsinghua case studies
A123 and Myomo examples
TLO policies vs. University support to Alumni
University Ecosystem to Support Spin-Offs Spring 2001, Ric Fulop ‘06, (born in Venezuela), five startups by twenty-five years old
Howard Anderson, serial entrepreneur teaches “New Enterprises” class, founded YankeeTek venture capital firm, two previous Fulop ventures that had lost $10 million!
Gave him space in his office next door to MIT on Memorial Drive to help Ric in his next undertaking. From left, Yet-Ming Chiang, Bart Riley, Ric Fulop and David Vieau of A123 Systems, with rechargeable lithium batteries at the company’s headquarters in Watertown, Mass. Fulop scanned the country in search of technological alternatives, including MIT TLO’s database
Jack Turner, Associate Director of the TLO, recommended that he meet with Professor Yet-Ming Chiang ’80 (born in Taiwan).
Ric described idea of using carbon nanotubes for new battery company. Chiang convinced Fulop Chiang’s lab had more interesting battery R&D underway.
Yet-Ming introduced Ric to Bart Riley, early employee of American Superconductor, an earlier spinoff that Chiang co-founded in 1987.
September 2001, Fulop, Chiang, and Riley began to negotiate with the TLO for exclusive rights to Chiang’s battery developments.
December 2002, company completed first round of VC funding from Sequoia Capital, Northbridge Ventures, YankeeTek and Desh Deshpande Another round of technology licensing from MIT in 2005 of nano-phosphate materials.
A123 moved rapidly forward with multiple products in its three target markets for advanced, rechargeable lithium-ion batteries, including, initially:
batteries for cordless tools (first product was line of professional tools by the DeWalt division of Black & Decker)
multi-megawatt batteries for renewable integration into electric grid
batteries for transportation (with two dozen different models of hybrid and plug-in vehicles with major American, European and Asian automakers). Raised many hundreds of millions of dollars in VC from regular venture capital firms corporate strategic investors, and large incentive grants from Federal and state govt.
IPO on NASDAQ (as AONE) September 2009, raising $380 million. Plants in Massachusetts, Michigan, China, and Korea > 1800 employees
One of the world’s leading suppliers of high-power lithium-ion batteries Deshpande funding in 2002 as the “Active Joint Brace” research project of Professor Woodie Flowers ’68.
Evolution from academic research to commercialization seen symbolically in the descriptions at various times.
Initial self-description was: “Our research group aims to create a wearable, affordable, unencumbering exoskeleton that augments human physical capability by working in parallel with existing muscalature.
By end of semester with their i-Teams group: “Ten million of the twenty-one million Americans living with disabilities have difficulty lifting a light object such as a fork or a toothbrush.”
Search/Hypothesis testing phase takes time (leads to Valley of Death funding problems) MIT Deshpande Center
January 3, 2002, creation of the Deshpande Center for Technological Innovation
Gift of $20 million from Jaishree Deshpande and Desh Deshpande, serial founder, co-founder and chairman of Sycamore Networks.
In School of Engineering, the Deshpande Center funds leading-edge faculty research on novel technologies with high potential for commercialization.
The annual award done by a committee of senior MIT faculty, complemented by members drawn from the New England high-technology entrepreneurial and venture capital communities.
Accelerate and improve movement to market of emerging technologies. Dr. Deshpande:
“MIT has always provided a fertile ground where its students and faculty can break through technology barriers, fuel new areas of research and development, and fundamentally transform whole industries…Our hope…is to give creative new entrepreneurs…the ability to translate their ideas into innovative companies and products.”
Ignition Grants of up to $50,000 each - exploratory experiments and proof of concept
Innovation Program Grants of up to $250,000 each - advance ideas past the “invention stage”. At that point in 2004, the team, consisting of MIT faculty, students, and an alumnus, plus a Harvard student, entered the $50K Business Plan Competition and won the Robert Goldberg Grand Prize of $30,000.
By January 2006, the research project was finished and Myomo Inc. (short for My Own Motion) was born. In July 2007 it received FDA clearance to market its first product for partial rehabilitation of stroke victims.
In November 2007, it received the Popular Science “Best of What’s New” Award for its NeuroRobotic Technology Innovation.
January 2010, Myomo’s CEO, Steve Kelly, was upbeat about company prospects and acceptance of its underlying technology, but admitted to continuing struggles to raise the financial support needed to grow. Myomo A few of the significant spinouts of the Deshpande Center are:
Vertica Systems Alumni Initiatives:
Seminars and the MIT Enterprise Forum
The Early Alumni Seminars
The MIT Enterprise Forum
Case Example: Brontes Technology
The MIT Entrepreneurship Center
Academic Classes in Entrepreneurship
Practitioner Classes in Entrepreneurship
Integrating the Academicians with the Practitioners
Mixed-Team Project Classes
Other Entrepreneurship Classes
Case Example: SaafWater
From $10K to $100K and Beyond
Lots of Clubs
Conferences and celebrations
Impact of the MIT Entrepreneurship Center and Network
Technology Licensing Office (TLO)
Case Example: A123 Systems
Recent MIT Institutional Broadening and Growth
MIT Venture Mentoring Service
MIT Deshpande Center
Case Example: Myomo
MIT Sloan Entrepreneurship & Innovation MBA Program
Legatum Center for Development & Entrepreneurship An Evolving MIT Internal Entrepreneurial Ecosystem Bigger Picture
Reviews of the literature:
Astebro & Bazzazian. 2010. Universities, Entrepreneurship and Local Economic Development
Rothaermel et al. 2007. University entrepreneurship: a taxonomy of the literature. Industrial and Corporate Change.
Siegel, Veugelers and Wright (2007)
What to focus on optimizing for?
Consulting and university-industry collaborative research
Commercialization of research
Research quality or output
Focus on TLO policies - royalty rate allocated to the researchers increases university licensing income (Lach and Schankerman, 2008) but reduce spin-off rates (Di Gregorio and Shane, 2003) Missed the target
Majority of local economic development - created by former students founding firms
Transformation of university policies toward increasing spin-off rates by university faculty may be called to question Annual US median university licensing net income (including cash–in of spin-off equity stakes) to be around $30,000
(excludes sponsored research) (Thursby and Thursby, 2007)
Median legal fees ($462,000) and salary costs ($638,000) for operating a TLO
Most universities are not likely to make money on TLO activities The cumulative student spin-offs thus outnumbered faculty spin-offs by a ratio of 48:1 between 1980 and 2003
Unregistered faculty spin-offs is somewhere between 30-45 percent (Markman et al. 2008; Audretsch et al. 2005) the ratio is still on the order of 20-25:1.
Number of student start-ups is at least one order of magnitude larger Spinning-off new ventures from academic institutions in areas with weak entrepreneurial infrastructure: Insights on the impact of spin-off processes on the growth-orientation of ventures
by Jean-Jacques Degroof, Edward B. Roberts
2003 study of 8 universities in Belgium (new to commercialization)
High-selectivity / high-support did best
"In underdeveloped entrepreneurial contexts that lack a strong entrepreneurial community, research institutions need to be more proactive by being selective and providing incubation capabilities to their spin-off projects." Evolved "stance" Firms based upon technology drawn from MIT and other universities generate 1.7 million of those jobs and $1.8 trillion of global revenues. Together with the companies based upon non-university technology, the technology-based new firms founded account for 85 percent of the estimated employment and 92 percent of the overall global sales impact. Focus on Barriers to Growth, not Entry