Disrupting the University Tech Transfer Space

At TandemLaunch, we invest in multi-media concepts but ultimately we are trying to disrupt the university technology transfer space. I wrote about the benefits of improving this highly inefficient $50billion+ market earlier. It’s big; it’s inefficient; and we believe that it is ripe for disruption.

Technology transfer is a high risk commercialization venture like any other. Success therefore depends on three factors:

-          Product-Market Fit (quality and market relevance of the product/service/intellectual property)
–          People (quality, business/tech/operational skill set and aligned effort of the people)
–          Resources (money and all the good stuff that money buys)

The current players in the tech transfer space have great difficulty with all of this. Most conventional university tech transfer programs suffer from all three gaps. A few have created secondary vehicles (e.g. consultants, valorization centres, etc.) that can fill one and in the best case two of these gaps. Unfortunately, ventures don’t work unless you cover all three parts…

Product-Market Fit: University inventors, like all other product creators, are unlikely to achieve product-market fit in a vacuum. Achieving it requires customer interaction. Talk to people, find out their pain points and design your product to solve them. Unfortunately, the current university reward system is designed to keep researchers on campus – far away from the human beings whose live they are supposed to improve. Papers can be published from the comfort of the office, grad students arrive on campus through a convenient recruiting system, and even technology transfer offices seem to expect that licensees will happily queue up on campus. “We build it and they will come” is the campus religion.

This is made worse by structural challenges. Research grants, the principal source of support for university development, often prohibit expenditure related to finding product-market fit. So even if you want to leave campus and go beyond the reward system, you cannot.  My first university start-up was founded solely to raise a small amount of “unrestricted” funding for market evaluation – despite the fact that we had over $1M in research grants for the project. Completing the absurdity, some genius reviewer at NSERC decided during the last year of that grant that the concept of LED TV wasn’t commercially viable (at that point the first LED TVs were showing up in Korean factories…).

People: Universities suffer from skill homogeneity in a world where diversity is king. There are world-class technologist aplenty, but finding business and operational skill sets is very hard. As a result, the technology transfer world today is dominated by a tiny number of professors at each university who happen to have business and/or operational skills (essentially by accident since universities generally make no effort to encourage those). It’s not uncommon to see a university with thousands of professors where a handful of operationally-savvy inventors make up the lion’s share of technology transfer activities (and often the entirety of commercial successes). This imbalance is structural and greatly retards commercialization. It’s like re-population planet earth after a nuclear war and somebody forgot to put women into the bunker. Possible with a lot of (bio-engineering) effort, but it would sure be easier with more diversity in the first place.

Resources: Universities with billion dollar budgets will allocate a handful of millions to their technology transfer offices. In alignment with the incentive model of the university, the vast majority of that money will then be allocated to the administration and identification of even more research funding. Only a tiny trickle goes towards the actual commercialization of the research output (i.e. technology transfer). None of the money, usually, goes into actual projects. That makes technology transfer offices irrelevant as resource-providers and leaves venture investors as the only source of financing. Maybe this sounds reasonable, but venture investors are rapidly moving away from early stage investments these days. The average fund size per VC Partner has gone from $5M to $35M in the last decade as a result of the incentive model that world (management fee dominating carry as source of VC payout). Seed-stage alternatives, such as Angels or mini-VCs (Super Angels), have largely bought into the Web2.0 mania at the expense of investments into deeper technology advancements. As much as I would like to scold the venture investment world for their lack of activity at universities, I have to admit that their reluctance to engage in university tech transfer is justified – the product-market-fit and people challenges above are real and implicitly make most university ventures a bad investment opportunity for traditional investors.

So, university technology transfer suffers from bad product-market fit, lack of qualified entrepreneurs and scarcity of financing relative to other investment fields. Venture economics would tell us to just abandon such a hopeless activity. End of the road, just let it go.

Except that innovation is the engine for our economy. Without innovation and its efficient injection into society, our quality of life advantages will erode very quickly. And universities remain by far the largest concentration of innovative research in our societies. We spend more money on university research than we spend on just about any other activity related to entrepreneurial innovation. University research consumes four times more money than industrial basic research. It consumes more than twice as much money as the entire venture capital industry invests. It employs nearly as many people as the entire high tech industry (and most of those high tech employees were at university at some point). And it is growing at a 5 year rate faster than the NASDAQ, the VC industry or any other common measure of technology commercialization!

Tell me that this doesn’t sounds like a good opportunity for disruption! The question the is whether it is ready for disruption. That’s what we are trying to find out at TandemLaunch.

 

Update: An interesting point of definition came up in a LindedIn discussion of this article. If you define “tech transfer” as the narrow step between “receiving inventions from researchers” and “transfering inventions to product entities”, then it is definitely a much smaller space and functioning at some efficiency. That happens to be the narrow mandate of most tech transfer offices and they can usually point to getting 50-200 invention disclosures from their faculty each year, patent maybe half of those and then license maybe 10-30% of that. Not a hugely successful rate but in the same ballpark as say the success rate of venture investing (these numbers are just my experience, I am sure there are many different regional TTO statistics).

My definition of “tech transfer” in this context is a lot broader. It starts with “money spent on applied research” and ends with “commercial revenue from that research” (not university revenue, global product revenue which is as good a measure of “benefit to society” for product technology as we can come up with). That’s what really matters. With $50B+ in research expenditure at US universities and less than 5% of product-related GDP coming from universities, that’s definitely a big inefficient space (relative to the industrial pipe at ~$12B in research expenditure and implicitly the other 95% of product GDP contribution).

In that context the so-called “tech transfer office” (using the more narrow definition in their terminology) is an important player but lacks the resources to cover the entire mid-range of this chain. For example, somebody needs to work with the researchers to calibrate their problem statements to improve the chance of ultimate product market fit. That’s only possible if you are in the market. At TandemLaunch we support university projects long before we invest by maintaining a feedback loop between representative industry players and the research group (i.e. we literally travel back and forth from university to industry with incremental updates/demos/feedback/problem statements – something that a TTO has neither the budget or mandate for). We hope that doing so will increase product-market fit of our ultimate investments and thus elevate value for everybody involved.
There are many other example both before and after the TTO mandate that we are trying to fill. I am sure we don’t get everything right, but we are learning every day.

19 thoughts on “Disrupting the University Tech Transfer Space

  1. Very provocative..and perhaps very one sided. I can’t comment on your points in the multimedia sector but i would suggest that your points may be less apt in at least the life science tech transfer world where inventors are often MDs or other medical professionals who have “customer interaction” and the tech transfer people do have diverse backgrounds. I would also think that a lot of start ups outside the university community also suffer from the points you make.

  2. Thanks for the comment Carmela. The medical space is indeed a different beast altogether. For the rest, my observations have been pretty consistent though (and I have seen tech transfer from a few angles as student, inventor, founder, licensee at big and small enterprise level, accelerator, investor, etc.).

    Start-ups obviously struggle with the same challenges, but the difference is that mediocrity in any of these three vectors leads directly to the death of the start-up. Not so in Tech Transfer organisations that are largely funded independent on commercial return (for the good reason that they often also deliver grant money into the university). This lack of direct feedback loop prevents or at least slows down natural selection dynamics.

  3. You have a narrow view of the purposes of the university in general and university research in particular. Accepting that narrow premise, your thesis has some merit (although I agree with Carmela’s comment entirely). But universities don’t exist primarily to be innovation feedstock for commercialization. You can argue they should be, but you may have difficulty achieving the disruption you seek if you assume that most others share that premise. Most research funding in universities is for basic research which, ironically, may provide the foundation for the development of disruptive technologies (often by others rather than by universities themselves) moreso than if you imposed a commercialization ethos on academia, demanding more engineering than science from people trained first and formost as scientists. And maybe your sample is different than mine, but the professionals, capabilities, and strategies used in most of the technology transfer offices that I know (and I know quite a few) are not very much like the stereotypes you describe.

  4. Thanks for the comment Brad. Obviously my focus here is entirely on the commercialisation of technology meant for commercial application. Other (more) important university mandates have very different success criteria (e.g. knowledge creation, education, training, etc.).

    While I have worked with some tech transfer offices with unique approaches, the most common scenario in my experience is a TT officer with 20-30 files on her desk, a very limited travel budget and no money to invest into any of these files. Regardless of the capability of the officer, that makes it extremely hard to do successful business development for any of the files.

  5. I see this discussion more one sided in that when any institution claims any part of ownership and governs the project or has any involvement at all has the obligation as a partner to invest in the commercialization of said product. And it is because of this vested interest and a speculation on my part no regard to the project in that they have 1 billion dollars to manage control and dictate innovation. This leads to the question of big companions too. If you have only the bottom line at heart not only for investors but the schools bottom line per program budget, is all this just preventing the next drastic change in understanding and reason for any field let alone technologies’? Because in this day and age it is the technology that owns the market and drives the industry forward.

    Case in point Google owning over 200 other companies since they started as a commercially “public” company that still drives innovation and if you don’t believe it just wait like a week or two when they come out with an even cheaper version of the tablet over priced for its market. It is my point that the University as a ‘whole’ has no desire to drive innovation to driver innovation for innovations sake alone. It is this very problem that would be transferee to run from that institution.

    The reason is simple in that why stay at an institution that doesn’t care about the commercialization. This all going on with the student and project members to find ‘base’ starting capital!? With that job already being an undertaking why not just ask VC to fund the whole project and get what 10-30% or more over the life of the companies that spool off of it or any profit over all or just hedged.

    This alone is what use to drive innovation but with the government near broke rounding 20 trillion dollars!? Leaving the very purpose of innovation and marketing with any other contributing of said project an obligation to drive innovation. Because case in point covered above, our government is flat as broke tagging not only their own dollars for taxes but those that gave campaign contributions in the tunes of billions of dollars in the past year or 4 given the global market…. Notes billion dollar Japanize campaign contribution…..

    But as Google paid $40 a share with a total of more money than it spent on all of its other company take overs ‘combined’. I want your office and its workers along with the project teams’ members to look at what happens when you drive a market with free and backed with investment capital all in house. Case in point the Google Docs, Google scribe and many more all from the more tab of your closest Google side pull down.

    But all this being said and saving other comments with reason backed understanding for another day. It is my hope that if the government with its trillions of dollars to spearhead a declining market that itself is unable to balance or fund with full disclosure of spending. Why would anyone suspect or even predicate a University with 1 billion dollars to misappropriate would fund anything but jobs for itself. Proving that per dollar spent the return on investment is blah blah blah….

    It is this mode of understanding that needs to be asked more often when it comes to education because the market is looking for the next big. But at this point I hope we are not too late kicking the already decomposing mass of what was once a country of innovation.

    Thanks for your time

    From: Gabriel M. Vieira

    Student School of Engineering transferee

    • Thanks for the comment Gabriel.
      I think there is a fundamental difference between knowledge and technology. Knowledge benefits society through dissemination (e.g. the chemical composition of Jupiter can be described in a paper and make the world a richer place proportional to the number of readers). Technology only benefits society through application (e.g. a new electrical car design does nobody any good until it is actually manufacturered).

      Historially, universities had a pure knowledge generation mandate (fundamental sciences, arts, etc.). During the middle of the 19th century we added a lot of technology mandates to the university (e.g. engineering vs science, medical vs biology, etc.). Having those fields places, in my opinion, an obligation onto universities to push for the social benefit corresponding to the mandate (i.e. application). Otherwise we could just keep engineering a training domain (undergrad only, professional lecturers) with maybe a tiny research element for theoretical/knowledge aspects of engineering.

      Universities have both mandates and it is good that they do. We just need to recognise the difference and provide a different structure for each.

  6. I think the elements are in place to do this, but for a different set of reasons.

    1. Investments in tech transfer are meant to foster knowledge and to create jobs. To foster knowledge, you need academic freedom. The usefulness of research is tied to the interest of the innovator. If your group proposes to identify areas of demand from an investment side, great. But you still have to convince innovators they should spend their time in a given space. R&D folks tend to be like cats, doing what they want, when they want. And no matter what the spin, university researchers have a stigma about entrepreneurship. The freedom to explore is why they are at a university rather than in industry.

    2. The university environment promotes “idea” people; business skills and product-to-market experience is in very short supply. To combine investors, company developers and innovators into a company is always uncertain. This is a true roadblock not easily overcome. To me, this means the faster you get technologies out of the hands of university innovators – “Univators” and into the hands of a proven management team, the more efficient the process.

    3. University folks live in a supply-side world. People give them money and they efficiently spend it. Rarely do they have knowledge and skills to manage capital raising, commercialization and a liquidity event. Time is as important as money. Instead of quickly moving fresh marketable stuff out of the lab and into the hands of capable people, they explore, ponder and improve. They need to commit to the success of one or two good products and act Most need a dose of practical business reality for them to be successful.

    4. Schools fail to appreciate the need to communicate research in everyday terms, don’t approach the right people, and try and cut deals that run counter to how these things will be funded and derive real world value (venture financing concerns). They hold the stuff until stale, think way too hard about how much they can make, negotiate forever, and frequently aren’t willing to do deals just to get the stuff out the door (rarely realizing that the clock is ticking on each patent, and that any return is better than no return). Because it’s not their money, no one operates as if “losses” (undeveloped patents and products) matter.

    5. A university frequently does business like the government creates jobs. It tries to make the world adapt to its reality rather than adapting itself to market dynamics. The point is not to make others meet the “process of their mission”, but to get innovation off the university shelves, into the hands of people who know how to commercialize technology, and into the public domain. Investment and jobs is the mission. Not process, micro-management or empire-building.

    6. Right now there is no true tech pipeline to industry. It’s fragmented like “for sale by owner” real estate. On one side you have highly degreed people speaking techno-jargon with a limited ability to determine a clear product, most simply hoping someone, anyone finds them. On the other side, the downturn of the economy globally has forced companies to cut back on R&D, and there is serious interest in most any new technology. That means it’s a seller’s market. But the truth is that technology is at most only 15% of the value of the entire “product to market process” and most ideas need to be vetted before they are worth a dime. To understand this, is to understand the key to driving value from innovation and making university transfer technology activities relevant.

    In my view, the biggest headache is the thought that each university is smart enough to do all this stuff themselves. Trust me, they aren’t; if they were they would already be doing it. That’s not to say many are not attempting, just too few do it well. Just my two cents.

    • Thanks for the comment. You are absolutely right that motivating the researchers is a key part of the process. In our case we try to do this through a combination of gentle guidance, support for their research and by keeping a lot of the frustrating parts away from them. The fact that TandemLaunch has in-house staff means that the inventors really don’t need to get involved in much of the business/operational aspects (if they don’t want to). Worked so far in my career but definitly not easy.

  7. Thanks for the comment and link Luc. That’s a great map. It would be interesting to see how many of the companies were the result of undergraduates vs faculty/graduate students. There is definitely a strong contribution of universities towards the start-up eco-system as the predominant source of trained talent. I would love to see some data on whether that contribution comes predominantly from training (undergrad) or actual research (grad/faculty).

    • Helge, from the alumni data I gathered close to 75% of the companies were founded by undergrads and about 23% graduate students. Faculty accounted for less than 3%. Not surprisingly, faculty-founded startups are almost all closely affiliated with their respective research areas, graduate students less so while undergraduate students with the least. The vast majority of graduate students who founded companies obtained their degrees from the science and engineering disciplines as opposed to business, arts and social sciences.

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  9. The term “Technology transfer” is being used and the phenomenon is adopted in avery narrow and commercialized sense.
    Technology transfer in reality should mean- “Transferring technology to masses with transformation to make it adoptable, acceptable, accessible and affordable for a common man.”

  10. There is much merit in your contention that the typical University TTO is underfunded and has exceedingly limited resources. There is a novel model in Canada, initially funded by the Canadian federal government and the Provincial government of Ontario, subsequently gaining commitments of both funding and in-kind investments by some of the largest and most successful technology companies in the world.

    I commend GreenCentre Canada to you for its model and suggest that you visit its website at http://www.GreenCentreCanada.com

    Though the Canadian Research Universities are generally smaller than their counterparts in the US and are much fewer in number, the technologies uncovered by GreenCentre in its first months of operation are quite remarkable. The model, incidentally, is intended to capture only those technologies that have been vetted by the sponsoring industrial companies as having good commercial potential AND having found no potentially interested licensees prior to being offerred to GreenCentre for commercialization.

    • Thanks for the link Larry. GreenCentre seems to be a very similar approach to TandemLaunch for the chemistry industry. Maybe a bit more on the service side and a bit less as an investor (at least judging from the website), but awefully close. And they are close to our backyard. Who would have thought. I appreciate the connection!

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  13. Nothing real new here…classic underperforming versus underresourced argument against TTOs and university innovation. Perhaps, you have highlighted that it may be a bit of both.

    I’d be interested to see this article written from the opposite perspective under the assumption that the universities were doing everything right and it was the rest of the system that was broken. Yes, there is always room for improvement in technology transfer, but many of systemic issues are less about the quarterback (universities), and more about the running back (those outside).

    It seems to me that those on the outside of universities seem to always have a “better” answer, yet are the first to balk at taking a real risk. This diminished level of risk-tolerance squeezes the system and focuses much of its efforts on more near-term innovation.

    Yet, if breakthrough ideas (many of which come from universities and advanced government agencies) waited for or were developed under the auspice of a “product market-fit”, they would be pressured to conform, shelved, or even ended. Steve Jobs actually despised the “focus group approach” for this reason.

    If we fairly look at transfer of technology from the university into the marketplace, there are many shining examples of a successful system. These are the running backs scoring touchdowns. Unfortunately, the others blame the quarterback.

    Maybe rather than a disruption to a relatively young industry, its time for a wake-up call to everyone else.

    Its time to buck up and take some chances.

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