By Keith McDowell
Two million dollars invested; twenty-three startup companies formed! So much from so little. But how can that be? Is it magic? Or is it more like the 1965 tune by John Sebastian and The Lovin’ Spoonful where “you’ll see how the magic’s in the music and the music’s in me?” Have we truly found a silver bullet to accelerate the commercialization of university research? First, a history lesson on the Texas Ignition Fund and what it is about.
In 2006 the Office of Research and Technology Transfer at The University of Texas System administration formed a small working group to search for mechanisms to enhance the formation of startup companies based on discoveries from the research laboratories of its fifteen member institutions. Arjuna Sanga, Associate Vice Chancellor, Matt Blanton, founder CEO and managing partner of STARTech Early Ventures, and Madison Pedigo, manager of the Texas Instruments Venture Capital Program, comprised the group. After a year of study, the group proposed a model similar to the Deshpande model used at MIT – the core being a “proof of concept” or POC fund. The Board of Regents agreed to the plan in December of 2007 and invested two million dollars in a POC grant program called the Texas Ignition Fund, or TIF.
TIF provided grants of up to $50,000 to support the development and maturation of research discoveries into marketable intellectual property through a competitive process. Under the outstanding leadership of Cathy Swain, Assistant Vice Chancellor for Commercialization, TIF hosted six rounds of proposal applications. The proposals were vetted by external volunteers including venture capitalists, entrepreneurs, Texas Emerging Technology Fund staff and advisors, and technology transfer legal experts. From a total of 123 proposals, 45 were funded by March of 2010, totally depleting TIF. The grants spanned a range of industry clusters with 31 in biotechnology and life sciences, 10 in micro-electrical and mechanical systems (MEMS), 7 in energy, 4 in advanced technologies and manufacturing, and 4 in nanotechnology with the remainder in five other clusters.
From the first distribution of grant funds in the fall of 2008 until the summer of 2010 – about 18 months, the outcomes from TIF included 23 startup companies, 9 licenses and options executed, 12 patents issued, 59 patent applications and $7.7 million in external funding. By any measure one chooses, these statistics clearly demonstrate the acceleration of university research discoveries into the marketplace. Two companies in particular standout as exemplars: Lone Star Advanced Technology, LLC, and FibeRio Technology Corporation.
Lone Start Advanced Technology, LLC, is in the energy sector and based on an alternative fuel conversion process that transforms lignite coal into heavy crude using an efficient and cost-effective micro-refinery concept. Developed by Drs. Richard Billo, Brian Dennis, and John Priest at UT Arlington, the technology has received over $2.4 million in external funding from the Department of Energy, the Department of Defense, and others as well as more than 50 inquiries from potential licensees and investors. Materials and processing costs are estimated at only $25 per barrel, suggesting that a profitable refining operation can be supported. Texas in particular has abundant lignite coal that can potentially be converted to heavy crude, and American oil refineries are fully capable of upgrading it into low-cost pitches, cokes, gasoline and diesel fuels. TIF funds were essential for helping to develop objective data on cost, quality and feasibility of this breakthrough process.
FibeRio Technology Corporation is a nanotechnology company based on a revolutionary “Forcespinning TechnologyTM” that produces nano-fibers with high yields, low costs, and increased safety. Developed by Dr. Karen Lozano’s team at UT Pan American, this new patented technology offers a broad range of applications and it was named one of the top innovations of 2010 by the American Society of Manufacturing Engineers. TIF funds helped test the prototype’s reliability, develop a business plan and marketing strategy, and form the new startup company. FibeRio received the Silver award from the World’s Best Technology Showcase in March, 2010.
Is the amazing success story of TIF magic? No. But just as the trumpets of Joshua and the Israelite army brought down the walls of Jericho, it does point to a major new tool in America’s battle to bridge the gap between research discoveries and their downstream commercialization. The trumpets are blaring at us. The evidence is clear for all to see from TIF and other new POC programs. If you want to accelerate commercialization, invest in POC funds. Otherwise, enjoy an incremental, languorous pace listening to The Lovin’ Spoonful as the world races past.
So who will pay for POC programs? The money has to come from someplace! Universities don’t have any money as state support is crumbling before our eyes and retrenchment is the order of the day. Donations to university development and advancement offices could be tapped, but that avenue isn’t appealing to development officers. Venture capital could provide the funds, but POC programs are much too early stage and far too risky. Furthermore, it’s not clear that venture capitalists have the requisite expertise to review and assess the commercial potential at such an early stage, although the TIF experience with external reviewers was very positive. State funding is out in the present economic climate, even though it would be in their best interest for the long term to fund the development of regional innovation ecosystems. Industrial funding is a real possibility, but will require significant efforts from both universities and industry to bridge the culture gap. That’s not likely to happen quickly. So we are left with federal funding.
Excluding the SBIR and STTR programs, which are manifestly not POC programs, the federal government has no concerted program for POC funding. I challenge the Department of Commerce and the Office of Science and Technology Policy to come up with new innovation and commercialization policies that include POC funding. I challenge the National Science Foundation, the National Institutes of Health, and all the other myriad federal agencies that fund basic and applied research to immediately create supplemental POC funding programs as part of the apparatus of federal research grants. There is no good reason or excuse why a researcher should not be able to apply for an additional $50,000 supplement to an existing research grant when discoveries are made that have commercial potential. America can no longer ignore our failure to fund “proof of concept” and bridge the gap from research to commercialization.
It’s not magic! It works! Let’s get it done!