It Works

It Works!

I received a call from a college senior who, with some friends, is planning to start an internet business when he graduates next year. Not a cause for celebration, or even unusual. What makes this conversation noteworthy are the answers to my questions.

This budding entrepreneur was looking for advice on the business model, help with writing the business plan and presentation, and sources of funding available in Northeast Ohio. This crew is representative of the community's definition of the target of the new entrepreneur. They are in just the right life-stage to take the risk of starting a business: no baggage such as a mortgage and family with many mouths to feed; already in the mode of living like a college student (i.e. Ramen for dinner, limited wardrobe, no sleep) because well, they are college students; no credit rating to damage (probably no credit available); and finally, fewer distractions from others in their network like aged parents, problem kids, that brother-in-law, and so on. They heard about the entrepreneurial support resources available in Northeast Ohio and sought them out. This in and of itself is very encouraging, and could be the end of the discussion, but it is not.

What really gets me amped is that the support groups he talked with all shared a similar message and all are following through with face-to-face meetings and real actions, not feeding them confusing, disparate and mis-leading information or empty promises of help.

I always ask a prospective entrepreneur who they have talked to up to that point. In this case, he had spoken with representatives from GLIDE, JumpStart, and TechLift. The company isn't ready for JumpStart's process. Yet, after evaluating their story, JumpStart made referrals to other groups in a better position to help a pre-company, company. The entrepreneur has meetings scheduled with TechLift's appropriate Entrepreneur-in-Residence and with GLIDE. The entrepreneur was able to relay the advice to date was consistent between each source and he had what he believes to be a clear course of action, which he didn't have when he started. There wasn't the usual story of confusion, frustration, wasted time, effort and in many cases money that is a prefix to most of the conversations I have with entrepreneurs.

We, the organizations dedicated to the support and nurturing of the people that are helping to build the new Northeast Ohio economy, are talking. We are sharing stories, identifying the best sources of help, creating and building the processes and methods that can shorten the learning curve and make the connections to get the ideas to commercialization and into the market faster, and in some cases getting them to failure quicker. This is great news! We should celebrate with a tall cold RooBrew. (More on that later)

The missing link

Whether we’re referring to evolution or ecosystems or experiments, most in the science community have come to understand that things don’t simply happen: they result. Changes in climate cause adaptation in animals or the addition of a catalyst to an experimental system results in a faster reaction. Yet, when it comes to technology transfer, to actually commercializing the patented products in which we have invested years of research and millions of dollars, we are too often content to wait for an industry opportunity to present itself. We assume, despite myriad evidence to the contrary, that tech transfer happens, rather than results.

In a 2007 paper on “University Licensing,” Georgia Tech University’s Marie Thursby and Emory University’s Jerry Thursby concluded that the recent growth in licensing creates a misleading picture, ignoring vast variations in licensing success among universities, scientific fields and technologies. Many universities do not make money on technology transfer, the authors asserted, explaining that the bottom 25 percent of universities reporting to the Association of University Technology Managers bring in less than $360,000 per year in licensing, while spending as much as $213,000 on legal fees alone.

According to the National Science Board’s Science & Engineering Indicators, within the United States:

• Universities account for about 75 percent of basic research, but complete only a fractional percentage of development
• Industry is responsible for about 90 percent technology development
• Universities derive 63 percent of their research budgets from government and only 5 percent from industry
• Overall, industry funds 62 percent of research compared to government’s 30 percent

Universities expect that licensing deals and successful commercial products will simply happen if they conduct careful and useful research. However, the widening gulf between universities and industry, which has resulted from mutual misunderstanding more than federal patent laws, can only hamper the transfer of technology from university labs.

To achieve the result of successful tech transfer, universities need to address industry needs, set up professional points of contact to carefully market their technologies and be a partner, rather than an adversary, in industry research. Universities also must work to combat misunderstandings about their ability to develop technology for industry and get creative in guaranteeing reasonable license rates for those that sponsor research.

If universities and industry become catalysts for moving technology from the lab to the marketplace, both will benefit by combining the power of universities to conduct efficient cutting-edge research as part of their educational missions and the strength of industry to access consumers and introduce functional products.

Patents and prosperity

I recently attended the Association of University Technology Managers (AUTM) Central Region Meeting in Cleveland and was particularly struck by an early panel on guiding faculty entrepreneurs to resources and success.

Robert Schmidt, founder and president of Cleveland Medical Devices Inc. and Orbital Research Inc., spoke in strong support of the intrinsic need for university support of small businesses as logical partners in the technology commercialization and wealth creation process. Schmidt stated that it is hard to get large multinational corporations to take technology directly from universities, a sentiment echoed by many in the university community. He also spoke of the strength of universities and small businesses as a team, saying that 38 percent of scientists are in small businesses and 19 percent are at universities.

Through the SBIR program, small businesses receive about 4.3 percent of federal research funding. With the help of this funding, smaller companies produce 5 times more patents per employee than large corporations and 20 times more than universities. While it is important to note that small companies can employ a higher concentration of researchers, because they often lack sales or support staffs and do not have additional responsibilities, such as education, in their core missions, the ability of small businesses to quickly develop patentable technology makes them an incredible asset to their surrounding communities. This fact becomes especially relevant when one considers the importance of patents to the wealth of communities.

Studying data from 1939 to 2004, Paul Bauer, Mark Schweitzer and Scott Shane cataloged eight measurable determinants of per capita income growth in the 48 contiguous U.S. states, including tax burdens, public infrastructure, business failure rates, climate and knowledge stocks. They found that “knowledge stocks,” in particular the number of patents per capita, overwhelmingly held the strongest correlation with income growth, even outpacing levels of educational attainment. At the time, Ohio fell squarely in the middle of the pack at 25th overall with an above average patent portfolio and existing industry structure.

Support of entrepreneurs, whether they come from inside our universities’ ranks or outside in the greater community, is a crucial way universities can advance their region and state. Schmidt’s advocacy sheds light on this fact, but he is certainly not the only individual putting forth the importance of engagement from university researchers.

Read more about Bauer, Schweitzer and Shane's research on "knowledge stocks."