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Tech Transfers: Turn-Offs or Start-Ups?

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Recently, Donna Rounds, the Director of Technology Development at the Hospital for Special Surgery in New York noted that "the dirty little secret for starting a new business is that you can get most things out of a tech transfer department pretty damned cheap." This December marks the 30th anniversary of the Bayh-Dole Act which in effect gave birth to the idea of tech transfer. In response to a sluggish US atmosphere for innovation, the law was passed to give ownership of inventions, developed with the aid of federal research funds, back to the universities that created them; it also allowed research institutions the freedom to negotiate whatever license terms would encourage development of the technology. The act was immediately dubbed by The Economist as "the most inspired piece of legislation to be enacted in America over the past half century."

Thirty years later, the act claims impressive results. A recent article in Science Translational Medicine by Vicki Loise and Ashley J. Stevens reports that since 1980 research institutions have spawned inventions that have spun out about 6700 companies, two-thirds of them still operating at last count in 2008. About 154 FDA-approved drugs had roots in tech transfer; overall, drugs discovered by public sectors researchers accounted for an estimated $103 billion in worldwide sales in 2009. Furthermore, university-licensed technology has created 279,000 jobs; it virtually spawned the entire biotechnology industry. In short, there wouldn't have been cochlear implants, honeycrisp apples, nicotine patches, v-chips for blocking certain TV programs, or even Google without the benefits of university research.

Today most research institutions have created offices of technology transfer to encourage licensing of inventions; several universities take aggressive positions in encouraging start-ups. Alan Paau, the executive director of the Cornell Center for Technology Enterprise and Commercialization, which last year reported 338 new inventions and launched 12 new companies, says he encourages professors to think entrepreneurially.

"We never want to work with anyone who won't put a little skin in the game. If a faculty member comes into my office with any idea, but doesn't want to risk anything, I don't see that as a promising start. On the other hand, if an entrepreneur comes to us and expects everything to be free, that's a problem too."

One solution Director Paau has found is to work closely with Cornell's MBA program to match would be entrepreneurs with professors with inventions.

But matchmaking takes work too. A Cornell microbiologist, Margaret Bynoe, who has come up with a method to regulate the blood/brain barrier, providing the possibility of treatments for a host of brain diseases including multiple sclerosis, Parkinson's and Alzheimer's, says her first response to forming a company to move her research out of the lab was "a flat no" because she just wanted to continue working in her lab on her research seven days a week. But her tech transfer office matched her with a Cornell MBA graduate who has agreed to become CEO of her newly hatched company, Adenios, for which Professor Bynoe serves as Chief Medical Officer with a significant equity stake. She admits she is now "excited about the company because the impact is so huge it will only further my research."

Some tech transfer offices do not function as effectively. Earlier this year, researchers at the Kauffman Foundation called for creating an open, competitive licensing system for university innovators allowing faculty members to choose their own licensing agents to bring discoveries to market quickly. Too many tech transfers offices, Kauffman researchers argue "have become monopolies that slow the process of commercialization creating a bottleneck of innovation on campuses."

How does an entrepreneur sort out the best possibilities? Most tech transfer offices list available inventions on their websites; first rule is don't stop at first try. One Chevy Chase, entrepreneur, Richelle Burnett was a systems engineer, who wanted to get out of the "male-dominated quantitative world." After three babies, she decided to look for an idea so she could start her own business. The first tech transfer office she dealt with was at a "hotshot" university that demanded huge upfront payments. So she turned next to James Madison University where she found a promising computer-based higher education tool used for accreditation and assessment programs. She struck a good deal with "reasonable royalty payments" as long as she meets thresholds. So far, her company, Madison Assessment, has hit yearly projections and has signed up 50 universities as clients. Now she is looking for further growth, possibly through acquisitions of testing companies in other areas, such as degree-specific tests for accounting or nursing. "These days," Burnett observes, "the world of assessment is rich for the pickings."

In future blogs, we'll continue to explore the world of tech transfer. Share your experiences so that would- be entrepreneurs get a balanced picture of what lies ahead as they comb tech transfer sites for promising start up ideas.