Partnerships for Innovation Accelerating Innovation Research Idea – Invention – Product: Pitfalls on the Pathway for Academic Technology

Panel Members Michele Marcolongo – Professor and Dept. Chair Materials Science and Engineering, Drexel University Karthik Ramani – Donald W. Fedderson Professor of Mechanical Engineering, Purdue University Jeremy Fishel – Chief Technical Officer and Founding Partner, SynTouch

Barbara Kenny – NSF Program Director: AIR Prakash Balan – NSF Program Director: Industry-University Cooperative Research Centers Program IUCRC David Hudson – Sr. Assoc. Vice President for Research, University of Virginia

Trivial Case In the beginning there is an idea, and the idea is GOOD! Complicated things happen for a long time. After a while - product ships! Consumers rejoice! Fortunes are made!

Ken Harrington –  ENTREPRENEURIAL ECOSYSTEM MOMENTUM AND MATURITY The Important Role of Entrepreneur Development Organizations and Their Activities Four phases of evolution where entrepreneur or venture is in its progression: Discovery Idea Startup Growth

The Discover Phase is where people recognize a problem but haven’t come up with a possible solution. It includes basic scientific research, hackathons, problem days, startup weekends, and other activities. People move into the idea phase when they come up with ideas that might fix the problem. 

The Idea Phase is when a prospective entrepreneur starts to act on his or her idea. People in the Idea Phase are trying to figure out if their ideas have potential. Idea Phase activities include idea pitch sessions, entrepreneur meetup events, resource fairs, education classes, mentoring, office hours, social events, and just asking about. The Idea Phase also includes searching entrepreneurial websites and event calendars to sort out where to start or find resources. 

The Startup Phase is the next phase in an entrepreneurial ecosystem The Startup Phase is the next phase in an entrepreneurial ecosystem. At this stage, prospective entrepreneurs commit to founding a venture, allocate time and resources to pursuing it, and work on refining their ideas and then founding a company. Activities in the Startup Phase include selecting a legal entity and structure, forming a team, developing a proof of concept, prototyping, refining the business model, crystalizing a value proposition and customer pitch, testing for customer demand, implementing intellectual property strategies, fundraising, and myriad other activities. Investors are interested in the best ventures that come out of the Startup Phase. 

The Growth Phase is when customers validate a company The Growth Phase is when customers validate a company. First customer revenue (not grant revenue) determines when a venture moves into this phase. The Growth Phase includes activities such as raising additional funding, market launch, growing the customer base, strategic partnering, increasing revenue, adding employees (jobs), reaching positive cash flow, competing, scaling, and exit. 

Let’s try to consider Harrington’s approach as we discuss the somewhat different situation of an the phases of evolution as a problem becomes an idea and moves to a start-up in the academic setting with which we are all more familiar.

Susan Enright, a 4th year grad student in Bob White’s lab, has an idea Susan Enright, a 4th year grad student in Bob White’s lab, has an idea. Related to the research in White’s lab, Susan pursues this idea with a background literature review, performs some additional calculations and simulations on the university computer and concludes there is an invention here. This is Susan’s first invention and she is not clear who “owns” this IP or exactly who the inventors are. Is Bob White an inventor? If there are multiple inventors, do they all get the same “share” of the invention? If not, who decides? Susan sends an invention disclosure to the university Patent, Licensing and Venture Group (PLVG) and considers submitting a short article to the Journal of New Ideas.

Susan thinks that this is more than an invention; this could be a company and she considers forming her own company to pursue this. NSF supported the basic research in White’s lab, so Susan approaches White and convinces him that they should pursue an NSF AIR-TT grant. While this is under review, she proceeds to form her own company and begins discussion with the university licensing group for a company license or option agreement. With her company letterhead, Susan (actually her company, Wren LLC) applies for an SBIR grant. The university PLVG files a provisional patent application.

Without consulting with White, Susan takes over the lab bench close to the wall (and fume hood) and sets up some preliminary company experiments in White’s lab. She recruits an undergraduate, Alain to help out. Both the AIR grant and the company SBIR grant are funded. The AIR grant allows White to add a grad student to his team. The SBIR funds allow Wren LLC to hire one of White’s post-docs (Serge), and at first Serge just continues to hang out in White’s lab and use the “special lab bench” for his company research.

Susan, Alain and Serge develop the basic idea further and see the basis for an additional patent. It is not clear exactly who owns this or who should prosecute the patent.

Wren, little more than a letterhead, a web page and an EIN, is contacted by AlphaNumeric, a major west-coast venture fund who might consider an investment in Wren.  Susan is excited, but knows she has no experience working at this level and quickly goes on line to try to learn who or what “C-suite” officers means and how to write a business plan. Susan (and Serge) quickly obtain space in the university incubator and start raising first round capital to move the technology further while preparing to speak with AlphaNumeric.  Bob White, upset that his lab has been used as the de facto company space, is made the CSO for Wren.

Space rental, salaries and expenses quickly run up the burn rate and the family and friends funds are rapidly disappearing, but a workable prototype is still over the horizon. The original commercialization direction Susan imagined now seems somewhat naïve; the company begins to alter course and refocus. This requires new and additional research and it is not clear that THIS university is the best place for it; also money is short. Disagreements arise about the best route to commercialization as there is pressure to take some small, easy to manufacture off-shore bits to market. These sales will generate some working capital for the real project and get some PR for Wren.

QUESTIONS?