Houston Voices

The Valley of Death: How universities can help startups survive

Universities and startups have different goals, but that doesn't mean that educational institutions can't help new companies through the valley of death that is entering the marketplace. Miguel Tovar/University of Houston

When looking out over the commercialization landscape, the vast space a product has to travel from discovery to the marketplace appears to be growing. For many startup companies, this so-called "valley of death" means the end of the road. Without support, resources and, most importantly, cash, many startups will shut down.

Universities are becoming epicenters for startup activity. In many ways, they are perfectly positioned to support commercialization, with a pro-research environment, lab facilities, faculty expertise, human resources, and tech transfer operations.

But there's one problem.

"Universities and industry are like two icebergs moving in different directions," says Montgomery Alger, professor of chemical engineering and director of the Institute for Natural Gas Research at Pennsylvania State University. "Companies need to make quarterly profits quickly through new products and services, and the academic business model is not set up to support that need."

The question then becomes: how can universities shift their approach to bridge the gap from idea to market?

Spark innovation on campus

Universities may need to rethink a few things when it comes to their innovation ecosystems.

"Universities must play a key role in the commercialization process because so many ideas start there," says Walter Ulrich, longtime technology management consultant and former chief executive officer of the Houston Technology Center, previously one of Houston's most prominent accelerators and incubators. "Investors and inventors go to where there's a critical mass of opportunity, so universities need to step up their game."

Supporting commercialization gives universities a chance to be even more relevant when it comes to local economic development. Changing the institutional culture, however, may be necessary if universities want to become a true bridge across the valley of death.

Alger, who spent part of his early career working for GE Global Research before transitioning to academia, argues that this can be done by creating multidisciplinary teams of researchers across the university to help industry bring ideas to the market — a foundational part of the bridge.

Another way to spark innovation is to boost technology transfer or industry alliance offices, according to Susan Jenkins, managing director of the Innovative Genomics Institute at the University of California, Berkeley. Hiring an intellectual property manager to work specifically with academic research institutes can go a long way in supporting an innovation environment.

"When it comes to innovation, universities need to be open to new ideas," says Jenkins. "They need to be able to shift quickly to the next best thing, whatever is hot at the moment. That's how the market works."

Disrupt the academic business model

Universities are designed to support educational throughput. Most are not set up to support commercialization activities.

"Universities are stuck in a rut," says Alger. "There has to be a conscious decision to make the university function like a business to support business."

That means putting the right resources in place to fix the many pain points companies may experience. Long response times, extensive paperwork processes and the lack of system wide policies governing university-corporate relationships can often lead startups and industry partners to look elsewhere for solutions.

"Just like scientists need to be innovative, the administration needs to be innovative," says Jenkins. "If you want to be in the race, you have to be ready to be flexible and adapt."

Another way to disrupt the academic business model is to consider commercialization as part of the promotion and tenure process.

"If universities are serious about advancing technology entrepreneurship, they must recognize faculty who drive commercialization," says Ulrich.

Alger agrees. "There has to be some kind of incentive structure established for the research program when it comes to technology transfer."

Six ways to get serious about startups

According to Ulrich, who has launched hundreds of successful startups throughout his career, startups need cash — and lots of it. Early licensing fees, short-term payouts, competitive prices for rent, and other services charged by the universities could end up keeping startups from success.

Ulrich says "Cash is king," noting that an increased demand for early-stage capital has widened the valley of death.

There are a few things universities can do to support early-stage startups:

1. Invest in long-term payouts.
Most venture firms expect returns in 7 to 10 years. By establishing longer-term payouts, more cash will stay in the hands of the entrepreneur.

2. Consider equity for returns.
Universities can negotiate equity, possibly even in the leasing of space.

3. License more broadly.
Diversifying provides more pathways for inventors to find the right fit for licensing their product.

4. Provide resources as investment.
Explore resources such as coursework credits for startups looking to expand their knowledge base.

5. Establish seed funding.
Entrepreneurs can use even the smallest amounts of cash. Not having to give it back is even better.

6. Create a university-focused angel network.
With broad alumni and donor bases, universities can more readily tap into its business community to build a network of investors.

Incorporating different streams of funding could be very important, says Jenkins, who worked with a foundation to establish entrepreneurial fellowship program at UC-Berkeley.

It's a dimension, however, that some campuses may not be set up to deal with yet.

"Product development within the academic research environment will take a focused investment," says Alger. "Universities just need to give the right attention and priority to it."

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This article originally appeared on the University of Houston's The Big Idea.

Lindsay Lewis is the director of strategic research communications at UH.

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Re:3D is one of two Houston companies to be recognized by the SBA's technology awards. Photo courtesy of re:3D

A couple of Houston startups have something to celebrate. The United States Small Business Administration announced the winners of its Tibbetts Award, which honors small businesses that are at the forefront of technology, and two Houston startups have made the list.

Re:3D, a sustainable 3D printer company, and Raptamer Discovery Group, a biotech company that's focused on therapeutic solutions, were Houston's two representatives in the Tibbetts Award, named after Roland Tibbetts, the founder of the SBIR Program.

"I am incredibly proud that Houston's technology ecosystem cultivates innovative businesses such as re:3D and Raptamer. It is with great honor and privilege that we recognize their accomplishments, and continue to support their efforts," says Tim Jeffcoat, district director of the SBA Houston District Office, in a press release.

Re:3D, which was founded in 2013 by NASA contractors Samantha Snabes and Matthew Fiedler to tackle to challenge of larger scale 3D printing, is no stranger to awards. The company's printer, the GigaBot 3D, recently was recognized as the Company of the Year for 2020 by the Consumer Technology Association. Re:3D also recently completed The Ion Smart and Resilient Cities Accelerator this year, which has really set the 20-person team with offices in Clear Lake and Puerto Rico up for new opportunities in sustainability.

"We're keen to start to explore strategic pilots and partnerships with groups thinking about close-loop economies and sustainable manufacturing," Snabes recently told InnovationMap on the Houston Innovators Podcast.

Raptamer's unique technology is making moves in the biotech industry. The company has created a process that makes high-quality DNA Molecules, called Raptamers™, that can target small molecules, proteins, and whole cells to be used as therapeutic, diagnostic, or research agents. Raptamer is in the portfolio of Houston-based Fannin Innovation Studio, which also won a Tibbetts Award that Fannin Innovation Studio in 2016.

"We are excited by the research and clinical utility of the Raptamer technology, and its broad application across therapeutics and diagnostics including biomarker discovery in several diseases, for which we currently have an SBIR grant," says Dr. Atul Varadhachary, managing partner at Fannin Innovation Studio.

This year, 38 companies were honored online with Tibbetts Awards. Since its inception in 1982, the awards have recognized over 170,000 honorees, according to the release, with over $50 billion in funding to small businesses through the 11 participating federal agencies.

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