The University of Florida Moves Beyond Gatorade

Stephen DeAngelis

June 04, 2007

I have written before about universities that try to help staff and students capitalize on their research and development by helping them spinoff their ideas into businesses (see for example Southern Cal Gets Innovative). BusinessWeek notes that the University of Florida has moved into the big leagues of such institutions of higher learning [“MIT, Caltech — And the Gators?” 21 May 2007]. Not only has Florida become a football and basketball powerhouse, they have become innovation powerhouse as well.

“When it comes to spawning new companies, a clique of universities has long topped the lists: Massachusetts Institute of Technology, California Institute of Technology, and the 10-campus University of California system. Their dominance seems almost preordained. These schools are in high-tech communities brimming with scientific brainiacs and risk-taking investors. They boast labs and equipment that only the biggest budgets can afford. They have worldwide name recognition. Now, against all odds, the University of Florida is joining their ranks.”

There has always been a tension between athletes and academics. Many professors resent the enormous salaries paid to head coaches in successful college sports programs. But college administrators know that successful sports programs bring in large donations. Universities like Harvard, however, have known for centuries that any reputation for excellence can also bring in donations. The University of California Berkeley, for example, earned a top rate reputation for research and its ability to attract Nobel laureates. It has also continued to support a strong athletic program. Earning a reputation for incubating new companies may well be an additional way to secure a reputation as a top notch academic institution. I would expect to see more colleges pursue multiple paths to excellence (sports/academic/business). BusinessWeek reports how quickly the University of Florida jumped into the entrepreneurial arena:

“Florida is best known as a sports juggernaut, and for a long time the Gators were its main claim to fame. Isolated in Gainesville, the university failed to create a single startup from faculty discoveries a decade ago. By the 2004-05 school year, though, its spin-off tally was up to 13. The Big Three still outdid Florida, with leader MIT generating 20, according to the latest annual survey by the Association of University Technology Managers (AUTM). But Florida whizzed past all the rest of the 228 survey respondents, including such better-endowed universities as Johns Hopkins and Harvard. The payoff is tangible: Florida’s license income jumped from $11 million 10 years earlier to $40.3 million, more even than MIT or Caltech. Its office of technology licensing is now a profit center.”

In an era when rising tuition costs risk subverting America’s system of higher education, any course that helps bring in money is important. License income is impressive because it underscores the fact that an institution remains at the leading edge of innovation and can turn learning into profit. It also represents the tip of a trickle-down economic effect that is creating profits and jobs for others as well. The University of Florida has taken a unique approach to entrepreneurship. It uses a strategy that garners profits from the intellectual property of staff and students, but it allows creative thinkers to remain academics without also having to become businessmen or businesswomen.

“The rise is the result of a change in strategy, which boils down to treating intellectual property like merchandise and then marketing these products to targeted customers. In a break from conventional wisdom, the university also shuns its own inventors when it comes to running startups, relying instead on hired guns who have proved they can make a go of business. ‘Our scientists are very good at science, and they’re at a university because they enjoy research,’ notes David L. Day, director of the university’s Office of Technology Licensing. ‘But I wouldn’t go to my barber for an eye exam. What works best is if they stay in the lab and I go and find a been-there-done-that, made-money-for-investors management team.'”

As a serial entrepreneur, I can attest to the fact that asking an academic to traverse the startup minefield can often seem like asking them to commit conceptual suicide. Good ideas can die from bad business implementation. The BusinessWeek article underscores that fact:

“Although the value of university research has been evident ever since a University of California biochemist co-founded Genentech Inc. in 1976, much of American higher education is still struggling to transform ideas into cash. Brainpower isn’t the problem: A steady flow of postdoctoral students and itinerant professors seeking tenured posts ensures that bright minds are widely distributed at schools around the U.S. Nor can institutions blame a scarcity of funding. University-based research spending has jumped nearly 45% since 2000, to $42.3 billion in fiscal 2005, according to the AUTM survey. Yet the pool of university money earned from license fees has risen at half that pace, to $1.6 billion, excluding lump-sum payments.”

As I have written before, innovation involves the practical application of new ideas. You need both a good concept and good execution or you don’t have innovation. According to the BusinessWeek article, execution is sorely lacking at most universities.

“Half of the universities in the survey have fewer than six people in tech transfer. Venture capitalists, badly burned when their dot-com investments exploded, are still wary of university spin-offs, particularly in the life sciences. While an Internet venture really can be started by a couple of undergrads in a dorm room, it typically takes a team of scientists years in a lab to get a new drug approved by federal regulators.”

That is why the University of Florida’s meteoric rise is so impressive. It seems to have discovered the secret of putting good ideas together with good execution.

“The out-of-nowhere success at Florida shows there are effective ways to attract capital and nurture campus-born technology industries. ‘The cultures at most universities are beginning to change,’ observes Ross C. DeVol, an economist at the Milken Institute in Santa Monica, Calif., and the lead author of a 2006 report on university technology spin-offs. He warns: ‘If universities don’t get actively involved in technology transfer, there are so many others around the world who will, and will be more successful.’ Florida adopted its new course in 2000. Until then, the university had been sitting back, waiting for corporate giants to materialize and write megachecks for the rights to its patents. But the bigs almost never appeared, because the investments and corresponding returns were too small for multibillion-dollar outfits. So the university chose instead to go after small businesses that don’t require blockbusters to thrive. To that end, Florida tripled the staff of its tech licensing office and hired Day, a go-getter director with private-sector experience to knock on doors. The office also began working with researchers to get an early glimpse of the work going on in their labs. And it linked up with two underutilized business incubators in metro Gainesville to provide subsidized homes for these just-born businesses. The university’s Sid Martin Biotechnology Incubator, a 40,000-sq.-ft. facility outfitted with 19 wet labs and $1 million in gear, is fully occupied today by a dozen startups. They include Banyan Biomarkers, which is developing a blood test to detect brain trauma, and Pasteuria Bioscience, which is testing a genetically engineered bacterium that kills a crop-damaging parasite. Another is AxoGen Nerve Regeneration, an 18-employee outfit on track to hit the market later this year with a nerve graft taken from cadavers. It shows promise helping accident victims regain function of injured arms and legs.”

As I’ve noted in previous posts, one critical link in getting good ideas to market is the idea broker who actively seeks companies that can benefit from emerging research. One of the reasons I hire an eclectic group of employees is because they serve this essential broker function in my company. The University of Florida has also created a staff that engages in that essential function.

“Florida’s tech transfer office has a staff of 19. That puts it in the same upper tier as MIT and Hopkins, though way behind the California system. The licensing office also has an annual budget of $5 million. One of the staff’s duties is to keep tabs on university research to assess what breakthroughs might be worth patenting and licensing. That’s no small task: Florida spent $518.8 million on research in the 2005-06 school year and employs some 4,000 faculty members and 8,000 assistants in its labs. Meantime, Day, 56, plays matchmaker, chasing down investors and executives who might be interested in commercializing their inventions. He hits dozens of biotech conferences around the country each year and recently hosted a two-day exhibit in Gainesville to showcase new companies and technology in the pipeline. He also taps alumni to broaden his reach.”

Alumni have always played a big role in raising university funds. But alumni are much more likely to welcome someone looking to help their business than they are to welcome someone who simply wants to put their hands in their pockets looking for donations. Connectivity — as my colleague Tom Barnett constantly preaches — is essential for success for in the information age. Tom’s national security mantra is “disconnectedness defines danger.” Brought into the academic world, that mantra would be “disconnectedness defines lack of donations.” Universities that successfully turn their staff and student research into profits will be those that learn to excel in the idea brokerage arena. As a result, they become much more resilient to vagaries of the economy as they look for steady income streams.