Breeding success with an incubator in its back yard

Nelsen realises the rarity of the traction for entrepreneurship MIT has both internally among scientists and Technology Licensing Office (TLO) staff and in the school’s surrounding environment among investors, researchers and other professionals; it exists in only a handful of other places such as San Francisco and San Diego.

“It’s been going on so long with venture capitalists, lawyers and other people who understand small companies,” says Nelsen. Even experienced people who have already made their mark are returning from retirement and recycling themselves into new entrepreneurial ventures.”

MIT’s TLO staff reviews about 500 invention disclosures from the institute’s researchers each year and cherry picks 75 for licensing. Another 20-30 are spun out into companies. The office has a staff of 30, half of whom are dedicated to reviewing the disclosures. In addition, 149 patents were issued last year. The TLO brought in gross income in fiscal 2007 ended June 30 of US$68 million.

Even though the TLO claims a success story, Nelsen cautions against unreal expectations of success or profits in the technology licensing business.  

“It takes a long time to get here,” she says. “There’s a lot of unpredictable luck in the game and no guarantee to make money.”

A formula for success?

There is no single formula for success. MIT’s TLO, whose activities date back more than 50 years and include spinouts such as one-time minicomputer giant Digital Equipment Corp. and BOSE, reorganised in 1986 when she joined the TLO. It had been an office full of patent attorneys, but evolved into one filled with people experienced in business. “We injected business and responsiveness,” says Nelsen.

Responsiveness is critical, and Nelsen emphasises the importance of simply being there to answer the phone. “We make it easy for the researchers,” she says.

There are four key elements to the office’s approach: invention disclosures require only a one-page paper, the office respects academic interests so it doesn’t ask a researcher to hold back a paper for publication or have a product ready, TLO officers do answer the phone, and over time news of its success has travelled throughout the institution.

At this point, the TLO doesn’t have to rake through the university looking for candidates; faculty typically come to the office or friends in the investment community recommend projects they know about at the school.

Early stage investments return to favour

The shyness among investors toward early stage investments in recent years is swinging back to favour them, but “not enough to knock your head off yet,” says Nelsen.

“The hangover from the dot com, dot bomb economy lasted so long,” she says. The interest in early stage investing stems to work coming right out of the lab or work recently published. But the really early stage investments typically are in very hot areas and involve well-known faculty. “Fortunately, we have a lot of that at MIT,” she says. Among the areas of interest are basic biology, materials, physical sciences, medical devices and displays. Nanotechnology interest still is in the beginning stages.

When the TLO staff sorts through invention disclosures, it doesn’t have enough time to conduct market research on each of them. The staff is experienced and tries to pick and reject “sure losers,” which include those that are only minor improvements in a field, those with too few potential users, those that don’t appear to be important enough, and those that likely won’t have too large a market. It also looks at the track record of the inventor, plus does patent searches in the cases of those that make it through the sorting process.

“We don’t try to pick the winners,” she says. “We try to pick the sure losers.” It usually is possible to get a patent, though the patent may not be as broad as the office would like. The minimum level of success: the TLO recouping at least its patent costs. A real success is a product on the market.

Nelsen says MIT is interested in getting science and technology out of the university, and won’t necessarily push for the highest price.

MIT’s TLO counts among its success stories Akamai, Alkermes and Genzyme. One case that was particularly rewarding to Nelsen is a company called Integra Lifesciences Corp., an MIT spinout located in New Jersey. An MIT professor worked for 20 years on a skin replacement for badly burned patients. “I’m satisfied we helped people with that,” she says.

An entrepreneurial ecosystem

The notion of spinning out a TLO, as did Imperial College, London, strikes Nelsen as interesting, but strange. “I don’t think of this as a highly profitable or predictable business,” she says. “In the United States, technology transfer is seen as a byproduct of the academic process. We don’t let the tail wag the dog,”

“But in the United Kingdom, because the UK government is interested in economic development, there is government support for the process,” she adds. “So the economy and academia are seen as being equal.”

An advantage MIT and other schools in areas like Boston and San Francisco have is that they are located within an entrepreneurial ecosystem, components of which sprung up on their own. MIT’s ecosystem includes the Deshpande Center for Technological Innovation, the MIT Entrepreneurship Center,  student clubs, the $100K competition in which students get cash prizes to further their entrepreneurial ideas, in addition to the external venture capital and investment communities. “The investors are in on activities, so this makes the academic wall permeable to them,” she says.

This type of activity could be transferred to Europe. What’s needed at a university is a clear mission for technology transfer, up to the president of the university, about the primary objectives and policies of the effort. Smart people also are important. “It’s a talent-based business, so you need to hire smart people,” says Nelson.

There is a trend in technology transfer to try to replicate the Kendall Square environment at the heart of MIT’s Cambridge campus elsewhere in the world, but so far, Nelson’s not worried about the competition. But she cautions that the U.S. government has to “get itself out of the current mess and get money for basic research, or we’re going to fall behind.”

Nelsen likes her job because it combines science, business, negotiating, and people elements. “We are doing something exciting and useful,” she says. “I don’t feel like ‘why am I working so hard to make that guy rich.’”