Engineering a start-up revolution

The focus of US university technology transfer offices on out-licensing patents to the highest bidder is unprofitable for all but a few elite institutions. In fact, most universities lose money on this activity, according to a paper by Walter Valdivia, Fellow of Governance Studies, Center for Technology Innovation at the Brookings Institution, Washington, DC.

In 2012, the top eight earners, representing five per cent of US universities, took in 50 per cent of the licensing income flowing into university coffers. The top ten per cent accounted for 70 per cent of total income.

Of the 155 universities that reported intellectual property licensing income in 2012, the top half command nine out of every ten dollars spent on research – and nine of every ten dollars of licensing revenue.

Validivia’s research shows 130 US universities did not generate enough licensing income in 2012 to cover the wages of the technology transfer staff and the cost of filing and maintaining their patent portfolios.

This is all the more awkward given the political pressure that US universities – in common with their peers in Europe – are coming under to make a contribution to innovation, job creation and economic growth.

In a report on this subject last month for the UK government, the CEO of the pharmaceutical company GlaxoSmithKline, Andrew Witty, recommended that universities should be charged with a greater role in delivering economic growth. Economic development should become the explicit third mission of universities, alongside teaching and research, Witty said.

There were similar conclusions in two landmark US reports on the same subject, ‘Rising above the gathering storm’ and ‘Research universities and the future of America’.

Valdivia’s research suggests that in the face of the pressure to commercialise research and the inability of many to do so through licensing, US universities have edged their way to a different approach, which he refers to as ‘nurturing start-ups’.

“This new model of technology transfer involves creating the incentives and organisational capacity within universities to support the entrepreneurial efforts of their [academics],” Valdivia says.

The nurturing involves providing resources for “campus entrepreneurs”, and introducing career incentives and partnering with local business incubators and investors. 

What many technology transfer offices have recognised, Valdivia says, is that university patents are embryonic technology. Only a small group of people – including the inventor – can understand the technical, let alone the commercial, potential. Based on this insight, technology transfer offices are providing services and support to academic inventors who would like to commercialise their research, but have little idea of how to go about it.

By remaining in the university environment, entrepreneurs can remain plugged into their scientific network, and access the collective knowledge of colleagues, libraries, databases, and other resources.

Instead of fees for service, technology transfer offices are taking equity. While this may squeeze their income yet further, the hope is that technology vested in campus start-ups will be knocked into commercialisable shape and get over the valley of death. 

Eventually there will be a bigger payday. “The university can expect higher returns from its shares and options in a successful start-up, and it retains a degree of control over that outcome,” says Valdivia.

There is an upward trend in universities forming start-ups and providing the services needed to nurture them, Valdivia notes.