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24 February 2014

Tech Transfer Regions: East US

GUV's monthly review of innovative regions arrives in the US east coast.

Author: Gregg Bayes-Brown, editor

With all the yarns spun regarding Silicon Valley, a casual observer may conclude the Californian tech cluster is the centre of the American innovation universe. In truth, however, America’s landscape is a tale of two coasts, with the older eastern side of the country still teaching the west new tricks.

The whole of the east coast, stretching to the cluster of small states in the north east from where the US first sprang down to Florida, is a bristling community of innovation and home to numerous world famous universities. And while Florida, North Carolina, Connecticut, New Jersey, and Virginia are all solid contributors to tech transfer in their own right, this snapshot overview will focus on three states: Massachusetts, New York, and Pennsylvania.

 

Massachusetts

The rivalry between the two coasts of the US stretches across numerous sectors: culture, industry, music. In the case of academia, the rivalry between Massachusetts institutions and Stanford is not too dissimilar to the UK’s Golden Triangle, which is of little surprise considering the origins of the universities. The top ranking of the three, Harvard University, is, as Richard Jennings of Cambridge Enterprise puts it, “the University of Cambridge’s most successful spin-out”, with the city where Harvard is based, also called Cambridge, named in honour of the UK institution.

Universities spinning out new universities, much like Harvard did from Cambridge and Cambridge did from Oxford before it, also led to the creation of Stanford. It was Harvard where the founders of Stanford, Leland and Jane Lathrop Stanford, came when they were looking to replicate the success of the institution on the west coast.

Several notable companies have since come from Harvard, although the two most famous, social network Facebook and tech giant Microsoft, were founded by Harvard drop-outs Mark Zuckerberg and Bill Gates, respectively. Another Harvard alumnus Mitt Romney, who ran for US presidency in 2012, went on to have a substantial impact in the private equity and venture capital world as one of the founders of Bain Capital.

However, the success of its student-led ventures have not equated into similar accomplishment in tech transfer. While Harvard’s 2013 licensing revenue of $15.2m and an average spin-out rate of nine companies a year is not to be dismissed, it doesn’t quite stack up to the success of Stanford in terms of tech transfer, which brought in $85m last year. However, Harvard could, and should, argue that in its defence, many of its spin-out companies are life sciences firms. By their nature, any equity investment in life sciences is typically going to take the better part of a decade, if not longer, to deliver much in the way of returns as the spin-outs’ product will take time to be proven to be effective and enters into mainstream medicine. Harvard can also point out that this is $15.2m a year in the black, something 85% of US universities operating tech transfer in the red cannot attest to.

Not content with just one world-beating academic institution in the US version of Cambridge, the third part of the US academic rivalry triangle is much closer to home to Harvard than Stanford. A mere two miles down the road sits the Massachusetts Institute of Technology (MIT). Started in response to industrialisation in 1861 (although with a four year gap between charter and its first courses thanks to the American Civil War), MIT has more than lived up to its founding ethos.

MIT’s Technology Licensing Office has had a long history of supporting MIT firms, mostly supported by intellectual property stemming from computing or engineering. Recent standout examples are Boston Dynamics, the MIT robotics firm recently snapped up by internet giant Google, and Witricity, which looks to transform consumer electronics by providing wireless power transfer. The technology behind these companies has led to a healthy bank balance for MIT’s tech transfer efforts, which brought in a cash income of $145m in 2012. The same year, MIT launched 16 venture capital-supported companies, each with at least $500k in funding.

A particular standout feature of MIT is its programmes abroad, with the aim being to bring the same know-how behind MIT’s technology successes to developing countries. The institution runs programmes in Brazil, India, China, Portugal, and a whole host of other countries. In Russia, the institute is supporting the Skolkovo Institute with a MIT campus, known as Skoltech. As reported on in GUV issue 008, the programme is perceived as a major step forward to stimulating innovation in the Russian economy, which has become stagnated. MIT aims to turn this around with a mixture of education on leading areas in technology, and an ingrained focus on eventual commercial outcomes via start-ups and spin-outs.

Across the Charles River from Cambridge sits Boston University (BU), another one of the top universities in the US. While BU sits behind its afore-mentioned peers in terms of research potential and tech transfer output, it’s notable for adopting a much more public facing approach than many other tech transfer units. BU’s Technology Development office has been putting on a networking event since 2010 called Tech, Drugs, and Rock and Roll. The event combines academics with entrepreneurs and investors while highlighting emerging technologies from BU, and even dares to have a little fun by closing the conference out with a live gig.

 

New York City

The US’ most populous city and listed as an Alpha++ global city alongside London according to the Globalisation and World Cities Research Network, New York City is a natural spot for innovation. However, its size and strength does not come without problems.

New York University (NYU), ranked 40th in the world by Times Higher Education, is leading efforts in the area to tackles problems which arise from mass urbanisation – a concern that is only going to become greater as the ever growing global population continue to migrate to cities. To this end, NYU’s Centre for Urban Science and Progress (CUSP) is using the whole of New York City as its laboratory. The Centre is drawing data from 26 departments from around the city, such as emergency services, energy distribution, sewer maintenance, and also collaborating with several other universities and tech firms around the world, all with the focus of developing solutions to challenges that face cities the size of New York.

NYU also recently completed its merger with the New York University Polytechnic School of Engineering, the second oldest private engineering and technology school in the US. Along with CUSP, NYU is now comprised of 21 schools and colleges. In terms of tech transfer, the university performs much better than most of its peers. The university receives over $400m in annual research funding, which translated into $1.8 billion in licence income during 2007 and 2011, which NYU claims rates it as the top university for licensing income during that time period. The university has launched over 70 spin-outs, and joins the billion club with over $1 billion raised in external funding for NYU companies. The university itself also gets involved with investments, and manages a $20m university venture capital fund, the Innovation Venture Fund. The fund typically comes in at seed and series A stages, and opts to invest somewhere between $100,000 and $250,000 across a wide range of sectors.

New York is also taking aim at Stanford’s start-up crown through the creation of tax-free zones for new companies. Called STARTUP-NY, the arduous acronym of State universities of New York (SUNY) Tax-free Areas to Revitalise and Transform Upstate New York, the programme looks to offer start-ups and university spin-outs the opportunity to operate tax free for ten years. The deal include income, business, state, local, sales, and property taxes, and eligible businesses include fresh start-ups, out of state businesses looking to relocate to New York, and New York-based businesses looking to expand into new sectors and create jobs.

The plan also aims to make it more viable for tech to be transferred out of New York universities through the building of tech clusters around them by offering the tax free space around campuses, as well as providing a more attractive offer to graduates the state is looking to retain.

NYC also recently launched a $100m initiative to build more life sciences in the area. Contributing $10m from City coffers, NYC is looking to be joined by several venture capitalist firms, and has already secured support from biotech Celgene and GE Ventures, the corporate venturing unit of General Electric. NYC has also set aside $5m to establish the Mount Sinai Institute of Technology, which should open its doors by the end of this year.

 

Pennsylvania

Travel west from NYC, and you’ll find the state of Pennsylvania, home to four prominent universities in terms of technology transfer. Two of which, University of Pennsylvania (UPenn) and Drexel University, are based in the eastern city of Philadelphia, while Pittsburgh in the west home to the eponymous University of Pittsburgh and Carnegie Mellon University (CMU).

The University of Pittsburgh had a strong 2013, comparable to many of its peers. The university attracted $759m in research funding, generated $6.5m in tech transfer revenue, and formed nine spin-outs. The university supports its firms with Pitt Ventures, part of its Office of Enterprise Development, which supplies entrepreneurs with business support, networking, mentorship, and access to funding.

Across town, CMU is on par with Pittsburgh, if not doing slightly better in terms of generating new companies. Last year, it contributed 12 new firms to the economy, and averages around 10 per year over the past eight years. It brought in slightly less in licensing revenue in 2013 than Pittsburgh with $5.32m, more or less average for the university, but had a bumper year in 2012 with $19.89m. CMU’s prospective entrepreneurs can also draw on the university’s Open Field Entrepreneurs Fund, which was launched in 2012 and went on to help six firms with a total backing of $300,000 within half a year.

Over at Drexel, the university has taken two major steps over the past year to bolster its stance on tech transfer. First, Drexel launched Drexel Ventures in order to support commercialisation and large-scale innovation at the university. The institution hopes that Ventures will increase corporate R&D investments into the university, and is supporting the advancement of ideas coming out of the university with its proof-of-concept Drexel Innovation Fund. Drexel also recently partnered with serial incubator manager DreamIt Ventures, which also runs hubs in Austin, Baltimore, New York, and Tel Aviv. The new incubator, which is supported by DreamIt’s $30m venture fund ($3m of which was contributed by Drexel), should be up and running in April.

UPenn has also had an active year. The university welcomed a new vice-provost for research and executive director for its tech transfer unit the Centre for Technology Transfer in the form of John Swartley. Having been with the university since 2007, Swartley was given the nod following the numerous leadership roles within the CTT and his creation of UPenn’s start-up support unit Upstart. The university also scooped the 2013 James Dyson award for a robotic arm capable of increasing human strength, which can be used both in manual labour and by people rehabilitating from injury. UPenn also signed into a commercialisation agreement with the UK-based commercialisation firm IP Group, which along with the University of Columbia, is using UPenn as a launch pad for the firm’s move into the US.

Copyright Mawsonia Limited 2010. Please don´t cut articles from www.globaluniversityventuring.com or the PDF and redistribute by email or post to the web without written permission.

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