Making Tech Transfer Work
How America’s idea factories can
work with CEOs to commercialize more technology.
Laura Kilcrease has founded or helped to found dozens of companies on the basis of technology created inside the University of Texas at Austin. The technologies have ranged from three-dimensional printing devices to nano-ink for solar energy panels. In
creating so many companies with names such as Exterprise, Hart Intercivic and LNNi over a quarter of a century, she has emerged as something of a legend in Austin entrepreneurial circles, having also founded the Austin Technology Incubator, worked at the renowned IC2 Institute and founded an early stage venture capital company called Triton Ventures, where she is managing director.
But as entrepreneurial as she is, Kilcrease is frustrated that more technologies developed inside the university do not make it into the commercial marketplace. “There is a vast investment going into the research, but we’re getting only a small amount of that research commercialized,” says Kilcrease. “Most technology institutions end up commercializing very little of what they have because their people are phenomenally good at solving their problems, but they are not necessarily thinking about how it applies to someone else’s problems in the marketplace.”
Kilcrease’s frustrations are part of a national conundrum—various arms of the U.S. government in 2012 spent $138.9 billion for research and development (R&D) at the Department of Energy’s 17 national labs, at research institutes, at universities and elsewhere, according to the Congressional Research Service. That spending over the years has helped make the U.S. arguably the most biotech and genomics industries, GPS satellites and other fresh ideas. However, at a time when the U.S. is still crying out for jobs, has all the spending fueled the growth of enough small- and medium-sized technology companies; and therefore, has it created millions of needed jobs? That answer, it seems, is overwhelmingly, no.
Different “idea factories”—labs, institutes and universities—face slightly different issues. Of the DoE’s energy labs, only three have been set up to facilitate the flow of technol- ogy to the private sector; but the other 14 remain focused on defense-related research,
much of it classified. Research institutes, often situated in the medical and biotech arenas because of billions of dollars in support from the National Institutes of Health (NIH), are under greater pressure from Congress to commercialize technology; and hence, they have opened more “translational” institutes—but only with limited success. Universities, aside from a relative handful, including the Massachusetts Institute of Technology (MIT) and Stanford University, tend to focus on publishing their findings in research journals and do not invest enough in technology commercialization. Most do not allow faculty to spend 20percent of their time on outside projects, as MIT does.
The core problems of identifying great new ideas, patenting them, nurturing them through different stages of development and allowing them to bear fruit in the marketplace are similar. “Fundamentally,” says Kilcrease, “it is the same set of issues.”
Part of the problem starts at the very top, in terms of how the U.S. government allocates
its billions of R&D dollars. “There’s a deep bias toward pure science,” says Mark Moro, senior fellow and policy director for the Metropolitan Policy Program at the Brookings Institution in Washington. “There’s an overvaluing of the life sciences by comparison with the physical sciences; and then, there is a kind of denigration of applied or commercially relevant work. Those are big problems.”
The Politics of Innovation
There are hints that the issue could gain ground at the national level. Likely Republican presidential candidate in 2016, Sen. Marco Rubio of Florida, for example, is proposing to exploit research breakthroughs to create more jobs. Unfortunately, at least for now, ideological gridlock is likely to prevent much action at the federal level. On the opposite side of the policy debate from Moro are basic R&D proponents who argue that any shifting of increasingly scarce federal dollars toward commercialization would reduce
spending on basic research and therefore destroy the “seed corn” of future breakthroughs. It’s at the regional/state level that the issue has generated the greatest attention because cities and states are trying to use technology from universities and national labs to create “clusters” of technology companies, as San Diego has done in biotech, genomics and wireless communications; the Denver area has with “clean” environmental technologies; and Orlando, Florida, has with computer simulation programs.
“This is a crucial, huge issue in the regions,” says Moro. “Regions are on their own now. The fact that Washington is gridlocked and that adjustments to federal programs won’t be forthcoming means they are taking ownership of regional, economic development with increasing sophistication. Regions are taking stock of their assets; and at the top of list are their research universities and their national laboratories—along with their community colleges and other entities.”
One of the states taking the subject very seriously is Colorado, which is home to 10 federal laboratories, including the National Renewable Energy Laboratory (NREL) in Golden, just west of Denver. NREL is one of three Department of Energy labs dedicated to tech transfer to the private sector, and it is one reason that Colorado boasts 300 companies in the clean-energy field with 30,000 employees. Companies from many other states also have licensed its technology. But commercialization of NREL’s technologies “doesn’t happen as easily as people think it ought to happen,” says Bill Farris, NREL’s associate laboratory director for innovation, partnering and outreach.
Part of the problem is simply informing the business world what ideas exist in the lab. The DoE came up with an Energy Innovation Portal (techportal.eere.energy.gov)
where it posts 18,000 patents in the energy field and provides summaries of how
about 1,000 of those ideas work. However, there is still a huge gap in the
mentality and operating style of scientists on the inside and business leaders
on the outside. To help bridge this breach, NREL created an Innovation and
Entrepreneurship Center, a kind of half-way house.
Nevertheless, putting together the entire “ecosystem” to support the commercialization of ideas has been challenging, particularly as it relates to capital. “I can provide some funding to help prove the technology,” says Farris. “But I’m not going to help capitalize the company. I wouldn’t make the best investor. Investors are pure of heart, in the sense that they are interested in making money. They don’t get emotionally attached to a technology; but left [on] our own, we get enamored with the technology.”
One entrepreneurial company that benefitted from NREL’s research is Natcore
Technology. Natcore’s Chairman, Brien Lundin, and CEO, Chuck Provini, met three
scientists whosework with solar energy fascinated them. They raised some funds
from family and friends. Then, they avoided taking on large amounts of debt or
selling a large piece of the company to venture capitalists by listing on the
Toronto Stock Exchange, through a platform called the TSX Venture Exchange, in
2009. The company’s first promising technology for possible commercialization
came from Rice University in Houston, a process called liquid phase deposition.
This technology held out the prospect that solar wafers, the building blocks of
a solar panel, could be made by immersing them in a liquid bath that created
various layers of receptors. That approach was simpler and cheaper than using a
furnace that burns at temperatures as high as 1,200 degrees Centigrade and
generates toxic waste.
Next, Provini heard about a black silicon material that NREL had invented. Using black silicon was intriguing because the creators of wafers would not have to figure out how to make them non-reflective. After all, the whole purpose of a solar wafer is to absorb the
sun’s light, not reflect it. NREL licensed the black silicon technology to
Natcore in December 2011. Putting the two technologies together using
nanotechnology techniques, Provini figures his company can reduce the cost of
making solar wafers by 20 percent. He anticipates reaching his first commercial
licensing or joint venture deals this year.
“The biggest key with Rice and NREL,” says Provini, “was that their primary
motivation was not to just get revenue. They wanted to try to commercialize
their technology and do good things and help the world. For new companies like
us, that’s key. We can’t write the big check.” He argues that idea factories
that do not charge large up-front royalties for their technology will reap
larger gains over the long run if the companies theyspawn become successful.
A basic issue in dealing with scientists was building trust that his company would not simply steal their ideas. “You’ve got to establish a relationship through face time,” Provini says. “You can’t do it with lawyers. You have to go there and persuade them that
you are a good company. Then, they will back off on some of the restrictions” on the use of their technology.
He recommends that a company should take a series of small, concrete steps to establish a relationship in which ideas can flow back and forth across the table. “In R&D, you never end up where you think you are going initially,” Provini adds. “There has to be a little bit of good faith. Not all the T’s have to be crossed and [not] all the
I’s get dotted. A lot of times, you’ll sit down and can’t get through the
contract negotiation if the business and the university or lab don’t have the
right confidence in each other.”
Provini’s case is slightly unusual in that he combined technology from two different technology institutions in different geographies and founded the company in yet another state. But Provini threaded the eye of the needle by adopting a collegial style with
researchers over a period of years and carefully nurturing technologies with
promise. It was not a case of one-stop shopping. One of the figures who has
spent 50 years in technology transfer, and who may have derived some of the
keenest insights, is Lita L. Nelsen, director of the technology licensing
office at MIT, which has licensed technology to hundreds of companies. Tech transfer
is about much more than mere licensing, in her view. It requires the transfer
of skills, as well.
“Startup companies don’t happen very often without the active participation of the inventors, either as founders or as consultants,” Nelsen says. An MIT professor can spend 20 percent of his or her time on a venture and graduate students and post-grads can join the company, taking with them many of the lessons derived from having helped invent a new idea. In so doing, “the vision and the championship and the know-how can
be transferred to the startup company,” she says. This process can rarely blossom in the same way at a federal lab, where scientists may not be allowed to work on outside projects, or at research institutes funded by NIH, which imposes conflict-of-interest policies against scientists seeking to commercialize their ideas.
Universities also will grant exclusive licenses to companies for a technology, whereas the federal labs and institutes will rarely grant that, another deterrent to successful tech
transfer. “If we give you an exclusive license, you will be more willing to try
to invest to bring this risky stuff to market because you’ll have protection
from competitors,” says Nelsen.
The hardest part of successful tech transfer is not finding or licensing an idea or even raising the money. “The hard part is finding someone who can set up a structure where the vision and participation of the inventors can be accommodated,” she explains. “The
scarcest resource is not money but rather the experienced technology entrepreneurs who can both raise money and also manage early-stage development.”
Nelsen argues that companies of all sizes are shooting themselves in the
foot if they fire their own internal R&D executives and managers, assuming
they can simply rely on ideas from a university. “If CEOs in some industries
are firing the guys in R&D to make their earnings look better, that’s not
going to help,” she says. “You need the receptors for early-stage technology in
the company, the engineers and development scientists who can receive the
technology.”
There’s a debate in the economic-development field about whether large
companies or small to medium-sized ones do a better job of commercializing
technology. Nelsen says smaller companies are the stars, but Brookings’ Moro
thinks the deck is stacked in favor of the big guys. “The large
corporations are characterized by greater capacity to drive and structure
long-term research partnerships, which allows them to work more smoothly with
large research universities,” says Moro.
“Smaller and medium-sized firms may not have a chief research or innovation
officer. They may not have the standard, professional player who can spend the
time to develop a research contract or partnership.”
Size May Matter
Actually, it takes both large companies and small startups to create the
robust, regional ecosystem necessary to commercialize ideas, according to other
experts. Sometimes large companies license a technology but spin it off into a
captive company to develop it. Many times, large companies will simply acquire
small firms that have already “baked” a technology and proven its commercial
value. “Small companies innovate, big companies acquire,” says Waymon
Armstrong, co-founder and president of a $12 million a year company in crisis
simulation software called Engineering and Computer Simulations, in Orlando.
The technology originated at a research park that the U.S. Army uses to develop
simulation training for soldiers.
Rick Weddle, president and chief executive of the Metro Orlando Economic
Development Commission, says one key to creating a regional climate where
commercialization can flourish is breaking down the silos between tech-transfer
officials, entrepreneurs, large companies, economic development officials and
other constituencies to allow them to better communicate and align their
interests. “If you are in your silo, and another person is in another silo,
there’s no way you can help each other,” says Weddle, who also managed North
Carolina’s vaunted Research Park for seven years.
CEOs cannot create the ideal ecosystems for successful tech transfer by
themselves, but they can work with different constituencies, including state
and local political leaders, to eke out progress. Weddle says many states are
now enacting new laws to remove legal barriers to tech transfer from public
universities and are studying how to improve their climates for innovation.
That’s good news for CEOs looking for new ideas.
The Bottom Line: Technology transfer from the nation’s idea laboratories
could be greatly improved if CEOs invest in developing relationships with
scientists and help create ecosystems that foster commercialization.
William J. Holstein is the author of, most recently, The Next
American Economy: Blueprint for a Real Recovery.
