It’s no secret that the business of start-ups is fraught with risk and uncertainty. Most statistics suggest that there is a better than even chance that a new company will sputter before reaching its fifth year. However, new metrics from the University of Colorado’s (CU) technology transfer office strongly suggest that there are ways to significantly outperform these odds when launching new, technology-driven companies.
The TTO reports that 132 companies based on CU technologies have been formed over the past two decades, and of these, all but 27 are still operational or have been acquired by other companies. Further, an analysis conducted by the Colorado Innovation Network (CIN) suggests that for the companies formed with CU technologies between 1996 and 2006, an impressive 82% have endured at least five years — a much higher rate than what was observed nationally (48%) during this period, according to the CIN analysis.
What’s the secret to establishing start-ups with lasting power? Kate Tallman, the interim associate vice president for technology transfer at CU, maintains there is no magic bullet, but she credits CU’s success in this area, at least in part, to a keen understanding of what the university’s role in the innovation ecosystem should be. “What I see happening is a lot of investments by universities in robust start-up infrastructure and trying to drive their start-up communities,” she says. “I think one of the keys to our success is that the TTO understands that our role is to be a feeder.”
Another key to CU’s success in the start-up arena is that the state has been generous in providing proof-of-concept funding so that university biomedical discoveries, in particular, can be developed to the point where they are healthy and attractive for commercialization. “We have developed more than $20 million in proof-of-concept funding (a vast majority of the dollars going to biomedical companies) since 2007 on CU projects and companies, with nearly $11 million of that coming from state matching funds,” explains Rick Silva,the senior director of technology transfer for CU’s Denver and Anschutz Medical Campus office. “That money enhances the validation package underlying the technology of many companies. Thus, they are well-positioned for SBIR [Small Business Innovation Research] funds. Our spinouts have won $60 million in SBIR/STTR funding since the CU proof of concept programs were initiated in 2007.”
Silva adds that the TTO strongly encourages suitors to establish a commercial driver before taking a license. “This is usually a founder who is incentivized by common stock and the potential of a salary once SBIR and small business grants are obtained,” he says. “This deters premature start-ups.”
Another tactic that deters start-up formation from occurring too early: the TTO pushes hard for new companies to assume the financial responsibility for patents. “This means most investor-founders don’t start the company until it is ready to take on some true business responsibility,” says Silva.
Tallman adds that CU has optimized a staged agreement process that helps to ensure that potential founders have met a set of conditions before they can exercise option rights and move to a license. This helps to put new companies on a solid footing, she says. A detailed article on what’s behind CU’s success in creating sustainable start-ups appears in the July issue of Technology Transfer Tactics. To subscribe and access the complete article, as well as the publication’s subscriber only archive filled with hundreds of success strategies for TTOs, CLICK HERE.