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A win-win: Business students get great experience, TTOs get extra manpower

This article appeared in the June 2015 issue of Technology Transfer Tactics. Click here for a free sample issue or click here to subscribe.

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Two prominent research universities have established innovative arrangements that give business students valuable real-world experience by providing opportunities to perform due diligence and other commercialization activities, which in turn contribute to the market advancement of institutional discoveries.

Rensselaer Polytechnic Institute (RPI) in New York offers Masters’ degree students from the Lally School of Management a chance to partner with faculty researchers from other departments, such as biomedical engineering. The Masters’ Scholars Research Program (MSRP) gives students an opportunity to work with campus researchers toward finding new commercial pathways for lab discoveries.

Purdue University maintains the Emerging Innovations Fund (EIF), administered through the Purdue Research Foundation (PRF). The fund is designed to provide financial support to new business based on Purdue discoveries. Through an initiative between the Burton D. Morgan Center for Entrepreneurship and PRF, a Student Managed Venture Fund (SMVF) course provides students a chance to participate in commercialization activities that can lead to real funding for start-ups they partner with during the course.

Responding to student needs

Both the RPI and Purdue partnership programs were developed in response to business students’ increasing interest in opportunities for research experience and real-world learning. Gina O’Connor, PhD, associate dean for academic affairs at RPI’s Lally School of Management, says she recognized a “trend toward business students being interested more and more in engaging in research in one way or another. We have a heavy research emphasis here in the Lally School, and we were also expanding the number of specialized Masters’ programs, along with our MBA. We were adding a couple of new masters’ programs, and so we were attracting more students and different types of students.”

Jonathan Gortat, senior project manager in Purdue’s Research Foundation’s Office of Technology Commercialization (OTC) and coordinator of the EIF, says, “The Emerging Innovations Fund is managed in-house at the research foundation, but we knew we needed to do due diligence on the companies that were applying for the funding. At the same time, we had also been looking to increase our interactions with the Krannert School of Management.” Gortat, who is a Krannert School alumnus, served on a committee with Krannert Dean Emeritus and Leeds Professor of Management Richard Cosier, PhD, who now teaches the SMVF course. “It turns out there was a perfect win-win situation here at hand,” Cosier recalls. “I had students who were asking for real-life experiences on doing due diligence and learning how venture capital could be invested. So instead of having graduate assistants do it like we did prior, we actually set up a course.”

O’Connor tells Technology Transfer Tactics that another driving force in establishing the MSRP program at Rensselaer was the desire to increase students’ interdisciplinary exposure. “[We] have a strong emphasis here on low walls across the campus. In the Lally School, we’re very focused on innovation that begins from an advanced technology. So I thought that the other angle on research we could take would be to have our interested students help faculty in the schools of science and engineering commercialize the outputs of their research,” she says.

Deepak Vashishth, PhD, director of RPI’s Center for Biotechnology and Interdisciplinary Studies (CBIS), says the new initiative is one component of a larger effort to “redefine the role of a top tier research university: one that is engaged in public and private partnerships, involved in interdisciplinary research, and providing quality education, all to drive entrepreneurial, sustainable, socially responsible scientific discovery and technological innovation.”

Vashishth notes that not only is the interdisciplinary nature of the arrangement appealing, and the educational benefit to the students invaluable, but his researchers also can benefit greatly from partnering with the MSRP program. “A lot of Principal Investigators are not …trained to commercialize their work; they’re doing a lot of fundamental and very important research.” Embedding management students, with their market research skills, into the lab helps to bridge the gap between discovery and commercialization, he stresses.

Establishing a new program

The MSRP program, now in its second year, began with a call for interest to students and faculty. O’Connor and Vashishth already had an ongoing dialogue about the potential benefits MBA students could provide to CBIS researchers by bringing business planning and market research skills into the labs. Vashishth then issued a call to his PIs for projects with some commercial potential. In the first year, the program received interest from about twenty students, and many more faculty than students. Interested students must write an essay detailing their interest, and selected candidates then are screened in interviews.

The process of pairing students with researchers can be time-consuming. “We had to go through some elaborate matchmaking process. Going through that took a long time. We’re learning to fine-tune that process,” says O’Connor. “The PIs actually come and do a short talk to the students and try to sell what they’re doing and what they’re looking for. Then the students consult with the faculty team who manages the MSRP. And we identify a match between the student’s interest and what the PI is looking for. So it is mainly a student-driven partnership,” Vashishth elaborates.

Once the management students, who are partnered in teams of two whenever possible, are matched to a project, they meet with their program mentors every two weeks for progress reports, guidance, and coaching. “The value add of coming together was that [students and advisors] could learn from each other, and everybody learned vicariously about a lot of different research streams going on at RPI. We would meet for two hours every other Wednesday. The faculty team would give a little bit of coaching and some networking if we had those opportunities: we may have known somebody else who could help these students move along in their path on the commercialization side and help connect them,” says O’Connor.

Growing pains an indicator of success

Seventy five percent of incoming RPI graduate business students expressed interest during the latest orientation session. Due to increased student participation, it became necessary to bring in a support person from the Student Services group to assist with administrative functions.

Students are also screened more thoroughly now, as a result of the increase in interest. Applicant interviews serve not only to match students’ interests with their ideal research project topics, but also to gauge their level of dedication to the program. “We also make them sign commitment letters now, because it’s not a for-credit thing and this serves to compete for their time. They have no idea how tight their time is going to get when they first step on campus. They have obligations to their professors, who are now trying to work with them and depend on them to move some of their work forward…. We want students who are really interested and committed to doing research,” not just looking for another bullet point for their resumes, says O’Connor.

She cites changes in priorities and levels of commitment as major hurdles facing the program during its inaugural years. “There are snags in this. Peoples’ commitments to research, to the particular research project, change. Sometimes the faculty’s commitment to the research project changes. Or the results don’t pan out quickly enough: All kinds of uncertainty normally occurs in the research process. Over in the biotech center, a lot of the faculty wanted our students’ help with writing the business portion of an SBIR grant. And if the grant wasn’t awarded, then they didn’t have funding to proceed with the lab work. Our students are hanging out there wondering what to do next,” says O’Connor. “Part of their learning is to identify options for the inventor in terms of other paths forward that can be taken. This has occurred in several cases.”

Students have been reassigned to different researchers in some cases, or dismissed from the MSRP if they do not fulfill their responsibilities.

Students gain experiential learning

The MSRP program culminates in student presentations detailing their research work during the year, including their final recommendations for advancing projects toward commercialization. One former student team, who worked to find non-medical applications of sensing technologies, elected to stay on through the summer semester to continue their commercialization work, and afterward went on to form a consulting firm together.

“They work virtually with one another and with the professor that they worked with, who granted them the rights to different fields of uses for his technology than what he had considered. They came up with a long list of potential applications, many of which were not in his field at all,” says O’Connor.

Other past projects assigned to Lally students include the exploration of the commercial possibilities of a professor’s low-cost scanning device, risk management strategy development for alternative energy companies, and market research for cancer imaging modalities and cardiac computer tomography techniques.

Students are learning valuable commercialization skills, says O’Connor. “[They] have to develop skills in interviewing an inventor, extracting from that what a potential value proposition might be, and then from a very, very early nascent stage of the technology, start to scope out opportunity spaces.”

Benefits to tech transfer

According to Vashishth, CBIS researchers are also benefiting from the partnerships. “Students actually go and learn what the market is, what the market is telling them about the technology and the need for technology. Students bring questions back to the PI and the feedback allows PIs to commercialize their research or to retool their research to a certain extent in a direction that leads to commercialization,“ he says.

Vashishth has high hopes for the program as it grows: “I want to see a complete circle here in which a student, working with a professor, identifies something in a lab that is potentially commercializable, does the market research, then arranges the financial resources with the person in the lab so there’s a true partnership. The student then works with an investment or one of the market leaders to bring the technology to market. Obviously, the program is only a couple of years old so it hasn’t reached that level yet, but that’s what I’d like to see in the long run.”

SMVF’s course structure

Purdue’s SMVF course has been offered each fall semester for the last five years. Applicants, generally master’s level MBA students, are screened by Cosier and Gortat. Cosier says: “Eventually we’re going to be using real money as venture funding, so the students have to have some kind of basic understanding of what constitutes a business plan and business functions. And hopefully [they have] a little bit of experience in some kind of a small business or start-up setting before they’re admitted to the class.”

Gortat adds: “Most of the companies that are applying for this funding are very technical, so finding students who have a technical background and some business experience can be important.”

The course, which has no regular class meetings but instead utilizes a mentoring process, is limited to 10 students per semester and is organized into three phases, beginning with a month of preparation in which students attend 6-8 interviews and mentoring sessions with venture capitalists, study sample fundamental material business plans, complete background readings, and receive guidance on the due diligence process.

During this first month, PRF receives and reviews funding applications from early-stage Purdue Research Park start-ups. “The companies that are eligible to apply are either located in one of the Purdue research parks, or they have licensed a technology from the OTC,” explains Gortat. Typically, eight to 12 start-up applications are received by the PRF during this time.

Getting down to business

In the second phase of the SMVF course, students are divided into two teams of five, with a team leader on each side. It’s important, Gortat notes, that the teams “be collaborative and supportive of each other’s strengths and weaknesses. You don’t want five finance majors on one team and five engineers on the other. Typically, we’ll get a good crop of students with a background in life sciences, and then others in engineering or IT. We then divide the students and the companies according to their backgrounds. If there are some technical problems, there’s a higher likelihood that students are going to be able to rely on their team members to help explain and get them through the some of the technical details of the start-up companies.”

At this point in the course, start-ups are split up between the two teams — so with a typical batch of 12 start-ups, each student team will be assigned to six. The next month or so is spent doing a “shallow dive,” which involves interviews with the start-ups, market research, and business plan reviews. This phase culminates with 3-5 page reports on each of the start-ups, which are then ranked from most to least worthy of funding. The start-up ranked most funding-worthy on each team is then selected for the third phase of the course, the “deep dive.”

“This culminates in a 30-page, highly professional report. After teams turn in their review, they make a presentation to a panel of experts that the PRF puts together. The start-up is also invited to make a presentation, and we may invite another start-up or two in there, just to make sure we’ve got backup in case the two primary start-ups are not recommended for funding.” says Cosier. From there, the PRF decides whether or not to fund the start-up.

Real money, real problems

The EIF provides anywhere from $100,000 to $250,000 in funding for the course each semester. This is real money with real consequences, a fact that is not lost on students. Gortat emphasizes this point. “When they realize that it’s real money and it is people’s livelihoods at stake, [the course] is taken a little more seriously than a class project where students do a financial model for a fictional business. Realizing that the potential funding available for these companies is sometimes two years of operating capital and two years of salary, or two years of whatever they need to do, is pretty crucial,” he explains.

This element of “real money,” cited by former students as one of the most unique aspects of the course, has provided some important but painful lessons. Cosier recalls a student team that had “worked very closely with this start-up doing their due diligence, and found a fatal flaw in the start-up’s intellectual property protection, about halfway through the third phase. They said one of the hardest things they ever had to do in their lives was recommend not funding this start-up, because they had done so much work with them, and they had gotten to know the management team. My message was: this is not an activity to make friends — it’s an objective business activity, and you’re using other people’s money when you do this type of activity in any real world situation. You have to be very, very objective and you can’t get too friendly with the start-up that you’re reviewing, even though it might be very tempting. If you talk to venture capitalists, [they’ll tell you that] this is a hardcore business of making the right investments. And that’s what [the students] learned as the bottom line.”

A clear success

From a commercialization viewpoint, the SMVF course has been a clear success. “The goal at the end of the day from our perspective in the research foundation and the tech transfer office is to get these companies to a point where they’re investable and they can get follow-on funding. We’ve deployed in the neighborhood of around $800K, and we’re near the $4 to $5 million mark [in investments and funding]. It’s a pretty good ROI for the companies that have been selected for funding,” says Gortat.

Students report that the coursework and lessons learned were just as beneficial to them. Thomas Grimes, a former student who contributed to Purdue start-up SensorHound’s research profile and a presentation that resulted in a $150,000 investment in the company, says “it was a great experience to be taken very seriously by the officers of real companies and to see them being receptive to various suggestions that we made during the interviews.” Gary Travis, another former SMVF student, notes that “[as] an aspiring entrepreneur and someone who has participated in several business plan competitions, it was really interesting, and helpful, to understand what the judges were looking for as measures of predictable success to determine the best candidates when making an investment decision.”

Cosier summarizes the student experience in the SMVF course: “It’s real people, real world, and the process is what we would find in the world of venture capital that they’re embarking upon. There’s a big, big difference in education between having simulated experiences and real experiences. And this is a real experience.”

Interdepartmental communication is key

O’Connor wants to be certain that the MSRP program is actually providing value to participating researchers. “Are the students moving fast enough in order to be able to provide value to the faculty? Will faculty interest grow in continuing with this, or will it slough off over time? There is a pressure to work with the students to deliver value. That’s another great reason that [CBIS’s Vashishth] has been a really good partner with us, helping us clarify what those faculty would view as valuable. Because sometimes the faculty in schools of science and engineering have a different perspective of what a business person does than what we actually do,” she says.

Vashishth is just as concerned about the role CBIS researchers play in the students’ experience. Assigned projects must have some depth and commercial viability in order to provide useful lessons, he stresses. “These students are not just there to run a market survey and write a report…. They need to go further. So selection of the project is important.”

He discusses potential projects with O’Connor and the two hand-select projects together, before assigning the work to students. “There should be something of educational value to the student. Sometimes it’s not the commercialization part but the innovation part — how does innovation happen in the biotech space?”

That cross-departmental communication is key to a successful partnership, Cosier says. “There’s got to be a really good working relationship [between Krannert School and the PRF]. That adds to the synergy of the units within the university. Sometimes a research foundation at a university, with its commercialization processes, can be a little bit removed from the academics. This is a really good bonding experience between the academic unit and the PRF.”

Contact O’Connor at 518-276-6842 or oconng@rpi.edu; Gortat at 765-588-3485 or jdgortat@prf.org; Cosier at 765-494-4353 or rcosier@purdue.edu; Vashishth at 518-276-2296 or vashid@rpi.edu; Grimes at tfgrimes@purdue.edu; and Travis at travisg@purdue.edu. 


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