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Emory’s proof-of-concept funding program: A little can mean a lot

This article appeared in the February 2017 issue of Technology Transfer Tactics. Click here for a free sample issue or click here to subscribe.

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Funding for early-stage university start-ups doesn’t have to mean big money — in fact, often it’s the little bit of initial funding that gets these fledgling business over a critical early hurdle and on their way to bigger things. That’s why a growing number of universities are establishing pre-seed funding programs — many of which make only a handful of awards and award only a few thousand dollars at a time.

The keys to making them work including pinpointing precisely where the funds will do the most good, and ensuring that the effort required to access the funds is commensurate with the amount being given.

The pre-seed fund at Atlanta’s Emory University started with about $500,000 that had originally been appropriated for a different purpose completely and then sat unused for many years. “We call it the Proof of Concept Fund. There’s no flashy name for it,” reports Clifford Michaels, PhD, RTTP, assistant director in the school’s Office of Technology Transfer. The money is not evergreen, he notes, “so it’s treated like a small grant made to prove out our assets with particular technologies that need additional work but that have a positive upside.”

Grant awards are from $5,000 to $30,000, he says, “so we’re not talking about a whole lot of money.” And, he adds, “we’re not expecting to make it back. We use our fund to make small investments to get a technology over a critical hurdle that makes it more marketable.” Specifically, he explains, the pre-seed money is expected to:

  • Improve the university’s intellectual property position where it didn’t have one or didn’t have a solid one, “so now we have something more licensable, more commercializable.”
  • Answer critical questions that make the technology a more attractive licensing asset. “If we have something that requires, for example, software that’s coded in a rare language, the innovator can spend the money to translate it to make it more appealing.”
  • Improve the technology’s ability to gather seed capital. “We have a couple of follow-on funding mechanisms that are unique to Georgia,” Michaels explains. One is the Georgia Research Alliance, which makes small, non-dilutive grants of up to $100,000 for technology or business development. “You’d use that funding to get a consultant to flesh out the market, for example,” Michaels notes. “Our funding is much smaller.” The other source of follow-on that the PoC Fund is synched with is the Coulter Translational Partnership, which is focused on biomedical technologies specifically and which provides grants of up to $500,000.

Picking and choosing

A fund for making small but meaningful grants “was something we’d wanted for a long time,” Michaels reports. In the four years the fund has been available to the TTO, it’s only been used about a dozen times — for good reason, he adds. “We’re a life sciences-focused operation,” he says, “so there’s no engineering research except a joint program with Georgia Tech. We tend to work on projects that are pharma assets or medical devices that require larger investments than we can handle with our small fund, and that’s one of the main reasons we have not made a large number of investments. We have to pick where to spend the money to get the most bang for our buck.”

An important aspect of the decision-making process, he adds, is its relative lack of in-depth analysis. “A focus has been making awarding the funds a quick, real-time analysis and vetting process that’s appropriate for the size of our investments. That’s a critical component. It’s very easy to get waylaid with an extreme amount of diligence. There’s a never-ending stream of questions you can ask about an opportunity. So we’ve been very, very conscious about doing an appropriate level of diligence for the stage of technology and the size of the dollars we’re putting in.”

The application process follows this basic outline:

  • An application is assembled by the innovator, the TTO licensing associate assigned to him or her, and the start-up team; it’s a 2- or 3-page document that covers the market, IP, the project, the deliverable and how the pre-seed funding might improve the opportunity.
  • The application is then vetted by the TTO’s technology management group, which includes the executive director, the technology-specific licensing staff, Emory’s chief IP counsel, and the start-up team. The licensing staffer presents the opportunity; the team discusses; the team votes on funding or asking more questions.
  • Emory also maintains a Venture Advisory Board, “a brain trust of business people, entrepreneurs and attorneys in the Georgia life sciences community that we turn to when we need input.” The Board meets to review applications and provide feedback when possible.

“We try to keep it reasonably rigorous,” Michaels says. “We want to have as much impact as possible, but we don’t want to bog down the process with 20-page applications and three months of vetting — before making a $5,000 investment.”

Bigger would not be better, he adds, and Emory isn’t seeking to flesh out the fund with private investments. “We want to keep it Emory money,” he comments. “If we took more, we’d have to be hands-off, and one of our goals is to make decisions quickly and timely — and with input from a minimal number of groups. If you add other people to the mix, it makes decisions more cumbersome. So it’s entirely run by the Office of Technology Transfer. We even run all of our own financing through an internal finance group, so even the paying out of the money comes from the TTO.”

Results may bring more funding

While the original $500,000 in found money won’t last forever, Michaels is reasonably confident the availability of critical pre-seed funding will. “As far as I know — and I don’t know all the mysteries of the fund — I understand it to be working like it’s an account that we’re drawing down just like any other account. But we have been told by our senior administration that when we start to run it down, we are welcome to come and ask for more. Their willingness to provide more funds will likely be based upon the success of the fund and our overall program around commercialization.”

How will the TTO justify the funding? “The shortest-term deliverable is a licensing event or follow-on funding,” Michaels points out. “For example, if we use our money smart and we enable a project to get $100,000 or $200,000 in non-dilutive funding to help move forward.” Long-term, of course, the goals are products and commercialization — but “that’s way down the road.” He explains: “I don’t think we have completely addressed those issues.”

The issues that are addressed involve typical pre-seed fund considerations, Michaels reports. One serious discussion arose over the existence of an actual market for the end product under review. “We knew the goalpost,” he says. “The issue was whether that goalpost indicated a viable market. That was one disagreement.” Another involved a case where there appeared to be alternative ways to arrive at the same endpoint that didn’t involve using the PoC Fund’s $5,000. “We had access to other internal support services that we thought could get us to the endpoint without involving money from our own pocket,” he says. “We were split half and half on that one.”

Indeed, he adds, often the questions “fall less on the technology side and more on the end product side,” such as what the market looks like, if there is one. “We have to ask if we want to invest in something that will never be a product, just like with all the other investment decisions, like patent filing decisions. A great idea may not be translatable. That rings true for PoC Fund awards as well.”

Avoid faculty misconceptions

Trouble is, once inventors find out the funding exists, they start asking about it — even for things the TTO doesn’t consider to be the best use of limited funds.That’s the sole downside to pre-seed funds: They do represent another opportunity for an inventor to have to hear “No.” Micheals comments: “But that’s our job. To be selective, I mean.”

He adds: “Letting inventors know what the fund is really for comes from the ground up. You have to have a consistent response from everyone on the team. Make sure inventors know this is not to fund basic research, it’s to fund translational research. You have to have a very consistent message to deliver so faculty don’t hear different things.” It’s easier for his operation to do that now that it’s actually funded a few projects it can hold up as examples.

But you can say a pool of funding “doesn’t fit what you’re doing” only so many times; feelings are still going to be hurt. “The fact that it’s a small fund, and a small investment, can take some of the sting out of the disappointment,” Michaels notes, though there have been a couple cases where inventors were “disheartened” by the application outcome. “You must be able to provide clarity and a clear explanation” of why their work doesn’t fit within the fund’s mission, he says. “Make it as transparent as possible. It may not get you over the disappointment hump, but it’s grounds for the next discussion.”

It helps that Emory as an organization has focused hard for at least a decade on improving commercialization transparency and on trying to engage different populations on campus in the technology transfer process. “Hopefully, our experience has bought us some good will and some confidence that we make grounded decisions,” Michaels adds. “We try to communicate to faculty that’s it’s a very detailed, organized and thought-out process. We’re not just focusing on favorites or those with the most political capital.”

You can’t eliminate all conflict, no matter how small the pre-seed fund is or how transparent the award process has been designed to be. “Making investment decisions is hard, even when the process is rational and timely — and minimal,” Michaels comments. “It’s still difficult and it still takes more time than you expect and there will still be disagreements. Even though it’s a completely internally run program, you still have the same discussions and disagreements that you would see in a more formal external program.”

Contact Michaels at 404-727-3890 or at 

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