Moving Ideas Off Campus – Business plan competition failure is replaced with Tech Transfer success

It was the University of Arizona business school’s annual Fame or Flame day, and faculty members were rating business ideas pitched by students in an entrepreneurship program as either first rate or feeble.

By SHIRA BOSS-BICAK

To the disappointment of Sara Conrad and Daniel Berger, who were both juniors in the McGuire Entrepreneurship Program three autumns ago, the rating on their idea to develop customer-service kiosks in retail stores was flame. The judges said the project was unfeasible because it would be too easy to copy and would have a low return on investment. "We had to start all over again," Ms. Conrad said.

To help them, a professor gave them a catalog compiled by the university’s Office of Technology Transfer that described dozens of technologies developed in the university’s physics, engineering and other scientific laboratories with the potential for being used commercially.

The invention that grabbed their interest involved two professors in the medical school who had designed a portable device able to peer into children’s eyes and photograph the retinas to detect shaken-baby syndrome. The two students reached an agreement with the researchers to develop a business plan to sell the product.

The two students conducted focus groups, analyzed competing products, determined a target price and estimated the market size. The doctors had envisioned selling the device to ophthalmologists; the students added pediatricians, hospitals and emergency rooms as potential customers.

"They had a device that was outstanding," Ms. Conrad said. "Dan and I took what they had and built it a little more to take it to a market they hadn’t thought of, and built a financial plan they hadn’t thought of."

They proposed a price of $5,500, a third of what the least-expensive competing product was selling for. They incorporated the company as Optica Inc. and laid out an exit strategy with details of how the ownership would be divided among the founders if the company was acquired.

After Mr. Berger and Ms. Conrad graduated the following year, the doctors sold the prototype and business plan to a local business group in return for shares in the company for themselves as well as Mr. Berger and Ms. Conrad. The company, now called Optica Technologies Inc., expects to have the Prism1 retinal camera instrument on sale within six months.

"With the University of Arizona being such a center of research, there are all of these wonderful ideas there," Ms. Conrad said. "We were able to celebrate what we were learning with a real, tangible device to work on. It was just waiting there."

Since Congress passed the Bayh-Dole technology-transfer law of 1980, universities have enjoyed the ownership of research breakthroughs that were developed on their campuses with the help of federal financing and have been scrambling to turn them into commercial ventures.

This transfer of technology from the campus to the capitalist marketplace has been a financial windfall for many schools. The top earners in the 2002 fiscal year, the most recent with figures available from the Association of University Technology Managers in Northbrook, Ill., were Columbia University ($156 million), the University of California system ($82 million) and New York University ($63 million). For all universities, the revenue generated from their researchers’ inventions has nearly doubled, to $1.3 billion in 2002 from $699 million five years earlier.

With the number of patents issued to universities rising to more than 3,600 in 2002 from fewer than 250 before the Bayh-Dole law was passed, the offices of technology transfer at universities are becoming overwhelmed with discoveries to assess and market. And increasingly, they are turning to a previously underused resource to investigate their potential: students in the entrepreneurship departments of their business schools.

"We all want to increase productivity,” said Ken Smith, interim dean of the Eller College of Management at the University of Arizona. "We do that by improving the relationship between the scientist and the business entrepreneur."

The idea of teaming up with university researchers caught on slowly at first at university entrepreneurial programs, where students were more inclined to pursue their own ideas for companies. But having witnessed young entrepreneurs take a quick route to business success in the Internet boom of the 1990’s, some have come to believe that working with ready-made technology is the best way to emulate them in the post-dot-com era, according to Jon Soderstrom, vice president for public policy at the technology managers’ group. At the University of Arizona, for example, 12 of the 20 teams currently in the McGuire program are now working on business plans based on technology transfer.

Universities themselves have started taking equity positions in start-ups or joint ventures founded on university-developed research, instead of charging royalties or licensing fees that young companies often cannot afford. (The state Constitution prohibits the University of Arizona from taking such an ownership stake, but there is a proposal on the November ballot to end the ban.)

It is not just the financial bonanza that motivates a university to promote its researchers’ inventions. These universities are also under pressure to create businesses that generate jobs for the local economy, Mr. Soderstrom said. From 1980 to 2002, more than 4,300 companies were formed based on academic discoveries, according to his group, resulting in the creation of tens of thousands of jobs. Yale University, for example, has spun off 18 bioscience companies in Connecticut. The companies employ more than 880 people and have raised $1.1 billion in public and private financing in the last five years, according to Connecticut United for Research Excellence, a nonprofit organization that promotes the bioscience industry.

"This is being multiplied all over the country," Mr. Soderstrom said. "It’s not only the Stanfords and the M.I.T.’s anymore."

The McGuire program is increasingly working with the university’s technology-transfer office to link inventors with students who will develop business plans. Scientists welcome the collaboration, says Jim Jindrick, an entrepreneurship professor at the University of Arizona, because they recognize they lack business and marketing expertise.

The university formally recognizes a business plan as proprietary intellectual property, and student teams working with researchers are required to draw up a "memo of understanding," which recognizes each party’s stake in the project.

Cooperation between students and researchers on commercial products is extending beyond the university. This summer, the University of Arizona sent several entrepreneurship students to work at research institutes in Mexico to evaluate technologies developed there. One team of six students ended up scrapping the two business ideas they had come up with and adopting a new technology for detecting oil leaks that was developed at an institute in Ensenada.

"We said, ‘Hey, why don’t we try this idea?’ " said Sandy Chen, an M.B.A. student on the team, who is now writing a business plan for a company called Leak Hound that will develop leak-detection equipment. The students are spending the next several months exploring additional applications of the technology, identifying possible markets, and building financial models.

It is not just research institutions that are benefiting from working with business schools. Companies, which have long sponsored research by faculty members, are tapping into the brains of business students by sponsoring business-plan competitions. Honeywell started such a competition last year, with an award of $150,000 to the winning team and its school. It gives student teams technologies that are being used in the company’s aerospace division and asks them to come up with other possible applications.

"We were looking at how we can increase the number of business plans we have to look at," said Wayland Adams, a product line manager and chairman of the committee that runs the Honeywell Growth Challenge. Last year’s competition generated 14 business plans, each of them being evaluated by Honeywell. "We might miss things that the students might see," Mr. Adams said.

Copyright 2004 The New York Times Company

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