Venture firm bets on university research

Seed capital targets schools in Colorado
and across the nation

The bleak economy makes Chad
Brownstein smile.

By Jennifer Beauprez
Denver Post Business Writer

A partner with Los Angeles-based ITU Ventures, Brownstein
has been spending plenty of time in Colorado perusing research
breakthroughs at university laboratories. He says now is the
time to find communication technologies that have yet to see the
light of day.

"I’m busier today than ever – even when I was an investment
banker on Wall Street," Brownstein said. "People are going to
look back on 2002 and wish they took advantage of a muddled
market. With chaos, opportunity is bred."

Brownstein’s unbridled optimism is exceptional, but more
venture capitalists are taking new interest in university
research.

During the dot-com boom, venture firms were more inclined to
invest in ideas or concepts such as online pet stores. Now,
they’re returning to nuts-and-bolts technologies often found at
universities. "No one was interested in the universities in 1997,
’98 and ’99," Brownstein said. "Now universities are the only
place getting extensive capital from the government, and the
only place where real innovation is taking place."

ITU has a $10 million fund, which is small compared with the
$800 million funds of some Silicon Valley firms. All of ITU’s
money is earmarked for first-round investments, also called
seed-stage deals, used to develop ideas for the commercial
market.

The firm fills a void in that most venture firms focus on
businesses that are more established.

But ITU’s strategy is risky. Those startups will inevitably need
another round of financing to survive.

"It’s something we need more of – seed capital to bridge the
gap," said Dan Mitchell, a partner with Boulder-based Sequel
Venture Partners. "The only caveat is if you have a small fund
and put it all in seed-stage deals, you’re dependent on new
investors to take them forward. You’re at risk of getting
squished."

Nonetheless, ITU Ventures has spent the past three years
making friends with about 30 researchers nationwide as well
as with corporate executives.

The firm has since invested in startups built around a variety of
technologies – from smarter, smaller semiconductors to
microelectromechanical devices, which are tiny microscopic
machines used in such things as car air-bag sensors and
manufacturing operations.

Some of those technologies go into creating new companies, in
which ITU finds management teams. Others are bought by
corporations that don’t have the time or money to invest in their
own research and development.

Many faculty members don’t know how to go about getting their
ideas into the marketplace, said Ren Su, a professor of
electrical and computer engineering at the University of
Colorado. He said Brownstein is a welcome face on campus.

It’s not just capital that’s needed, but knowledge, Su said. "Chad
wants to advise the faculty," he said.

Universities in Colorado historically haven’t been aggressive
about getting their technologies out into the business world. But
that’s starting to change, particularly at CU.

Under the leadership of President Elizabeth Hoffman, the school
has put more money and people behind its so-called tech
transfer office, which helps faculty members patent, license or
create companies. The school has grappled with management
turnover and lagged behind other schools in turning ideas into
royalties.

Brownstein has been key to trying to jump-start that process in
Colorado. He organized a summit earlier this week to help
faculty members find a home for their innovations. About 150
faculty members, venture capitalists and representatives of
corporations attended.

"It went really well," he said. "People are really ramped about
the possibilities. We think we raised our fund at the right time,
and now there is opportunity."

http://www.denverpost.com/Stories/0,1413,36%257E33%257E609551%257E,00.html