VentureLab: A University Innovation System

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Presented at the 68th Annual ORAU Council of Sponsoring Institutions on March 6, 2013, by Lee Herron of the Georgia Research Alliance.

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VentureLab: A University Innovation System

  1. 1. VentureLab:A University Innovation System Lee Herron Vice President of Commercialization Georgia Research Alliance
  2. 2. Background• The GRA is a public-private partnership in its 22nd year• Receives an annual allocation from the State of Georgia for redeployment in Georgia’s research universities with the goal of stimulating innovation-based economic development• Strong board incorporates business and academic leaders• Coalition of major research universities• Three programs: Eminent Scholars, Infrastructure Development, VentureLab
  3. 3. Focused investments in researchcapability lead to commercial outputsTALENT INFRASTRUCTURE COMMERCIALIZATIONGRA invests in recruiting GRA invests in specialized GRA invests in most promisingworld-class Eminent R&D equipment and discoveries to encourage formation ofScholars to universities facilities new companiesScholars build research Helps universities recruit Tiered investment approach providesteams that attract major and support Scholars, land seed funding to “best of the best”R&D grants/contracts major R&D grants projectsTeams generate discoveries Promotes collaboration GRA Venture Fund, LLC fills gap inwith commercial potential across universities and with available early-stage venture capital industry
  4. 4. What is VentureLab?• Program for commercialization of science and technology inventions from the labs of Georgia’s research universities• Milestone-based, providing funding and advice to facilitate commercialization• Focused on creating sustainable, Georgia-based companies• Covers the innovation continuum from idea generation to seed investment• University partners: University of Georgia, Georgia Regents University, Georgia Tech, Emory University, Morehouse School of Medicine, Georgia State University
  5. 5. VentureLab starting pointKnowledge and Innovation New Venture Invention Uncertainty Risk Little or no information, Risk can be measured difficult to manage and managed VentureLab helps to convert uncertainty to risk and manage risk to create value
  6. 6. How does VentureLab work?• VentureLab directors at each institution identify opportunities and help faculty design and implement a development plan.• Assessment includes: – Intellectual property – Technical feasibility – Market dimensions and dynamics – Funding feasibility – Regulatory and reimbursement issues as appropriate – Management requirements
  7. 7. VentureLab process• Project management – Relevant and measurable milestones identified for each project – Budget developed and allocated to phases: • Phase I – feasibility, proof of concept • Phase II – prototype manufacture, demonstration in relevant animal model • Phase III – initial customers, recruit management, initiate IND- enabling studies – Funding • Phases I and II are grants to the institution • Phase III – loan to the company • GRA Venture Fund – dedicated to companies emerging from VentureLab
  8. 8. Commercialization process and VentureLab role Proof of Concept Company Launch Company Scale-up Phase I Phase II Phase III Company Technology Business Company scale- formation, t Venture opportunity strategy and up echnology capital funded identification and model incubation evaluation licensing Commercialization Catalysts University Technology Partners Transfer Incubators (e.g. ATDC, BioBusiness Center) Start-up Stage-appropriate management teamCommunity Resources Investors, other fund sources ▪ Phase 1 funds ▪ Phase 2 funds ▪ Phase 3 loan GRAVentureLab GRA Industry Fellows and Distinguished Entrepreneurs GRA Seed FundingVenture Fund VentureLab functions
  9. 9. VentureLab project management• VentureLab Fellows – Serial entrepreneurs and other business people who work with faculty as a business coach or launch CEO• External advisory board – Members consist of experienced industry representatives and venture capitalists – Review projects at Phase transitions – Provide critical advice and contacts• Industry Fellows and Distinguished Entrepreneurs – FY2014
  10. 10. GRA Venture Fund• Seed venture fund captive to companies emerging from the VentureLab program• First close in July 2009 at $20 million with target of $30 million• 6 investments to date with three follow-on investments and one exit
  11. 11. VentureLab Project Pipeline: FY 2003 – FY 2012 Company Proof of Concept Company Launch Scaling Company Acceleration Phase 1 Phase 2 Phase 3 GRAVFBioscience companies 9 1 Due 3 Diligence 122 58 Active 30 33 Active 18 17 Active Investments 1 Made 64 6 2Technology companies 6 2 3 Due Diligence 88 56 Active 39 32 Active 15 15 Active Investments 5 Made 32 13 2
  12. 12. Results to date• More than 1,000 university technologies/inventions reviewed since 2002• 370 awards administered to 265 companies/projects – Awards and loans total over $25 Million• More than 100 companies formed – Over 650 employees – Greater than $550 million in equity investment – Revenue: $111 million in 2011, $298 million since 2002
  13. 13. Lessons learned • Cash mismanagement ability Run out of 7 • Unable to attract follow-on funds funds • Adverse funding market conditions Poor business • Model inconsistent with market structure 12 model • Inappropriate pricing model • Development takes too long Technology 34 • Failure in trials Start-up fails • Non-reproducible product failure modes • Poor start-up team “chemistry” Management 32 dysfunction • Incomplete or non-complementary skill set of team Failed IP • Misjudgment during due diligence protection • Insufficient claims awarded 4 • Misjudged market dimensions or dynamics Market related • “Stolen market” (i.e., new competitor) 24 issues • Adverse market dynamics • Faculty member relocates 6 Relocation • Company moves out of state
  14. 14. VentureLab: Critical success factors• Manage expectations• Team – stage appropriate, industry experienced management to complement the knowledge and skills of the faculty inventor• A focus on relevant risk factors – prioritization of commercially relevant activities – Should be guided by a well-thought out commercialization strategy rather than scholarly preferences – Prioritization forms the basis for milestone development• Realistic assessment of commercial viability – Preferably prior to formation of company
  15. 15. Observations from 10 years of experience Factors for success Rationale▪ Active sourcing of technologies is critical to ▪ Prudent scale-up depends on finding more find the strongest commercialization strong ideas, not simply funding a higher opportunities percentage of applicants▪ Hiring experienced, “fundable” entrepreneurs ▪ These actions are self-reinforcing and address must occur in concert with active technology multiple bottlenecks sourcing and scale-up▪ Investing in connectivity and networking is ▪ Benefits of “critical mass” generally occur required, despite seemingly ambiguous through interconnections in the ecosystem benefits▪ Patience is necessary when assessing ▪ Typical time to market for a bioscience start-up performance, since university-based projects can easily exceed 5-7 years take time to show job creation results
  16. 16. 2013 – A focus on outcomes• Incorporate new program elements – Formalize Industrial Fellows program – Distinguished Entrepreneurs – Host forum to showcase VentureLab projects and companies• Fund to milestones rather than to an amount per phase of development• Greater emphasis on Venture Development
  17. 17. VentureLab: Part of a dynamic, interrelated ecosystem VentureLab: Up to GRA VentureUniversity $400,000 FundResearch Sustainable and Venture Capital Business Angels, F&F, SBIInvention R/STTR Strategic Partners
  18. 18. Contact information H. Lee Herron, DVM Vice President of Commercialization Georgia Research Alliance 50 Hurt Plaza, Suite 1220 Atlanta, GA 30303 Direct : 404-443-2650 Telephone: 404-332-9770, ext 2650 Mobile: 404-386-7929 Lee.herron@gra.org; www.gra.org

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