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Creating a University Based Venture Fund. Brian Cummings Technology Commercialization Office University of Utah. The Opportunity. US research Universities are an economic engine conduct >2/3 of all basic research are primary source of technology produce >400 start-ups per yr - PowerPoint PPT Presentation
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Creating a University Based Venture Fund
Brian Cummings
Technology Commercialization Office
University of Utah
The Opportunity• US research Universities are an economic engine
• conduct >2/3 of all basic research• are primary source of technology• produce >400 start-ups per yr
• Universities vary dramatically in their ability to convert research into results.
• Majority of Tech Offices can’t hit break even
• Pressure is mounting to produce results from Feds to State sponsored economic development
• Companies and VC’s still find it difficult to engage Universities in innovation development
Research Initiatives: Nationwide 2000-2005
$32.5 billionBuildings, university research, high-tech economic development
32 states are currently investing in university research for economic development (Now 41)
State Support of Economic Development
The Numbers – an Uphill Challenge• $32.5 Billion bent on building technology
ecosystems from US Universities with broken infrastructure
• $116 million in annual patent costs
• 70% of patents will go unlicensed
• 60% of TTO’s aren’t even at breakeven
• Ave revenue of ~$460,000 per office
• Ave of 2.8 start-ups per year
• 80% of venture funding targeted to 12 metro areas
Source: University Inc. 2006
Strategies for secondary cities:
• Strengthen Clusters and Networks – Use local groups and virtual organizations to bring together investors, entrepreneurs, researchers and other parties to establish formal and informal relationships.
• Encourage a Continuum of Capital – Support local angel capital investors who can nurture early-stage companies Increasing
• Investment Creativity – Seek out alternative models of investment
• Enhance Accessibility – Create policies and programs to support entrepreneurship
Source: www.icic.org - 2007Source: www.icic.org - 2007
The 10 highest-performing secondary cities in the U.S. (ranked by number of private equity deals per city) The 10 highest-performing secondary cities in the U.S. (ranked by number of private equity deals per city) are (1) Boulder, Colo., (2) Salt Lake City, (3) Westborough, Mass., (4) Ann Arbor, Mich., (5) Norwalk, Conn., are (1) Boulder, Colo., (2) Salt Lake City, (3) Westborough, Mass., (4) Ann Arbor, Mich., (5) Norwalk, Conn., (6) Providence, R.I., (7) Southborough, Mass., (8) Stamford, Conn., (9) Melbourne, Fla., and (10) New Haven, (6) Providence, R.I., (7) Southborough, Mass., (8) Stamford, Conn., (9) Melbourne, Fla., and (10) New Haven, Conn.Conn.
The Shift
• Can Universities drive economic development?
• Can they effectively serve their communities?
• Can you build a model that can be replicated?
• Can you stimulate continued innovation?
• Can you build business in the confines of a non-profit?
• Can you generate a long term equity structure?
• Access to CEOs/executive management talent
• Access to seed or venture funding
• Access to entrepreneurs.
• Access to start-up resources
• Ability to create university start-ups – in their environment
Most Challenging aspects for TCO’s
Creating an Ecosystem
Where do we Start?• Involve Everyone
• Restructure Organization
• Shift Toward Customer Service Business
• Add Value in Every Transaction
• Support all Phases of Start-Up Development
• Streamline Processes
• Identify High Value Collaborative Research
Supporting Early Stage TechnologyDriving Innovation
+Venture Bench
+Entrep.in Res
The Best of Angel – Venture - Ecosystem
The University of Utah Issue
Challenges
Start-up Activity
0
5
10
15
20
25
Num
ber
04 05 06 07 08 09
Year
Number Start-ups: US Universities - 2007
Source: AUTM 2007
Start-up Activity (by industry sector)
Start-up Activity FY ’06-’08 (Funding Status)
Strong need for a new model
Stage Pre-Seed Seed/Start-Up
Funding Gap between $100,000 and
$2,000,000
Early Later
Source Founders, Friends
and Family
Individual
Angels
Venture Funds
Investment
$25,000 to $100,000
$50,000 to $150,000
$2,000,000/$5,000,000 and up
OpportunityFor
Alignment
Decreasing CapitalStartup/Seed % of Overall VC Money
16.7%
13.5%
9.0% 8.4%
6.1%
3.0%1.8% 1.3% 1.8% 1.9%
3.4%
0%2%4%6%8%10%12%14%16%18%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Source: Venture Source, NASVF
Reasons For An Angel Organization
• Quality deal flow• Greater investment clout from combined
dollars• Collective due diligence• Education: formal and informal• Group social benefits
Angel Organization - Decision MatrixMember-Managed
Vs.Manager-Managed
Legal Structure
InvestmentProcess
MembershipFinancialResources
Angel Organizations:
Investment Statistics: 70% of angel groups leave investment decisions up to the
individual members 23% of the angel groups invest by majority group decision
Of those that invest by majority decision, 90% are structured as LLCs, supporting previous discussions that the LLC legal structure appears to be the preferred group investment vehicle
7% of angel groups invest through investment committee decision No responding angel group required unanimous decision for
investment
Source: Center for Venture Research, University of New Hampshire 2005 Angel Organization Survey
995 Early Stage
Equity Capital Markets Large, Complementary
2007 Angel Investmentsource: UNH CVR
Ea
rly
Sta
ge
La
te
$26.0B57,000 deals
Mostly early stage
2007 VC Investment
source: NVCA/PWC/VE
Mostly later stage 3,813 deals
$29.4B
415 Seed
New Company Formation
Source of Equity Funds – Typical Year
0 100,000 200,000 300,000 400,000 500,000
500 Classic VCs
1000-2000 Seed Funds
>50,000 Angels
>200,000 Friends & Family
500,000 Startup Companies
MONTANA
WYOMING
IDAHO
WASHINGTON
OREGON
NEVADA
UTAH
CALIFORNIA
ARIZONA
NORTH DAKOTA
SOUTH DAKOTA
NEBRASKA
COLORADO
NEW MEXICO
TEXAS
OKLAHOMA
KANSAS
ARKANSAS
LOUISIANA
MISSOURI
IOWA
MINNESOTA
WISCONSIN
ILLINOISINDIANA
KENTUCKY
TENNESSEE
MISSALABAMA
GEORGIA
FLORIDA
SOUTHCAROLINA
NORTH CAROLINA
VIRGINIAWV
OHIO
MICHIGAN NEW YORK
PENN
MARYLAND
DELAWARE
NEWJERSEY
CONNRI
MASS
MAINE
VT
NH
ALASKA
HAWAII
>100 deals
25-100 deals
< 25 deals
< 10 deals
VC Deals by State – The added Value
2006
Why a Venture - Seed model is criticalA great investment committee can:
1. See around the corner
2. Has the follow-on funding available
3. Works full time – fund manager
4. Help sober up an entrepreneur – art to saying “no”
5. Provide necessary Board and mentor roles
6. Provide some unrestricted capital
7. Encourage entrepreneurship
* Training at BYU, UU, USU
The Initial Wants
• Build a community based fund• Engage the local VC’s• Venture vs Angel• Have the follow-in funders at the table• Clog the pipeline• Closed vs Open•
Lessons Learned
• Can’t please everyone • No good deed goes left unpunished
• Pick a lead• Keep it open – the market knows• Don’t focus on the Univ. needs• Full time commitment• Consider the economics
Next Steps
Commercializing Interventional Medical Technologies
An Entirely New Strategy
Investor Presentation
Accelerating Energy Innovation with Early Stage Capital & Commercialization
Expertise
The Technology Commercialization Service
Alignment
Talent
Automation
Creating a University Based Venture Fund
Brian Cummings
Technology Commercialization Office
University of Utah
801-581-7792