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One EntrepreneurOne Entrepreneur’’s Career s Career ––From University Upstart to From University Upstart to
Universal StartUniversal Start--upupJacob Jorgensen, M.D.Jacob Jorgensen, M.D.
UC DavisUC Davis
January 12, 2007January 12, 2007
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What I Will Present Today
My perspectives on:Turning results of academic research into real world productsMy personal experience in transitioning from a university researcher to an entrepreneurSeveral examples of my own startupsLessons learned from 25 years as an entrepreneur
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Who I am
Trained physicistquantum field theorynuclear fusion powerbiophysics
Licensed physicianSurgeonSurgical and Clinical Pathologist“medical theoretician”
Hardware and software designerSerial entrepreneur – from start-ups to IPO’sFund raiser - $60 million raisedCorporate executivePresently, working as a venture capitalist
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What I Do Now
Presently, a General Partner at Velocity Venture Capital of Sacramento
Help entrepreneurs with their start-upsMore specifically:
“Company Building”Provide capital (money)Help entrepreneurs achieve successHelp start-ups become self-sustaining
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Academia and Entrepreneurship
Many start-ups begin with a research result, set-up, application or ideaMany entrepreneurs are former or current researchersResearch ideas can sometimes best result in the common good through commercializationBut…commercialization is not easy, even for the best of ideas and people
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Academia and Entrepreneurship
The Idea
Assignment Agreement
Established Company
Start-up
License Agreement
Success
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Academia and Entrepreneurship
Routes to commercializationthrough established companies – majority of ideasthrough start-ups – minority of ideas
Established companies are more successful at:Addressing well-entrenched marketsCommercialization of products with incremental improvements
Start-ups are more successful at:Addressing new marketsCommercialization of truly disruptive technology (re: Innovator’s Dilemma, Anderson)
Doesn’t need to be a choice between academia and entrepreneurship
Can continue in both academia and start-upCan temporarily leave academia, returning after start-up is launched
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Academia and Entrepreneurship
Closer ties between academia and start-ups is beneficial to both
Numerous examples: MIT, Stanford, etc.Cross-pollination adds to both sidesMeans for research results to more quickly and directly benefit society
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Roadmap of Example Projects of Mine
B.S. Program – Theoretical Physics - MITFusion Reactor Research - MITPh.D. Program – Theoretical Physics – MITX-Ray Diffraction Physics - MITM.D. Program – Columbia UniversityThoracic Surgery, Clinical Pathology, Clinical Decision Making, Columbia University Medical Center, NYCResources for Clinical Technology, Inc.JPM Digital, Inc.TeleVector, Inc.Technology for Financial Institutions, Inc.Executive TeleManagement, Inc.EIS International, Inc.Malibu Networks, Inc.Broadstone Networks, Inc.Mobile Internet Technologies, Inc.PriveSec, Inc.Velocity Venture Capital, Inc.
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Roadmap of Example Projects
B.S. Program – Theoretical Physics - MITFusion Reactor Research - MITPh.D. Program, Theoretical Physics – MITX-Ray Diffraction Biophysics Research - MIT
M.D. Program – Columbia UniversityThoracic Surgery, Clinical Pathology, Clinical Decision Making, Columbia University Medical Center, NYCResources for Clinical Technology, Inc.
JPM Digital, Inc.TeleVector, Inc.
Technology for Financial Institutions, Inc.Executive TeleManagement, Inc.
EIS International, Inc.Malibu Networks, Inc.
Broadstone Networks, Inc.Mobile Internet Technologies, Inc.PriveSec, Inc.
Velocity Venture Capital, Inc.
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Project: Work on MIT Alcator C PrototypeNuclear Fusion Reactor (Tokamak)
Intellectual Contribution:Physics of elastic collisions, and mean free pathsPhysics of equilibrium solutions to the Boltzmann equationDebye shielding and the Langevin equationPolarization transforming properties of anisotropic plasmasPhysics of magnetohydrodynamic flows
Goals:Participate and contribute to research in use of controlled nuclear fusion for clean, cheap power – create the ultimate clean energy sourceDevelop improved plasma behavior modeling by factor of 100xCalculation of certain critical field parameters for full-scale Alcator C operation
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Nuclear Fusion as a Clean Energy Source
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Cut-Away of Tokamak Fusion Test Device
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Project Conclusion: Work on MIT Alcator CPrototype Nuclear Fusion Reactor
Final Status - Work ResultImproved understanding of required energy budget factors for break-even operationImprovement of containment parameters by 1x104
Understanding of plasma dynamics in tokamak confinementPersonal Accomplishments
Developed deeper understanding of high-temperature plasma behaviorExperienced value of iterative progress model in complex projects
Lessons LearnedComplicated problems require focus and dedicationRecognition of multiplier effect of tightly-coupled teamworkRecognition of importance of each individual’s contribution to a projectDeveloped confidence to set high goals
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Project: Work in MIT Center for Theoretical Physics -Quantum Field Theory
Intellectual ContributionMathematics of Non-Abelian Gauge Theories, Renormalization of Gauge Theories, Spontaneous Broken Local SymmetriesApplication of mathematics of Group Theory Symmetry, Poincaré Algebras, Lagrangian Path-Integral MethodsApplication of Relativistic Wave Mechanics, Schrodinger-Klein-Gordon Wave Equations, Pauli-Weisskopf Quantization of Scalar Fields, Cluster Decomposition Principles, etc.
Start up ConditionsBlackboard, chalk and well-worn eraserIntimidating thesis advisor
Goals:Contribute to a solution to unification of electro-weak forcesUnderstand the universe a little bit betterAward of Ph.D. in Theoretical Physics
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Tools of the Trade
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What Does it All Mean?
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What Does it All Mean?
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The Ultimate Mystery
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Project Conclusion: Work in MIT Center for Theoretical Physics - Quantum Field Theory
Final Status - Work ResultLarge quantities of hard workConsumption of large quantities of coffeeLoss of massive amounts of sleep
Personal AccomplishmentsCompletion of coursework, incomplete Ph.D. dissertation
Lessons LearnedDeveloped confidence to solve difficult problemsDeveloped humility to see limitations of intellect aloneUniverse doesn’t give up secrets easilyQualification to drive a cab in Boston
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Project: Work in MIT Department of BiophysicsX-Ray Diffraction of tRNA
Intellectual ContributionApplication of Fourier Transform mathematicsUse of analog optical computational facility to solve diffraction pattern problemsLearn the use of osmium tetroxide with crystallization of t-RNA
Start up ConditionsNo labNo understanding of mathematics of diffraction of “folded” helical structuresNo personal experience in biophysics research
GoalsAssist the group to be the first to determine tertiary structureof t-RNA with x-ray diffraction crystallographyProvide mathematical help in decoding diffraction patterns for a folded helical structure
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Typical Output of X-Ray Diffraction Apparatus
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Splash in the Press – New York Times Front Page!
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Project Conclusion: Work in MIT Department of Biophysics -- X-Ray Diffraction of tRNA for Tertiary Structure
Final Status - Work ResultFirst determination of tertiary structure of t-RNAStructure determined to 4 Å, and 3.5 Å resolutionsMethodology set for follow-on structure determinations
Personal AccomplishmentsDeveloped deep understanding of principles of x-ray diffractionDeveloped computer instrumentation skills
Developed some skill at crystallizing complex proteins
Lessons LearnedRecognition of importance of personality fit for effective teamworkDeveloped appreciation for the competitiveness of world-class researchFirst hand experience of why it is important to acknowledge everyone’s contribution
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Project: Academic Medical Career
Intellectual ContributionTheoretical physics and biophysics backgroundAbility to focus and work hardCuriosity about complex biological systemsInterest in applying mathematical methods to medical practiceAbility to postpone gratification
Start up ConditionsWork up to 120 hours per week
Areas of SpecializationThoracic surgery, surgical pathologyClinical pathology: clinical chemistry, microbiology, virology, hematology, laboratory automation and medical decision theory
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Project: Academic Medical Career
Thoracic SurgeryLong hours, rote work, highly repetitiousNo opportunity for creativity, no role for mathematics or physicsVery strict social hierarchy – play along or you are cut out
Clinical pathology – (Laboratory medicine)Ability to be creative, use analytical thought processes, apply mathematics and physics, work with patients and see immediate benefit of research
Areas of FocusMedical decision theoryClinical laboratory testing and diagnosticsInterpretation of test and examination resultsApplication of mathematics and physics to laboratory testing and diagnosisApplication of computer technology to laboratory and medical diagnosis
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Project: Academic Medical Career
Clinical laboratory testing and medical diagnosticsState of the art – 1980:
No analysis of what should be called “normal” resultNo use of classic decision theory or probability theoryNo understanding of confidence levels assigned to particular medical diagnosesNo methodology to determine where improvements were neededNo basis for deciding efficiency and cost-effectiveness factors in testing
Application of mathematics and physics to these areas after 1980:Bayesian probability theoryGame theoryMultivariate trajectory analysisHarmonic analysis
Resulting in new well-defined and understood concepts:Predictive value, sensitivity, specificity, incidence, prevalence
Now, a new rigorous methodology for understanding components of efficient, accurate medical decision making
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Project Conclusion: Academic Medical Research –Columbia University Medical Center
Final Status – Work Result:Licensed physician – specialty in thoracic surgery, clinical and surgical pathologyBoard qualified
Personal Role and AccomplishmentsSuccessfully applied mathematical principles to medical decision makingDeveloped new laboratory automation technologies to significantly improve accuracy and timeliness of clinical testingDeveloped new methodologies to evaluate efficacies of laboratory testingDeveloped new medical decision making processes with mathematical analysis
ResultM.D. with an outsider’s perspective, and with a lot of math…
Lessons LearnedMatch intellectual interest with career contentStressful to be a “maverick”Reserve a backup career
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Project: Resources for Clinical Technology, Inc.
Intellectual ContributionApplication of Fourier Transform mathematicsApplication of physics of vibrational modes of liquids, optical physicsApplication of Fourier transform methods (origins from x-ray diffraction work)Learned analog circuit design, Z-80 assembler language, simple software
Start up ConditionsStarted with one partner
MarketMedical technology
Product GoalHighly accurate intravenous fluid monitoring deviceHelp save lives with more accurate drug infusion
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The Intravenous Fluid Administration Problem
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Analogy: Atomic Nucleus and H2O Fluid Drop
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IV Drop Chamber Product
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Typical IV Fluid Pump
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Project Conclusion: RfCT, Inc.
Final Status – Work ResultImproved IV flow monitoring accuracy from ± 20% to ±0.1%Successful product developer, but could not control product distributionPatent was “buried” because it competed with another of sponsoring company’s product lines (physiological pumps)Company sold to Honeywell Electronics for MedicineBecame a leading developer of clinical equipment
Personal Role and AccomplishmentsCo-founder, CEO and Chief Technology Officer (CTO)Authored several patents and papers relating to infrared optical scanning of fluid flow, with application of mathematical physics to imaging processing
Lessons LearnedControl (own) intellectual propertyControl manufacturingUnderstand and influence product distributionUnderstand economics of the use of the proposed product
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Project: TeleVector, Inc.
Intellectual ContributionApplication of mathematics of control theoryApplication of mathematics of harmonic oscillation, Bessel functions, etc.Creation of signaling protocol (telecom switch computer system)Creation of system architecture for computer-telephony integrationNeeded to learn digital circuit design, software design, microprocessor architecture, telecommunications principles, electronics manufacturing
Start up ConditionsStarted with one partner
MarketVoice and data communications applications for businesses
Product GoalDevelop and sell specialized high-performance telecom switching systemsProvide means to dramatically lower communications costs
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Project Conclusion: TeleVector, Inc.
Final Status – Work Result20 employeesDominant supplier of special-purpose, high-performance telecom switching equipment for Successful and profitable, but could not grow beyond market niche
Personal Role and AccomplishmentsCo-Founder, CEO and CTOHelped established new industry – Computer Telephony Integration (CTI)
Lessons LearnedHaving employees is an unexpectedly huge responsibilityDon’t retain equity at the cost of outside experience, expertiseChoose partners wiselyDon’t hire employees just because they are family or friendsEnsure all members of management are economically alignedUnderstand basic issues of each functional area – marketing, sales, finance, manufacturing, operations, engineeringHire people with relevant experience in these areasBeing totally risk averse will severely limit company potentialDon’t seek less or more capital that necessary
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Project: EIS International, Inc.
Intellectual ContributionComputer Telephony Integration architectureSeveral Hardware/software patentsMathematical algorithms to optimize CTI protocol behavior
Start up ConditionsMerger of two small start-ups, totaling 6 employees
MarketCustomer Relationship Management (CRM)
Product GoalDevelop and sell CRM hardware/software system utilizing CTI technologyImprove ability of companies to maintain relationships with customers
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CTI System Architecture for EIS
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EIS CTI Technology
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EIS CTI Platform
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EIS Initial Public Offering on NASDAQ – The “Red Herring”Document the Night Before the Offering
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Project Conclusion: EIS International, Inc.
Final Status – Work Result600 employeesDominant supplier of computer-telephony based CRM systemsSuccessful and profitable – Raised $50 million in IPO, acquired 4 companiesCustomers such as AMEX, AT&T, IBM, MCI, GM, Sears, Reuters, Arbitron, etc.
Personal Role and AccomplishmentsChief Technology Officer and VP EngineeringHelped build and grow new industry – Computer Telephony Integration (CTI)Managed acquisition and merger of 4 companies
Lessons LearnedCEO’s have company-stage fitChoose venture capital firms carefullyDiversify funding sources earlyIntellectual property is essential for successful partnershipsIntellectual property is essential to survive competitionIntellectual property is extremely important to ultimate valuation of companyGoing public (IPO) has unanticipated risks – be sure you understand themCompanies can become burdened by their own momentumInternational sales is much more costly that anticipated
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Project: Malibu Networks, Inc.
Intellectual ContributionMathematical analysis of interaction between TCP/IP and media access control layer of communications system software in bandwidth-limiting environmentsMathematical algorithms for optimization of quality of service (QoS)
Start up ConditionsOne partner, start-up based in Sacramento
MarketTelecommunications service providers and Internet service providers
Product GoalDevelop and sell high quality-of-service (QoS) broadband wireless communications systemsChange the world by creating a disruptive technology that makes voice and data communications available to the other side of the “digital divide”
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Malibu Networks Wireless Broadband Technology
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To SP NETWORK
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RF MediaRF Media
Internal Data Flows and QoS Processes in Malibu System (One of Company Patents)
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21 US and International Patents
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Malibu Networks in the Press
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Malibu Networks - 5.8 GHz 100Mbps System
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Project Conclusion: Malibu Networks, Inc.
Final Status – Work ResultWorld’s first commercial 100Mbps wireless broadband access systemSupplied several hundred initial systemsProvided basic internal architecture for WiMAX IEEE 802.16 industry standard Internet Bubble crash prevented next round of financing – Company shut down
Personal Role and AccomplishmentsChief Technology Officer (CTO), VP EngineeringIndustry expert, conference speaker, author, consultant
Lessons LearnedHire an experienced CEO and professional management teamDiversify venture capital sourcesCreate a dominant market position with the use of patent strategy and industry standard architecturesBeing too early to market can be as fatal as too late to marketPrepare for the unexpected (Internet crash, SARS epidemic)
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Individual Experience as ContributionFounded 10 high-tech companies$60 million in funding25 years as senior corporate executive
Start up ConditionsPartner – Jack Crawford, Jr.Collective networking contactsRegion rich with technical talent and executive management experience
MarketSacramento region exclusivelyStart ups – Internet, networking, software, clean energy, life sciences
GoalVelocity Venture Capital acting as a “company-builder” of technology startups Help entrepreneurs to make their companies successful
Project: Velocity Venture Capital
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What is Velocity Venture Capital?
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Company-Building: a Key Driver of the Innovation Economy
Entrepreneur+ Intellectual Property + Management Talent+ Capital + Supportive Business Environment = A Valuable Company
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A Company¯Building Case Study
Q1 2006 (Est. Value = $0; Headcount = 1)
Entrepreneur with an idea □ Intellectual Property□ Talent□ Capital□ Supportive Business Environment
An alternative energy technology company with a unique rooftop wind turbine technology
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A Company¯Building Case Study
January 2007(Est. Value = $2.5M; Headcount: 5 20+)
Entrepreneur with an idea
Intellectual Property-Patent filed and Issued
Talent-Industry experienced CEO-Key Advisors from Sacramento State & UC Davis
Capital-Velocity invested and is building syndicate
Supportive Business Environment -Weintraub is investor’s counsel-DLA Piper is corporate counsel-Exploring SureWest /Raley’s as beta customers-Velocity currently incubating (exploring manufacturing space at McClellan and Mather)
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Entrepreneurship / Intellectual PropertyClean Tech (Aerojet)Wireless (SureWest) Media (Thomson)Life Science (UC Davis)Software (Sacramento State)Storage (HP)Semiconductor (Intel)
Management TalentMigration of Tech execs from Bay area (and other regions)Intel /HP executives taking retirement packages Local exits creating seasoned management (2nd generation entrepreneurs)
Market Trends in Sacramento’s Innovation Economy
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Capital Velocity -- 9 investments into locally headquartered companies (2005/2006)Bay area refugees --investing into techReal estate developers looking for some diversification --investing into techBay area VCs providing follow-on financing for seed/early stage deals
Supportive Business EnvironmentMentoring/IntroductionsProfessional service firms (Legal, Banking, Executive placement)Incubators/subsidized office space, specialty space (manufacturing, wet lab)Beta customersWork force developmentCulture that understands/ supports risk taking
Market Trends in Sacramento’s Innovation Economy
SACTO
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Exits Lead to Sequels
$3+ billion in M&A or IPO transactions
Exit activity provides:• More local seed capital, entrepreneurs, management talent, venture capital to the region.
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Thank you for the invitation today!
Jacob Jorgensen, M.D., General PartnerVelocity Venture Capital
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Sacramento on the National Stage
Entrepreneurial Business Environment
Hot Tech Market
Regional Growth
Quality of Life
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500+ Technology Ventures in the Sacramento Region
40%
30%
20%
10%
Communications Technology
SoftwareClean
Technologies
50%30%
20%
Seed Stage Early Stage
Mid Stage
Life Sciences
Technology Sectors: Venture Stages:
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Venture Capital = Catalyst for Company¯Building
Funding source for start-ups that cannot yet qualify for bank financing
Initial funding for major US business successes
Sacramento is significantly undercapitalizedDenver: ~4.0% of all US venture capitalSan Diego: ~2.0% of all US venture capitalSacramento: ~0.4% of all US venture capital
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The Economic Impact of Venture Capital and Company¯Building
Example: Velocity Venture Capital model portfolio~20 locally headquartered companies
500+ new high value jobs = $20M+ annual payroll
100,000+ square feet office/manufacturing space
~$200M capital drawn to the region$10 to the region for every $1 invested
Draw more entrepreneurs and management talent
Create new wave of philanthropists
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“Recycle” Entrepreneur
Do it all over again!
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Regional strategy: Clusters of technical excellence in Sacramento
“Our region has technical centers of excellence (AND is more capital efficient)”
Life Sciences (UC Davis), Wireless & Broadband (SureWest, Intel), Media (McClatchy, Thomson)
Clean tech (Aerojet, Sac State, UC Davis)Globally
2006: $100 Billion investments into clean tech (3x to 25x returns)
Locally50 clean tech companies in the region (~250 employees and growing) CleanStart business plan competition and industry conferenceUC Davis / Chevron deal provides $25M for biofuels centerWind Collaborative Initiative / Energy Efficiency Center at UC DavisGrowing expertise and activity at Sacramento StateActive local collaboration between tech, universities, govt., non-profits, and real estate
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