The VC, The Professor, And The Valley Of Death
Tuesday, September 29, 2009; 12:20 PM
Editor's note: This is a guest post by Vivek Wadhwa, an entrepreneur turned academic. He is a Visiting Scholar at UC-Berkeley, Senior Research Associate at Harvard Law School and Executive in Residence at Duke University. Follow him on Twitter at @vwadhwa.
Everyone seems to be waiting for the next great discovery which will change the world. But, believe it or not, the next Internet, semiconductor, or breakthrough in MRI technology may already have been discovered. It???s just languishing on the shelves of the university research labs you drive by on your way to work every day. University researchers don???t know how to commercialize their discoveries and smart, hungry entrepreneurs looking to meet the next Larry or Sergey don???t know how to find them. These parallel universes rarely meet (well, except sometimes at Stanford).
In 2007, U.S. universities performed $48.8 billion of research and filed 17,589 U.S. patent applications. In that same year universities received back revenues for licensing and royalties on patents of less than $2 billion. Those revenues include ongoing royalties from all of the research licensed over the past 40 years. The implication is clear. An astonishing amount of promising research is left in the lab.
When I say this to university administrators, they get incredibly defensive (almost like the VC???s I pissed off with my last post.) They rightfully argue that the role of the university is to teach and to add to the world???s knowledge base. The real benefit comes from the students who universities educate, who go and start the Apples and Microsoft???s. No argument there. But we have a goldmine of knowledge and potential innovation locked in our research universities. This goldmine could fuel the next two decades of economic growth. It is time to mine this goldmine.
I???ll sketch out a little treasure map for you in part two on this topic, posting later this week, but first, you need to know more about the inhabitants of the other dimension. Some of the brightest people in the universe work in our universities. After getting a science or engineering Masters degree (which could earn them six-figure salaries in Silicon Valley) they slog it out for 4-6 years at close to minimum wage to get their PhD???s. Then they wait another decade to *maybe* become a full professor, usually by working at a series of lesser university jobs in less than optimal cities or towns. Even those PhDs who get tenure usually don't make anything near what senior tech guys make in industry.
Clearly they are not in it for the money. Rather their twin desires are often to acquire knowledge for knowledge's sake and to do good for the world. I know these are foreign concepts to some of you, but this is the academic world. And by the way, they often see the business world as the ???evil empire??? that robs their discoveries of purity and puts a dollar sign on anything it can.
For those reasons, they are usually more concerned about disseminating knowledge and publishing academic papers than creating patents that limit how this knowledge can be used. (I have known many academics who refuse to file patents because they don't believe in them). These purists worry about the conflicts of interest that can arise when taking money from industry might be perceived to color their research. And they want to ensure that their teaching activities are not adversely impacted by the time spent on commercialization efforts.
To make things worse, the funding which universities received from the government usually only covers the cost of writing some papers. They don???t get enough to build a prototype or prove their technology. This is what most VC???s want to see at a minimum before investing in technology, to make sure they are not investing in a "science project," the industry term for leap-of-faith investments in lab science discoveries. Not surprisingly, the vast majority of university technology withers on the vine. This chasm between promising benchwork and investable prototype, between what professors and VCs can and are willing to do, is also known as the ???Valley of Death???.
The challenge is to create a bridge between these researchers and the VCs or idea-seeking entrepreneurs who know to turn an idea into an invention. Many of the ideas and breakthroughs are easy to exploit and just require enterprising minds to come together with inquiring minds. But others require the investment and support which only VC???s can provide. (Hey, I never said that venture capital didn???t serve an important purpose ??? just that VC???s don???t innovate.)
Taking these types of hard science discoveries from bench to fab or factory is sometimes very, very hard work that often does require VC capital, fat Rolodexes, and regulatory and industry specific operational expertise. But someone has to take these discoveries into a stage beyond ???science project??? ??? and this is where the entrepreneurs need to step in again???to hand VC???s the ???technology on a platter??? that they expect.
I asked a colleague at Duke University, Barry Myers ??? who is considered to be one of the leading biomedical researchers in the world and also happens to work part-time at a VC firm (weird, isn???t it?), to help me create a guide for the adventurous entrepreneur. I must warn you that this isn???t going to be easy. In my next post, I'll walk you through what Barry said.
Yes, we???ve got a cliffhanger.
(Photo credit: Jon Sullivan)