How Big 3 Triangle colleges are fueling startups
[Originally posted on the Triangle Business Journal, June 14, 2019]
The Triangle is often heralded for its ready workforce and research universities readily pumping out talented students.
But these universities are not just spitting out graduates and potential employees – they are increasingly spinning out companies and patents. And that’s making their founders — and their schools — millions of dollars.
In the last fiscal year alone, the Triangle’s three largest universities spawned more than three dozen new companies. That number is increasing each year due to a strong economy, plentiful research dollars and an army of researchers in the region.
The results are the culmination of a concerted and purposeful effort by Triangle universities in recent years, as entire offices have been created to maximize research dollars.
But while many of the efforts to maximize research funding and commercialization efforts were brought on by the last recession, even during this golden age of growth university leaders say they are concerned about the reliability of federal dollars and changing political priorities.
And that’s important to universities looking to attract world-class talent incentivized by both research and market opportunities, as well as providing the foundation for a booming startup industry in an area looking to attract more venture fund attention.
But with these systems in place, university officials say they expect the commercialization numbers to continue growing, so long as the funding remains stable.
Duke University, for example, has seen an explosion in commercialization activity in the last five years. During the period, licensing revenue to the schools and researchers more than doubled from $25 million to $51 million per year. Patent count saw similar growth – up from 53 in 2014 to 107 last year.
As for spin-out companies, the university reports 16 in the 2018 fiscal year, more than triple the five companies formed in 2014.
Robert Hallford, hired as Duke’s director of new ventures just over a year ago, says the increase in activity is palpable during the last years, as Duke has poured more resources into providing commercialization options for its faculty.
He says increasing tools and ease of commercialization – coupled with a strong investor economy and a changing faculty standard of success – has created a strong local ecosystem.
“It’s a function of the new blood in the faculty,” he says. “For the old guard, it was enough to be published and recognized for your academic accomplishments. The younger generation of professors today are far more interested in seeing their work realized not just in the market but in companies they have a hand in.”
Duke is not the only university seeking a commercialization boom.
UNC-Chapel Hill, Duke, and N.C. State University combined to rake in more than $63 million in licensing revenue from 345 agreements last year, disclosed 787 inventions, and created 247 patents.
And that does not include the impact of a constant list of startups.
Synoxa Sciences CEO Joshua Pierce, who is an N.C. State professor of chemistry.
Judith Cone, the vice chancellor of innovation, entrepreneurship and economic development at UNC, said the university has launched over 600 companies since the late 1950s. Of those, 462 still exist, employ more than 71,000 people and had $11.3 billion in revenue last year.
Wade Fulghum, the interim executive director of N.C. State’s office of research commercialization, says the school’s success is bolstered by support and advisement services for the faculty.
“Before, the way our office did startups was we negotiated a license then the founders or scientists were kind of on their own,” he says. “Now it’s so easy for faculty to do a startup because of the resources and connections through our programs.”
Another huge part, he says has been new angel networks that have appeared in the last few years.
Those networks – the Carolina Angel Network at UNC, Wolfpack Investment Network at N.C. State and Duke Angel Network at Duke – have invested more than $25 million through nearly 50 deals with early stage companies.
Mizar founder and president Paul Maddox and his wife, Amy, are both professors at UNC-CH.
However, these universities’ golden years of commercialization may be threatened by changing political winds that threaten federal research dollars – the fundamental input which powers the research for commercialization.
For example, the 2020 White House budget included a proposed cutting of the National Science Foundation (NSF) budget from $8.1 billion to $7.1 billion. The NSF estimated the cut would result in 1,000 fewer grants nationwide, and as many as 400 fewer scientists, if approved.
According to NSF data, the state of North Carolina received $206.3 million in funding in FY2018. The funding supported 606 research grants. Of that funding, more than half ended up in N.C. State, UNC or Duke coffers.
In FY2018, N.C. State received $60.7 million through 184 grants, Duke received $41.8 million through 127 grants and UNC received $41.2 million through 184 grants.
And though each university says they are working to diversify the source of research funding, at UNC, Cone says there is room and reason for doubt.
“Every group has to question everything,” Cone says. “Coming out of 2008 and the recession, that reminded us of how tentative everything is. One can’t take for granted anything, the winds of change – politically or economically – are out of our control. So we have to be smart positioning ourselves.”