The Role of Universities and Technology Commercialization in Economic Development

1
The Role of Universities and Technology
Commercialization in Economic Development

• Don Smith
• Director, University Partnership of Pittsburgh
• University Director of Economic Development
• University of Pittsburgh and Carnegie Mellon
  University
• November 17, 2006

2
Overview

• Why is this issue so important?
• Tech Commercialization Myths
• The New Technology Pyramid
• The Role of TBED Intermediaries
• Where we go from here

3
Why are the Universities playing a bigger role?

• The economy has changed
• Talent, Technology play central role
• Universities are more important than ever
• There is great interdependence with the region
• A stronger region aids faculty and student
  recruitment
• Local company partners improve the research and
  education quality
• University leadership understand their roles

4
Why the focus on Universities andTech Transfer?

• Unlike retail and local market services, tech
  generates new wealth in its region
• Tech startups play important role in regional
  growth
• Universities one of very few factors that
  consistently emerge as a competitive advantage
  for their regions
• Perceived role of Stanford and MIT in Silicon
  Valley and Boston success

5
The Fundamental Paradox

• EVERY great tech region has at least one great
  research university, BUT
• Not every great technology research university
  results in a great technology region
• Technology Commercialization can be a big part of
  the differentiation

6
University Contributions to the Regional Economy

• Traditional
• Employment and purchasing
• Talent attraction and development
• RD funding attraction
• Recent Add-Ons
• Startup company generators
• Business assistance services
• Special initiatives and policy leadership

7
What do we know?

• University research has strong regional
  spillovers (Jaffe)
• Great research leads to great companies
• RD quality, Eminent scholars best predictors of
  venture-backed university spinouts (Zhang)

8
What do we know?

• It takes time, with a consistent and focused
  approach.
• RTP, SD took 15 years or more
• Benefits of university excellence accrue over
  time
• Harvard, MIT great for over a century huge
  alumni base, residual buildup of talent and
  capital in the region.
• Local ability to leverage universities differs
  regional absorptive capacity may define success

9
Myths in TBED

• Traditional university roles are diminishing in
  importance
• MIT and Stanford actively created Boston and
  Silicon Valley miracles
• Great tech transfer equals regional economic
  development
• VC creates new companies
• There is a silver bullet solution

10
Myths II

1. Research jobs matter less than private sector
   growth
2. Students Entrepreneurial training successful
   technology startups
3. Universities get rich on Tech Transfer
4. Self Sufficiency should be a goal of TBED
   organizations

11
1 Traditional University Roles Less Important

• Great Teaching and Great Research are still the
  highest priorities, and the activities of
  greatest economic impact for universities.
• The talent is produced that drives all companies
  in the region/state.
• Fundamental research breakthroughs are behind
  most homerun companies, and no one else is
  pursuing.
• All the evidence suggests that the stronger the
  research and faculty, the greater the commercial
  impact

12
2 SV and Boston Myths

• Stanford and MIT set out to create tech clusters
• Favorable tech transfer policies and startup
  biases led to SV and RTE 128
• State programs played a role
• They were entirely VC driven
• Vastly underplay role of experienced
  entrepreneurial management, and federal RD
  funding

13
3 Tech Transfer Proficiency Drives Economic
Development

• Columbia perennially at top of list, yet little
  NYC tech growth
• Stanford and MIT policies less favorable than PA
  institutions
• PAs top institutions performing at top of
  startup pack already, yet Commonwealth lags
• Pitt, Penn, CMU all hit top ten in startups or
  startups per M in research in last 3 years
  (AUTM)
• Less than 2-4 of startups are from universities
  (Lester, LIS Project)

14
4 The VC Myths

• VC creates companies
• VC invests in and increases success rate of
  company opportunities
• VC has regional gaps
• Models show good efficiency at finding good deal
  flow
• Seed, Pre-seed stages are possible exceptions
• VCs wont invest outside their region
• Even SV VCs invest over half of their funding
  outside SV
• Nearly all successful PA companies have attracted
  outside VC

15
5 The Silver Bullet Myth

• If we just had more (pick one) VC, Incubators,
  Tech Parks, Tech Transfer, experienced managers,
  lower taxes wed be the next Silicon Valley

16
Tech Commercialization is similar

• Research funding, seed funds, incubators, tech
  parks, cluster initiatives as THE silver bullet
• Reality all of these, consistently over time
• Or, massive surgery
• Austin 32 chaired professors at UT for MCC,
  more for Sematech
• NC RTP 3B for UNC, NC State infrastructure,
  300 acres for centennial campus
• GA 50 eminent scholars, half at GA Tech
• We need a new food pyramid for tech
  commercialization

17
Old Prosperity Pyramid

1. Cheap land
2. Physical Infrastructure
3. Cheap, Abundant labor
4. Low taxes
5. Low cost capital
6. Skilled labor
7. RD

18
New Technology Pyramid

• Skilled Labor
• scientists, engineers, experienced
  entrepreneurial management
• Technology RD
• University RD, Corporate RD
• Specialized Infrastructure
• Clusters, Labs, Tech Parks
• Risk Capital
• Pre Commercialization, Pre Seed and Seed Capital
• Technology transfer
• University-Industry Centers Fair, fast and
  transparent tech transfer policies

19
Critical Mass is Everything

• SV and Rte 128 work because they achieved
  clusters of scale
• Agglomeration economies keep them going despite
  super high costs, taxes, congestion, etc.
• Efforts that fail to target and achieve critical
  mass wont create long term, sustainable success

20
Critical Mass

• Talent is a key driver
• Attracted to clusters of activity and cutting
  edge research and development
• Universities are a key provider, but companies
  are important training grounds
• Anchor companies attract and grow talent
• Economies of scale for VC, services result in
  increased activity
• Critical Mass/Clusters provide the absorptive
  capacity

21
University Roles

• Technology
• Tech Transfer
• Attraction of Companies
• Tech parks
• Targeted Cluster Initiatives
• Talent
• Education programs
• Executive and Continuing Education
• Attraction of talent

22
University Roles

• Entrepreneurship
• Training
• Technical Assistance
• Incubation
• Venture Promotion / Activities

23
University Partnership of Pittsburgh

• Designed to make connections with the private
  economy
• Lowering the barriers to industry-university
  interactions
• The friendly front door to the universities
• Coordination and communication vehicle for policy
  between the two universities
• Sharpen focus on economic development
• Focus on Oakland for physical development
• www.universitypartnership.com

24
Universities Today

• Primary driver of tech based initiatives
• PTEI, Robotics, Digital Greenhouse,
• Pittsburgh Life Sciences Greenhouse
• Great expansion of tech transfer/ tech
  commercialization
• Technology Commercialization Alliance(Pitt)
• Innovation Network (CMU)
• Driving real estate market
• Collaborative Innovation Center I (II in process)

25
The Role of TBED Intermediaries
26
What is TBED about?

• Trying to create synthetically, through policy
  and programs the conditions that developed
  organically in SV and Boston.
• Can it be done? The jury is still out.
• Best examples so far
• NCs Research Triangle Park (25 year, focused
  recruiting effort with supporting policies and
  programs)
• San Diego (CONNECT role, limited programs)
• Austin (state support of UT was main policy,
  along with branch plant locations)

27
Differing Roles for Universities

• Georgia Model
• GA Tech as the delivery vehicle for state
  programs
• ATDC, Venture Lab, MEP, Electronic Design
  Research Center
• PA Model
• Develop outside intermediaries to bridge gap
• Life Sciences Greenhouse
• Technology Collaborative
• Innovation Works

28
Life Sciences Greenhouse

• Four focus areas
• Drug discovery tools and targets
• Tissue and Organ Engineering
• Medical Devices and Diagnostics
• Therapeutics for Neurological Disorders
• Invest In Both sides of the equation
• Academic research, academic faculty,
• Linkages to industry, Pre-Seed funding,
  Incubation, Step up space, Executive talent,
  Marketing, Workforce
• New 501c3 with strong university board presence

29
PLSG Mission and Programs
People
Space
Capital
Connectivity
University/Research
Startup Company
Existing Companies
PLSG Stars
PLSG Talent
PLSG Executive Corps
PLSG TechnologyDevelopment Fund
PLSG Seed Fund
PBDC
University Development Fund
PLSG SBIR Advance
PLSG VC Outreach
PLSG PTC Biomedical Network
PLSG Facilities
PLSG Incubator
30
How can we make it work better?

• Grow the scale
• Great evidence that critical mass of research is
  key
• Deal flow (quality and quantity) defines success
• Define and accept our roles
• Universities TBED orgs Market economy
• Partner effectively
• Both sides bring unique resources to the table

31
Conclusion

• Continue to grow the research base
• It all starts there
• Build local absorptive capacity
• Cluster based development
• Anchor/Breeder companies
• Entrepreneurial infrastructure
• Facilitate the transition from lab to local
  market
• Relationship building between universities and
  companies
• TBED efforts to enhance quality and quantity of
  deal flow
• Pre-market funding

32
Some Pittsburgh Data/Examples
33
RD Attraction

• Pitt and CMU attracted over 1 Billion in RD to
  the region this year
• The AAU estimates that 28-31 jobs are created for
  every million in RD
• 28,000- 31,000 research-related jobs
• Space Implication up to 1 Million sq ft of
  institutional research space may be needed

34
Company Attraction

• The Universities
• the regions 1 asset for company attraction
• Big name successes due to the presence of our
  universities
• Star faculty are the big draw

• Examples include
• RAND
• Renal Solutions
• Intel
• Seagate
• Sony
• Oki Electric
• Bosch
• Google
• Many more . . .

Space Implication Elmhurst, CIC, PTC Site all
full growing demand for RD and office space
in proximity to universities and UPMC
35
Technology Commercialization

• 300 University-related tech startups in region
  with over 7000 jobs in region
• US 1 spinout per 87M RD, Pittsburgh 1 per 56M
• Pitt ranks 6th nationally in 2004 AUTM data with
  10 spinouts (CMU spawns 14 in 2006)
• Pitt and CMU in top 30 in venture backed startups
  (Zhang, 2004)
• 68 of regional jobs in companies with over 1000
  employees, are in companies that started here
• Space Implications Flexible incubation and
  step-up space needs are growing