Job Creation and Innovation Panel:  How an Idea Can Create Jobs and Economic Growth

I am very happy to be here today, as the US research university voice in the innovation circle discussion.  I have worked for a number of universities in the commercialization of research results over the past almost 30 years and have had the privilege to see tremendous growth in the creation of new companies based on university research results during that time.

U.S. universities perform more than $21 billion in federally funded research each year.  Much of the research funding is aimed at understanding and solving fundamental questions and problems facing our society.  When interesting results occur, the discoveries can often be futuristic, having no obvious application or market at the time of the creation of the idea.  As an example, the entire biotechnology industry was enabled based on university research and innovation.  Commercializing platform innovations which enable entirely new markets requires risk-taking investors and entrepreneurs, often via a start-up company to develop early products and services.  Larger companies generally do not want to take the very early development risk – they often prefer to wait until a technology is more proven and then become involved.  Once clear applications emerge for the new technology, larger and more established companies can partner with and perhaps acquire the start-up company for large scale-up of manufacturing and distribution.  In another scenario, the start-up grows and becomes an industry leader in a new market segment.  For those very early-stage university innovations, a start-up company is often the first commercialization vehicle.

The federal government has had an important role in stimulating the start-up of new companies based on university technology.  Since the passage of the Bayh-Dole Act in 1980, 6,000 new companies in the U.S. have been formed around university technologies.  153 new drugs, vaccines and devices have been developed; and entire new industries,have been created.

University start-up companies are effective in creating new jobs in our economy.  Between 1996 and 2007, 279,000 new jobs were created in the U.S. from university inventions and start-ups.  While some of these start-ups don’t make it, a higher percentage of university start-up companies are successful as compared to non-university start-ups.  University start-ups are significantly more likely to survive their formative years, be profitable, receive venture capital financing, and result in an IPO than non-University start-ups.  Eight percent of university start-ups go public vs. 0.07% for others.  Seventy-two percent of university start-ups remain in their home state, an important factor for local economic development and economic impact.  Obviously, university start-up companies are an important piece of the job creation formula in the U.S.

So how do these start-up companies get formed?  There is a necessary nucleus for each new company consisting of a platform technology, a small team of great people and financing.  An important requirement in the attraction of funding for a start-up is a proprietary position for the new company.  Remember that the risks are high and the financing requirements are often millions of invested dollars.  Venture capital inventors, angel investors and others all need to believe that the company has a proprietary position in order to justify the large investment risk they are taking.  Strong patents are a key part of the proprietary position that the start-up holds.  In fact, at the early stages, the people and the patents are basically the core of the company.

I would like to talk a bit about STC and how it creates start-up companies, concluding with a couple of examples of recently-formed companies.  STC.UNM is a nonprofit corporation formed by and owned entirely by UNM.  STC serves and supports all of the University’s academic programs, from science and medicine to fine arts and business management. It is STC’s duty to protect and commercialize the inventions and creative works– the valuable intellectual property – of faculty, staff and students.

At the University of New Mexico’s STC.UNM, we place an important emphasis on developing and facilitating start-up companies.  STC operates the Lobo VentureLab, which offers office space (real and virtual), assistance with market research, and other services for our emerging start-up companies. STC staff and student interns spend time introducing industry entrepreneurs, investors, inventors and technologies to facilitate matches for the embryonic start-up companies.  We develop summaries of the business opportunities presented in a way that can simply convey the information that may interest an investor or entrepreneur.

STC forms 5-8 start-up companies per year, ranking us well above most of our peer institutions, as measured by number of start-up companies, normalized for research expenditures.  The types of startups emerging from the University of New Mexico range from a new diagnostic to better manage cystic fibrosis, new coatings that are so superhydrophobic that water literally bounces off of a surface, workers comp software delivery, inhaler drug delivery several orders of magnitude more efficient than current devices, early diagnostics for endometrial cancer, instrumentation for skin cancer detection, drug development equipment, efficient smart lighting devices and a therapeutic to treat lupus nephritis.  A study conducted about the impact of STC start-ups showed that not only were hundreds of jobs being created in the local economy in a short period by these companies, but that these jobs were much higher average wage, at $80,000.  Clearly, these are important jobs to be creating in New Mexico and in the U.S., which will help to provide for a robust future economy for all.

Please let me conclude with a couple of short examples of start-up companies emerging from the University of New Mexico.

The first is INTELLICYT CORPORATION.

In 1998, Dr. Larry Sklar, Professor of Pathology, and Dr. Bruce Edwards, Research Professor of Pathology at the University of New Mexico’s Health Sciences Center, began working together on improvements to flow cytometry technology. In 2006, STC presented their invention to an experienced biotechnology entrepreneur who wanted to relocate to New Mexico. Terry Dunlay was so impressed with the technology that he formed a start-up company called Intellicyt Corporation.  The technology, described as “a flow cytometer on steroids,” is called the HyperCyt® system andgreatly increases the speed (30 times faster) at which cytometers, or cell scanners, can process samples. The technology’s supercomputing capability and 384-well microplates can test hundreds of thousands of compounds for drug discovery and cell research. Users can perform bigger experiments, screen more compounds and analyze data in ways that are not possible with a conventional cytometer. STC had acquired a portfolio of patents and patent applications on the technology.  The company has raised nearly nearly $3.3 million in private equity, including $1.1 million from local investment firm Verge Fund and $1.5 million from the local office of investment firm Village Ventures. The company is currently selling its product to biotechnology, drug company and research labs nationwide. In 2009, sales grew by 140 percent with a 100% increase in revenues in 2010. Intellicyt recently signed a deal with Beckman Coulter, a leading life-science testing device company who is selling the technology worldwide. Intellicyt employs more than 40 people at its Albuquerque-based facility.

The second example is LOTUS LEAF COATINGS INC.

Created in 2010 around a super-repellent coating developed at the University of New Mexico and Sandia National Labs, Lotus Leaf Coatings Inc. is an example of a new company with high potential for commercial success. The technology was developed by Dr. Jeff Brinker, who holds joint appointments in the UNM Department of Chemical & Nuclear Engineering and Sandia National Labs and Dr. David J. Kissel, a former doctoral student and lead researcher on the technology, who has since become the chief technology officer of Lotus Leaf Coatings. The technology manipulates materials at the nano-scale to make a glass-like substance that can be sprayed, brushed or dipped onto surfaces. The substance mimics the natural coating properties of the lotus leaf—a super repellency to moisture and self-cleaning ability.  Consumer and industrial applications for the coating span a large market, from self-cleaning surfaces for medical devices to protective coatings for electronics to corrosion prevention for metal-based and marine products.  STC filed several patent applications and presented the technology to local investors who were attracted by the technology’s performance and market potential. Several members of the New Mexico Angels, a membership organization of independent investors who invest in New Mexico-based, early stage and seed companies with high-growth potential, decided to not only fund the company but run it as well. Angel investor and former Flywheel Ventures associate, Lawrence Chavez, is the CEO of Lotus. The company has already formed a strategic partnership with a major medical device manufacturer who will develop the coating for medical markets.  The company has created a number of new jobs already and is looking to substantially grow its operations in 2011.

Thank you very much for your time and attention today.