For professors at Arizona State University (ASU), finding investors to seed and commercialize their research is more than just difficult. Opportunities to raise seed capital are as dry as the desert landscape.
Last year, 23 companies in the Grand Canyon State raised $72 million from venture capitalists, according to the MoneyTree Survey from PricewaterhouseCoopers, Thomson Venture Economics (publisher of PE Week), and the National Venture Capital Association. Just eight of those financings were seed-stage deals.
The year before, 25 Arizona-based companies raised more than $206 million, although part of that 2002 funding total included a $50 million deal for health care services provider Schaller Anderson.
To help boost the totals, ASU has launched the ASU Innovation Fund to provide universities with enough funding to prepare technology for commercialization and later rounds of venture capital.
“The fund is there to provide financial assistance for faculty who have invented technologies or products that are not quite over the hump to the proof-of-concept stage and need that last piece of funding to complete a prototype or solicit licensing deals for that technology,” says Carl Lewis, vice president of marketing and director of Arizona Technology Enterprises.
The organization is ASU’s technology transfer group and one of the fund’s sponsors. ASU Research Park is the fund’s other sponsor.
Arizona’s effort shows that it is not just Silicon Valley that is seeding new innovation. Indeed, universities nationwide are active in technology commercialization.
The $20 million New Markets Growth Fund is run out of the University of Maryland’s Smith School of Business, while Boston University manages the Community Technology Fund to finance early-stage IT and life sciences companies. At Cornell University in New York, BR Ventures finances university spinouts.
Universities across the United States increasingly are recognizing the value and importance of both their basic research and engineering programs, says Patrick Ennis, managing director of ARCH Venture Partners. Ennis says he was not too familiar with the ASU project, but ARCH regularly funds startups coming out if universities and national labs.
“The fact that Arizona is launching a fund shows that there are many benefits for all constituencies in commercializing university technology,” Ennis says.
For now, ASU’s coffers are filled with $300,000 to invest. The fund will invest up to $50,000 in a single project, based on how far along the technology is, the technology’s significance, its commercial potential and the quality of the proposed business plan.
The fund’s investment committee so far has received a handful of proposals, one of which is likely to receive funding soon, Lewis says.
The firm will invest enough capital in a single technology to create a prototype, complete its proof-of-concept trials, and ultimately license the technology.
ASU’s Innovation Fund will hold on to a futures option to invest in the company if its technology proves successful. ASU already holds on to any intellectual property that is developed by its faculty, but often licenses those rights to other companies.
The fund will also take royalties off any licensing deals.
“There’s not a lot of venture capital out here,” Lewis says. “We’re trying to fill in that gap.”
Alastair Goldfisher contributed to this story.