Scaling the Ivory Tower

Corey Reese looks a lot like Ron Conway, only 34 years younger and with a beard. OK, the 22-year-old Berkeley graduate actually looks nothing like Silicon Valley’s most prolific angel investor. Not until you watch him network in a room full of entrepreneurs and financiers. Reese has what no business school can teach: a rare combination of moxie, poise and ambition.

It’s no surprise that a San Francisco-based venture firm would want his help to source deals on Berkeley’s campus. Picking a capable insider is just one way of finding the best talent and technology locked up inside academia’s high walls.

Silicon Valley VCs increasingly are looking at investment areas such as energy production and cleantech, which require substantial technology. The science driving innovation in these areas isn’t coming exclusively out of Stanford University, either. It’s coming out of places such as Oklahoma State University, Virginia Polytechnic Institute and Rice University.

University research is becoming increasingly useful across the board. In fact, there’s been a 45% increase in the number of patents granted to the top research universities over the last decade. And those patents are finding their way, typically via licensing agreements, into startups. The number of startups using technology licensed from universities jumped nearly 20% in 2006 to 698, according to the Association of University Technology Managers.

Then there’s the talent. Larry Page, Sergey Brin and Mark Zuckerberg are just the most recent names to spring to people’s lips when they talk about tapping into the talent locked in Ph.D. research programs and hanging out in the houses of Harvard. Reaching the right people has never been easy.

But what if you had somebody who could locate and lock on to the right people, track technology like a heat-seeking missile and would cost only a 10th of your typical pre-MBA associate? Such a person is Corey Reese. He spent his senior year doing due diligence for Alsop Louie Partners, blazing the way for the nascent firm’s campus associate program.

It’s an example of one easy way to get into deals coming out of universities. If that idea doesn’t suit your fancy, there are four more on the following list:

1. Hire an insiderStewart Alsop and Gilman Louie had come to the conclusion that they shouldn’t chase the hottest new technology on college campuses, but the hottest newly minted entrepreneurs. “If you look around at who is starting companies that make a lot of money, some percentage of them are kids,” says Alsop. “Every VC firm on Sand Hill Road is all over Stanford looking for the next Larry and Sergey. So we designed the campus associate program at Berkeley because it was right across the bridge.”

Reese was a special case, an undergraduate with a lot going on already. “I had done a year of college in high school and could have graduated early, so all my difficult courses were done by the middle of my junior year,” he says. “I had done two startups and had been out raising my own fund for nine months (he ultimately jettisoned the fund-raising effort when a co-founder pulled out).”

It’s easy to imagine Reese working his magic on the students and faculty at Berkeley and having at least a passing acquaintance with a good portion of the 1,500 electrical engineering and computer science students on campus. Reese’s break came during a meeting with Adjunct Prof. Ikhlaq Sidhu, who runs the school’s Center for Entrepreneurship & Technology.

Reese was looking for advice from the professor, who had worked at 3Com. Sidhu pulled up a page on his PC and showed it to Reese. The job offer for “Campus Associate” at Alsop Louie Partners was a perfect fit. Reese had read about the newly founded firm earlier that year in Venture Capital Journal. (No joke. See “Top of Mind: The gadfly and the gamer,” pages 73-75, April 2006 VCJ). Reese jumped at the opportunity.

The partners brought Reese in for the summer and had him sit in on various meetings and pitches. Things went well and he quickly acclimated. For $1,000 a month, and the promise of a finder’s fee for any deal the partners approved, Reese was off and running when school started in September 2006.

He brought two or three startups in to meet with the Alsop Louie Partners each month and met with almost immediate success when he hooked up with Darian Shirazi and David McIntosh—two 21-year-old Berkeley students. Neither was a neophyte. Shirazi had been an early Facebook employee and he and McIntosh had created a mobile photo-sharing site called Fotodunk, which they sold to iLike for $120,000 in the fall of 2006.

“They [Shirazi and McIntosh] knew that I was doing venture-related things and I knew they were out fund-raising,” says Reese. The two were pitching a company called Redux, which would use a suggestion engine, similar to Amazon.com’s book recommender, for meeting new people. “Their pitch looked like something you would see from a repeat entrepreneur.”

Alsop Louie Partners decided to back the university students within 45 minutes of their first meeting. The firm put in $1.65 million along with Peter Thiel for Redux’s first round in the spring of 2007, and it later teamed with Draper Fisher Jurvetson to invest another $3.5 million

It’s been a weird experience for the 54-year-old Alsop, though.

“My initial reaction was to say, ‘This is a pain in the butt because they [university-age entrepreneurs and associates] don’t know anything,’” he says. I really had no experience working with people under the age of 35 since I was in that range myself.”

The experience was made even stranger for Alsop because he has children in the same age range. His son is 22 and his daughters are 25 and 28. “You develop a particular relationship to your kids, and now I’m dealing with people who aren’t my kids, so it’s a real mind shift for me to treat them as adults,” he says. “They exhibit many of the same qualities my kids do, but I’m doing business with them.”

It’s not quite the same, though. “We have to do a certain amount of adult supervision,” Alsop says. “We can’t have them drinking at our parties since they’re mostly under-age. But they’re not party animals anyway.”

Hiring undergraduates to source venture capital deals on college campuses is not an entirely new practice. There were dozens of would-be financiers chasing deals on college campuses during the dot-com boom. Groups such as Silicon Ivy Ventures, UniversityAngels.com and StartEmUp all mined university campuses. None is no longer active.

ITU Ventures had a program that was the most similar to that of Alsop Louie Partners. ITU, based in Los Angeles, was founded in 2000 by three 20-somethings and has raised three funds to date. During the dot-com boom, the firm hired Matthew Fogarty, a student at Berkeley’s Haas School of Business to source deals. It hired business school students at MIT, as well.

During his time on campus, Fogarty sourced at least three deals that ITU backed: optical components manufacturer Opient, services company SkyFlow and semiconductor measurement company OnWafer Technologies. Opient and SkyFlow went bust, but OnWafer went on to raise $7.35 million from ITU, Mohr Davidow Ventures and Newbery Ventures. The startup was bought for $15 million in 2007. That one deal may have justified the cost of the Berkeley campus associate to ITU.

ITU’s strategy of backing only ideas that come out of universities has produced 10 liquidity events, but none has been a barn burner. Of the acquisitions with disclosed deal values, just one fetched a price of more than $20 million, with most registering about 2x on the total VC raised, according to venture data from Thomson Reuters (publisher of VCJ).

The Alsop Louie Program may do better thanks to a few key tweaks it is making to the ITU model. For example, university deals are not Alsop Louie’s primary line of business, its campus associates are undergraduates, not MBAs, and its focus is consumer oriented, not deeply technological.

The firm is plowing forward. Reese graduated in the spring of 2007 and is now working at Alsop Louie Partners part-time while he works with Redux. The firm has hired a new campus associate to fill his shoes: sophomore Eli Chait. It also expanded the program to Stanford and MIT with two additional hires.

Reese helped find Chait and offers this advice to any firm looking to replicate Alsop Louie’s campus associate program: Ignore techies and MBA types. Look instead for someone “who understands the political landscape of the university in the key players in earch realm,” he says. “It’s a very rare MBA student who will be able to reach out to the engineering school and be well respected there. There’s resentment when an MBA tries to hang out in the engineering department and seems to be saying: ‘Are any of you geeks interested in working on this cool company?’ There are legions of guys dying for access to the venture business that would love to do this. Hire somebody at the end of the school year and have them play the role of associate over the summer to get the sense of what types of deals your firm looks at.”

2. Connect with alumni

Companies such as Redux are a rarity. Most really successful entrepreneurs have spent time in the industries they’re looking to revolutionize. Research from the Kauffman Foundation shows that the median age of the founders of U.S. technology companies is 39 and that twice as many were older than 50 than were younger than 25. That being the case, leveraging university connections and networking with your alma mater is an easy and zero-cost way to find deals.

Canaan PartnersJohn Balen loves his alma mater, but he isn’t particularly fond of doing deals tied to universities. “It’s just a lot of work,” he says. “They’re not startup factories.”

To really work an alumni network, try donating your time and expertise back to the school. Many business schools invite executives back to interact with students, give lectures and judge business plan competitions. Schools such as Princeton, Harvard and Columbia have alumni clubs that host lectures on entrepreneurship or offer opportunities to informally meet potential collaborators.

Balen has kept close ties to Cornell University in Ithica, N.Y., where he earned both a bachelor’s in electrical engineering and an MBA. He’s given lectures at the business school and sits on the advisory board of the school’s entrepreneurship program.

Balen has also hosted the Silicon Valley Cornell Entrepreneurs group at Canaan’s Menlo Park offices. In fact, it was through that group that he met entrepreneur Steven Gal. Gal had been going to the Cornell entrepreneur events for some time before he decided to start his own company. He set up shop with Bruce Hansen and Mike Cook in 2002 to build a better way of identifying fraud and preventing identity theft called ID Analytics.

When it came time to raise cash, it was natural that the first person he turned to was Balen. Canaan ended up leading the $10 million Series A investment in the startup. Balen syndicated the deal with Trinity VenturesNoel Fenton, another Cornell alumnus.

“The whole Cornell entrepreneurial network is so useful because we’re all very technical and we’re interested in working with these types of companies,” Balen says.

Robert Abbot, a general partner at Norwest Venture Partners, had a similar experience. “I’m not going over to Stanford every month and meeting with a bunch of Ph.D. students,” he says. “I let their ideas get filtered one or two levels first.”

He’s got a great filtering network, too. Abbot happens to be particularly well connected to Stanford’s electrical engineering department and the doctoral students who have driven innovations in computer networking through his brother, William Abbot, who earned a doctorate there.

Entrepreneur Norman Swenson had been out of Stanford’s Ph.D. program for about a decade before he decided to join forces with Paul Voois to start a company. Swenson and Voois wanted to attack the market for network processors, the silicon chips that speed up Internet connections. Swenson, Voois and William Abbot had all studied under Stanford professor John Cioffi.

Swenson was having lunch with a venture capitalist one afternoon when he thought he saw his old friend from school, William Abbot. He went over to say hi only to discover that it was William’s brother, Robert. Swenson, still on the hunt for investment dollars, set up a meeting to pitch his startup. “It was good for an introduction but it didn’t lower the bar in terms of what you had to do to get funding,” he says. Abbot ended up leading Norwest’s $8 million Series A investment in Swenson’s and Voois’ company, ClariPhy Communications, in 2004.

3. Reach out to university VC programs

Each university has its own way of promoting entrepreneurship or fostering a community of would-be startup founders and financiers. One of the most fruitful for venture capitalists may be the university-sponsored venture capital fund programs popular at many business schools. Working with students can be a great way to recruit talent, see deals coming from the university and reconnect with alumni. Best of all, it’s simple, free and offers vetted deal flow.

The best known university-sponsored programs are Cornell’s BR Ventures and the University of Michigan’s Wolverine Ventures. Each relies on business school students to find and fund deals. Although there is no explicit requirement for the funds to invest in companies coming out of university research labs, the close relationship to the school makes each fund one of the first stops for would-be university entrepreneurs.

One of the most successful university groups actually collected cash from outside institutions. University Venture Fund, based in Salt Lake City, has raised $18 million from a variety of venture capital firms over the years. The fund is managed by undergraduates and graduate students at the University of Utah, Westminster College in Salt Lake City, Brigham Young University in Provo, Utah, and the Wharton School of Business. The group collects a 2.5% fee and 20% carry.

It has already picked at least one winner: Infinera (Nasdaq: INFN). The company raised $182 million in a public offering last summer. Other companies of note that University Venture Fund has backed, according to its website, include Advent Solar, which has raised $114 million from VCs, and Web 2.0 company SocialText, which has collected $12 million.

There’s no guarantee, of course, that plugging into a student-run venture fund will yield better deal flow. In some cases it may even be the other way around. For example, RWI Ventures, a partner to the program, brought the Infinera deal to University Venture Fund for consideration.

One of the University Venture Fund’s founders has recently launched his own fund, Peer Venture Partners. Jared Hutchings got the University Venture Fund off the ground in late 2000 and is now out raising an independent fund that will continue to work with universities. One source pegs the fund target between $50 million and $100 million. Hutchings declined to comment.

Some university venture funds are run by professionals. For example, the University of Maryland launched a $20 million fund in 2003, employing full-time, professional investors. The fund works closely with the school’s business development department to commercialize laboratory work. It also calls on business school students to help do diligence on deals. It typically invests between $200,000 and $2 million in startups in the mid-Atlantic.

There’s no formal process in place for interacting with the students associated with these funds. BR Ventures lists the email addresses of its student participants on its website, for example. The Wharton affiliate of the University Venture Fund does likewise, though the Utah affiliates only list the fund’s administrator. If you’re uncertain about approaching a student directly, try going through each group’s advisory board.

SIDEBAR: University venture funds

BR Ventures

Affiliation: Cornell

Overview: A venture fund staffed by second year business school students at Cornell’s Johnson School. The group hosts an annual business idea competition that comes with a $100,000 prize and is typically the source of its investment leads. Venture capitalists, such as alumnus Eric Young of Canaan Partners, have helped judge the event in the past.

Investments: Genome sequencing company Pacific Biosciences, video conferencing company SightSpeed, biotechnology computing company Gene Network Sciences, biodegradable materials company e2e Materials and others.

Limited Partners: Cornell

Website: www.johnson.cornell.edu/brv/

New Markets Growth Fund

Affiliation: University of Maryland

Overview: Looks to invest $200,000 to $2 million in technology startups in the mid-Atlantic region that will consider relocating to low-income areas. The firm works closely with UM’s business development office and sometimes calls on students at UM’s Robert H. Smith School of Business to help find deals. Jack Biddle sits on the group’s advisory board.

Investments: Video advertising company Lightningcast (sold to Time Warner’s AOL), broadband television company TidalTV, software company Vision Chain and others.

Limited Partners: M&T Bank, CapitalOne, MBNA Corporation, Capital City Ventures, University of Maryland and others.

Website: www.newmarketsfund.com

University Ventures

Affiliation: University of Utah, Westminster College, Brigham Young University and the Wharton School of Business

Overview: Managed by 25 undergraduate and graduate students, the firm has raised $23 million for deals it syndicates with venture capital firms.

Investments: Networking company Infinera (Nasdaq:INFN), energy company Advent Solar, corporate wiki-maker Socialtext and others.

Limited Partners: UBS Bank USA, Morgan Stanley, Bain Capital, Canaan Partners, DFJ, Intel Capital, Thomas Weisel Partners, UV Partners, vSpring Capital and Wasatch Venture Fund

Website: www.uventurefund.com

Wolverine Ventures

Affiliation: University of Michigan

Overview: A venture fund staffed by students at Ross School of Business that typically invests between $50,000 and $200,000 in local startups.

Investments: Dermatology product maker NanoBio, VoIP managed service provider IntelePeer, medical device company Direct Flow Medical among others.

Limited Partners: University of Michigan

Website: www.zli.bus.umich.edu/wvf/

Source: VCJ reporting

4. Tap university-affiliated angel groups

Another source for deals coming out of universities are angel groups that are plugged into various schools. Tapping the newly formed Harvard Angels is a good way to see three promising startups each quarter if you’re an alumnus. The angels typically invest between $100,000 and $250,000 in a promising company. The group backed Internet company Grouply in a $1.3 million Series A investment round in January alongside LinkedIn founder Reid Hoffman, SoftTech VC and others. Meetings are coordinated through the Harvard Club of San Francisco.

In contrast to the Harvard Angels’ formal meetings, Youniversity Ventures offers students at both Stanford University and the University of Illinois at Urbana-Champaign informal “office hours” to pitch startups and get advice. The group consists of Jawed Karim, a co-founder of YouTube, Kevin Hartz, a co-founder of international money transfer company Xoom Corp., and Keith Rabois, vice president of business development for Slide, a startup that makes Web widgets.

Each member of the Youniversity team offers advice from his experience and can open doors to early stage financiers, such as Sequoia Capital, in which all are limited partners. The experience is intended to be more educational than financial. “We don’t want to encourage that mindset where you’re coming in to get accepted or rejected,” says Hartz. “This is more of a hobby for us. Instead of going out and playing golf, we like to work on startups.”

Of course, not all university-oriented angel groups are made up of alumni. Consider the Bluegrass Angels, a group of local businessmen that backs companies coming out of the University of Kentucky. Although there is no explicit relationship to the school, the informal network is strong. One of the group’s co-founders, Leonard Heller, now serves as VP for commercialization and economic development at the school.

University-oriented angels work just as well or as poorly as any other angel investors. Some VCs believe angels tend to overvalue their startups and can be reticent to move forward decisively on key decisions. These may be obstacles too great to overcome with mere collegiate congeniality.

SIDEBAR: Angel groups with university connections

Bluegrass Angels

Affiliation: University of Kentucky

Overview: The group is focused on financing seed stage startups with the potential to bring jobs and prosperity to Kentucky. Although it is not completely focused on commercializing technology from the University of Kentucky, it is certainly involved. One of the group’s co-founders, Leonard Heller, now services as VP for Commercialization and Economic Development at the school.

Investments: Biotechnology companies Allylix and Rhinocyte, software companies Mersive Technologies and RentalHouses.com

Website: www.bluegrassangels.com

Harvard Angels

Affiliation: Harvard

Overview: Made up of 30-50 Harvard Alumni from Silicon Valley and San Francisco that look at about three deals a quarter. A typical investment might be between $100,000 and $250,000.

Investments: Internet company Grouply

Website: http://harvardclubsf.org/events/index.asp

Youniversity Ventures

Affiliation: Stanford University, University of Illinois at Urbana-Champaign

Overview: The three-man group of successful entrepreneurs typically invests less than $250,000 in startups that come to its “office hours” for mentoring.

Investments: Prediction marketplace BluBet.

Website: www.youniversityventures.com

Source: VCJ reporting

5. Connect with non-profits that help commercialize university tech

Why do it yourself when you’ve got someone who will do the work for you? Diving into university laboratories to find innovation can be a little like going to the ocean to find water. So many people are working on interesting new technologies that it’s hard to know where to start.

DFJ Mercury’s Dan Watkins could have trolled more than 60 universities in the southeastern U.S. to find the right technology to turn into a company. Instead, he let The Southeastern Universities Research Association (SURA) bring the right technology to his doorstep.

SURA is part governmental organization, part academic organization and, for about the last five fiscal quarters, part venture capital firm. SURA operates Thomas Jefferson National Accelerator Facility on behalf of the U.S. Department of Energy and spearheads collaborative research initiatives among 64 universities located between Texas, Florida and Maryland.

The non-profit has been around for more than 20 years but only recently started working with venture capitalists to commercialize innovation at its member universities. Its staff sends out solicitations to the schools in the SURA network and asks them to submit mini-business plans, typically no more than five pages long. The SURA staff vets those plans and sends the 30 best to its network of venture capital firms. “We go flush out those opportunities that the VCs might be interested in but don’t have time to go pound the pavement for,” says Marc Oettinger, the group’s program manager.

As part of his regular university visits, Watkins got to know Ravi Bellamkonda, professor of Biomedical Engineering in the Joint Coulter Department of Biomedical Engineering at Georgia Tech/Emory. Bellamkonda had interesting technology around contrast agents used for medical imaging, but he hadn’t found the right way to put it to work.

It took the SURA solicitation for Bellamkonda to formalize his thinking. He later hooked up with technical co-founder Ananth Annapragada, an associate professor at the University of Texas, and Russ Lebovitz, who stepped into the CEO role. SURA formally pitched the company to its VC partners and DFJ Mercury decided to back the company along with Gideon Hixon in a $625,000 Series A round last September.

So far, SURA has partnered with DFJ Mercury, RCT BioVentures, Harris & Harris Group, H.I.G. Ventures, Tall Oaks Capital and Intersouth Partners. It takes a finder’s fee on any investment made by a venture firm and reserves the right to make a small investment out of its own funds. VCs interested in signing up for the group’s quarterly pitch should contact Marc Ottinger (moettinger@sura.org). But act quickly. Ottinger says the group wants to keep its partnership small for now.

SIDEBAR: Advice from the trenches

University deals are difficult and time consuming. Even when you find the right technical founder, there’s no assurance that the deal will work out. “Just because somebody’s a great researcher doesn’t mean that they’ve got the verve to start Amgen,” says John Balen, a partner with Canaan Partners.

But if you absolutely must fight your way through the tangle of departmental politics, source the next hot deal, or wrench intellectual property out of the grip of tech transfer officers, at least take some advice from the experts:

Educate the educators

Dan Watkins, DFJ Mercury: “Intellectual property coming out of universities can be like a leaky bucket: you have to be very active or else the value slips away. We like to get to know the university researcher and what they expect to get out of it. Some of them want just to further advance their research and this is just another source of money to them. They all typically have to learn what founders may expect to end up with if they acquire capital. We do the education, show them the cap-table and try to get them to talk to other entrepreneurs.”

Be patient

Hanson Gifford, The Foundry: “Just be patient and work through it. Intellectual property is important. Figure out what it’s worth to you and then go negotiate. Some of these things take easily over a year to conclude. There are a whole lot of compensation plans that can be created. Looking at different plans can help you find an arrangement that’s mutually acceptable. Most universities have ended up focused primarily on royalties and startup companies are focused primarily on equity and less sensitive to the impact of royalties, so everyone can come away feeling good about it.”

Watch out for corporate sponsors

Todd Kimmel, Advanced Technology Ventures: “Let’s say I’m spinning something out of the chemistry department. Well, whoever is funding the chemistry department has to look at the IP first to see if it’s interesting. I don’t have a problem with that, but I don’t know why it has to take 60 to 90 days. BP [British Petroleum] gave a tremendous amount of money to Berkeley. Stanford, too. Now, when a researcher comes up with a good idea, they may want to work with Todd, but in the back of their mind, they’ll be thinking they had better run it past the guy at BP first.”

Bird-dog the competent

Carl Weissman, Accelerator: “It’s just a relationship process. My prime relationship at Caltech was with Larry Gilbert [director of tech transfer] and at University of Washington it’s Fiona Wills [director of invention licensing]. What these people have in common is they get it. They get what it takes to move an early stage technology backed by venture capitalists to an exit. They’ve been extremely creative in coming up with deal structures that can work with our venture capital syndicate. Once you find them, you have to stay with them. It’s not always the head person. There are individuals at a number of universities that I could confidently tap into and a number that I would never work with.” —Alexander Haislip

SIDEBAR: I’ve got a great idea, now what?

Incubator. Just the sound of the word may call to mind raucous Internet entrepreneurs spinning around in Aeron chairs, burning through your money. Incubators have gotten a second life in life sciences, however. VCs have banded together to provide space, tools and management skill to the most promising medical innovations and researchers coming out of universities. Incubators can cut startup costs and take the time to build relationships and work out deals with university licensing departments.

Consider the case of Dr. Y. Pierre Gobin. The UCLA researcher was frustrated. His university had licensed technology he developed for pulling blood clots out of brains, but the organization that licensed his technology wasn’t putting it to work. The innovation that he and his team had worked on could save the lives of stroke victims, no small contribution when some 750,000 Americans suffer from strokes each year.

When the license expired, Gobin got on the phone looking for someone who could take the idea and run with it. One of his calls landed him in just the right place. He had worked with Mark Deem some years ago and was excited by what his old friend was up to now.

Deem is one of the executives at The Foundry, an incubator backed by Spit Rock Ventures and Morganthaler Ventures. The group works with universities all the time, navigating the labyrinth of red tape to extricate valuable intellectual property. The Foundry connects the university IP with talented early stage managers to build products. Deem ran Gobin’s technology by CEO Hanson Gifford, who loved it. Gifford re-licensed it from UCLA and built a startup around it: Concentric Medical.

“Of every five patients that are getting treatment, two walk out of the hospital without any lasting damage that would otherwise have been dead,” Gifford says. “That’s pretty exciting.” He helped put together a management team and get the technology out of the research labe and into development.

Concentric went on to raise $54 million from venture capital firms such as New Enterprise Associates and Oxford Bioscience Partners. It filed for a $69 million IPO in August 2007 but pulled it in February 2008 opting for a $15 million debt financing. Gobin stayed involved as a board member for several years, received equity for his consulting and invested along with the VCs, Gifford says.

Incubators can be more than just a place to source deals though. They can also save VC firms a lot of money.

Consider the case of Allozyne. David Tirrell, William Goddard and Dee Datta had been working on technology for improving protein therapeutics at Cal Tech. The three Ph.D.s knew that this was an area of medicine that needed improvement and thought their work might be commercialized to improve insulin treatments for diabetics and interferon beta treatments for people with multiple sclerosis.

They started pitching venture capitalists and eventually worked their way to Chad Waite, a managing director at OVP Venture Partners. Waite had a look at the group and thought its technology had promise. He put them together with a veteran biotech executive named Kenneth Grabstein to formalize their pitch and help them develop a reasonable budget for a Series A investment.

Grabstein and the Cal Tech researchers came up with a number. They figured they would need at least $7 million in their first round to get a fully formed company off the ground. The biggest part of the budget? Hiring a CEO and filling out the rest of the executive suite.

But there was still a lot of risk baked into the technology developed in Cal Tech. Plus there was the licensing, which was by no means a done deal.

Waite wanted to play out the scenario a little more before endowing the company with a boatload of cash, so he passed it over to Carl Weissman.

Weissman spends about 10% of his time working for OVP as a venture partner, sourcing deals and sitting on boards. The other 90% of his time is spent juggling as many as five seed stage life sciences startups as the CEO of Accelerator. “You have to get creative and flexible with your time and hope that things don’t catch fire all at once,” he says.

Accelerator is a management company created by MPM Capital, ARCH Venture Partners, Versant Ventures, Alexandria Real Estate Equities (NYSE:ARE) and the Institute for Systems Biology. It was launched in 2003 with a $10 million investment. Amgen Ventures and OVP joined in financing Accelerator’s second fund, a $11.8 million vehicle, in 2004.

Its aim is to utilize the same management, office space and resources to save on costs for the three to five startups looking to prove their worth. The management team Weissman heads focuses on getting companies to value-added milestones as quickly as possible. Signing a licensing deal with a university such as Cal Tech can be one of the biggest steps up, and Accelerator’s management has plenty of experience doing it. Four of the seven startups it has worked with came out of universities or research institutes.

Weissman offered the Cal Tech researchers half of the amount they had asked for. Accelerator would do the Series A for $3.4 million. He worked with Cal Tech’s tech transfer office and came up with a creative way to get the deal done. Then Weissman focused on getting the team to focus on the things that would give them the biggest bump in valuation.

The arrangement worked for Allozyne. “They hit all the milestones we hoped for and we were able to recruit a world-class CEO out of Novartis,” Weissman says. “They got a $30 million Series B and moved out a month ago. Their lead product should be in the clinic in the first quarter of next year.” —Alexander Haislip