A morning breakfast with a Chicago start-up resulted in me going back to the Crain's Chicago Business article I recently read. The term, 'technology transfer tax' seemed to stay in my head these last weeks and I set out to understand they 'why' behind the university + start-up mix.
Marc Andreesen, one of the brains behind Mosaic, which was developed at the University of Illinois, said this in an older PC World interview:
"We took Mosaic as far as we could in a research environment. [There,] we could do new things without worrying about return-on-investment requirements. But you couldn't hire support people for the users. The National Science Foundation doesn't pay for technical support people. So we decided to start Netscape around this idea."
Marc went on to create Netscape and has since contributed millions to Stanford, including $27.5 million to Stanford Hospital.
Return on investment in the university/tech space seems to mean that in order for Marc to create a start-up, taking the technology he created out of U of I to do so, he had to pay U of I a set amount of money and/or promise a certain level of ROI to the school. Why didn't Illinois take the approach that Stanford did with Larry and Sergey? Standford owns the patent on PageRank and Google has an exclusive license to the patent, which creates residual revenue for Standford. It's a win/win for everyone.
Students create interesting idea using university resources. Students create a company and have an exclusive license to use the technology, which they made at their institution. Institution gets bragging rights and extra revenue for the school. For an entrepreneur to promise a large amount of ROI to their university, without even knowing what to promise, I'm not surprised that Marc Andreesen went west.
The latest Crain's piece on 'breaking the technology transfer code' touches on the need for more investors to fund those early stage start-ups, which would enable universities to 'sell' the tech transfer of a start-up to another private company, which would put money back into the pockets of the early stage investor, the university and, of course, the Founder of the start-up.
So where do we go from here?
Silicon Valley's millionaires help fund other millionaires. The Midwest is slowly attempting to get to this level, but it's not there by a long shot. It's understood that VCs prefer to have entrepreneurs a) provide their own capital and/or b) be in business for a few years, showing substantial ROIs, but if you ask me, the Midwest/Chicago is lacking that curious spirit that leads to innovation.
Yes, there are new funds in our midst to help with this very thing, but time and time again, entrepreneurs can't seem to clinch any of those funds for their ideas. No one says asking for money is a simple task and it shouldn't be taken for granted. What is disheartening, however, is the notion of 'We love your idea, it has legs, but come back to us when you have more users'.
After all, I'm sure the business leaders that are covered in the 'Socialite' sections of Crain's Chicago Business, Chicago Social and the newly launched Michigan Avenue can get their heads together to assist in the cause - if they really wanted to.
Then again, what do I know. I'm just a dot com nerd that's trying to make a change through the lens of a computer screen...
Great post. It's interesting because everyone points to this chicken and the egg dynamic of "if we had a couple of successes, then the money would flow in" philosophy. I'd say we have had some successes here, and hopefully more is done to support the ecosystem of tech entrepreneurship. We need it!
Posted by: Emile | September 24, 2008 at 01:49 AM