Alternative ways to Market Early‐stage Technologies:
How to assist University Spin-off Ventures
Akio Nishizawa Professor, Graduate School of Economics & Management, Deputy Director, New Industry Creation Hatchery Center (NICHe), Tohoku University
Break-through Innovations play
Critical Roles for New Economic Growth in the Knowledge-based Society.
Innovation Cycle
Break-through Innovations
Higher Incomes
High-tech Industries
Quality Jobs
Economic Diversification
Inventions emerged from
University Research might be the Foremost Seeds for Break-through Innovations.
University focuses on Basic Research and Early-stage Technological Development
University
Industry
Commercialization
Source：G. Tassey, The Economics of R&D Policy, Quorum Books, 1997, p.76
Big Gap exists between Invention
and Innovation.
Between Invention and Innovation
Invention
Patent Functional
Business Validation
Innovation
New business/Firm
Viable business
Basic Research
Proof of Concept / Invention
Early-stage Technology Development
Product Development
Production/ Marketing
The Gap, Death Valley, The Darwinian Sea
Innovator‟s Dilemma will happen
in Existing Companies, when they try to bring Early-stage Technological Invention to the Market.
The Innovator’s Dilemma
Cannibalism and/or Sunkcost etc.
University tries to market its
Early-stage Technologies through New Ventures.
University Technology-transfer Strategic Model in the US
Technology Stage Low
Ⅰ. Early Stage
Licensing Strategy
Sponsored Research: 11%
Transfer Destination
Large firms
High
Degree of Technological Resolution
Ⅱ. Proof-ofConcept Equity: 17% Ⅲ. Reducedto-Practice New Ventures
Degree of Legal Risk (vis-à-vis partners)
High
Ⅳ. Prototype
Cash: 72%
Large firms Low
Source：G. D. Markman et al. “Entrepreneurship and university-based technology transfer” Journal of Business Venturing, Vol. 20, No. 2, Elsevier, 2005, P.257
Path to bring Early-stage
Technologies to the Market through University Spin-off Ventures is still narrower than Normal Tech-transfer.
University* Technology Transfer Productivity
$2.51M/per disclosure
(L. Berneman’s Model applied on AUTM Licensing Survey FY 2003)
$38.5 B Research
51.6%
15,355 Disclosures
7,918New Patent Applications 49.6%
29.1%
Assessment
25.6%
3,926ssued Patents
products
Commercialization
4,473Agreements
8.4% 2.4%
platforms
374Start-Ups
*198Universities+Teaching Hospitals + Research Institutes
Newly Start-up Ventures should fill
the Gap to survive for Further Growth by exploiting Outside Resources.
Valley of Death
(AKA The Gap)
Family & Friends
($0-25K)
Passive Informal Investors
($25-100K)
Positive Cash Flow
Active Institutional Informal Venture Investors Capitalists
($1M+)
($100-500K)
Breakeven
Concept
Sweat Equity & Personal Savings
Working Model
Seed Capital
PreVenture Capital
Venture Capital
Sales
Product Introduction Engineering Prototype
Production Prototype
University cannot assist
University Spin-off Ventures only by its-self.
Business and Academia:
Separate but Essential for Value Creation
Business
Development Talent
Capital
Management
Academia
Science Ideas
Intellectual Property
Who takes Leadership to
integrate these Factors Successfully to expedite Further Growth of University Spin-off Ventures in the Region?
High-tech City Model
Academia
Community Talent Technology Capital Know-How
Public Sector
Business
Source: IC2 Institute, UT at Austin
How to create this Model?
Innovation Cluster/ Key for Success University Spin-off Ventures
Integrating Tri-lateral Networks at Incubator Carrier Network
Business Angel Network
IPO/Strategic Alliance
Incubator
Getting Positive Cash-flow
Higher-growth
Entrepreneurs Early-stage Technologies
Business Know-how & Information Network
Academia-IndustryGovernment Collaboration
Platform for Nurturing University Spin-off Ventures by Exploiting Social Capital in each Region
Local Business Community State + Local Governments
U-I Research Center at Research University
Number of University Spin-off
Ventures has grown after Completion of the Innovation Clusters in the Regions around the Research Universities in the US.
Growth of University Spin-offs in the US
450 400 350 300 250 200 150 100 50 0 198093 94 95 96 97 98 99 2000 2001 2002 2003
Source：AUTM Licensing Survey: FY 2003
424
424 401 374
306 275 212 192
294
202
Univ. Spin-offs
77.9
Creative Class with New-types of
Job has emerged through Expanding of High-tech Cities, which are the bases for New Economic Growth in the US.
Changing Employment in the US Industrial Sectors
50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 1940 1950 1960 1970 1980 1991 1999
Creative Class Manufacturing Services Agriculture
Source： R. Florida, The Rise of Creative Class, Basic Book, 2002
High-tech Cities in the US
Seattle
Minneapolis
Madison
Portland Salt Lake City
Silicon Valley Denver
Kalamazoo Ann Arbor Bio Midwest Pittsburgh
Boston
Los Angeles
San Diego
Wichita Albuquerque
Phoenix
Dallas
Atlanta
Bio Capital Research Triangle
Austin
Orlando
Source: E.Bolland, C. Hofer, p.291, BioSpace.com, Clusters of Innovation etc.
Touching upon the Japanese
Current Situation of University Spin-off Ventures.
ＭＥＴＩ
Growth of University Spin-offs in Japan
No. of university Spin-offs
1200
Hiranuma Plan 977
Ministry of Economy, Trade and Industry
1,112
1000 800 600 400 200 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
TLO Law
The Law on Special Measures for Industrial Revitalization
783
594 429
Science and Technology Basic Law
1000startups
287 201
The Law to strengthen Industrial Technology
98
116
148
Source: METI Survey 2005
Number of University Spin-off
Ventures in Japan has grown extraordinarily, but still severe problems to be solved.
Lack of Growth Potential for University Spin-offs in Japan
ＭＥＴＩ
Ministry of Economy, Trade and Industry
While University Spin-offs have been increased in numbers on a nation-wide scale, their sales are far below the average sales of SMEs. The impending challenges to be addressed are to stimulate rapid growth of University Spin-off ventures and to play the role to enhance the economic value of Japan.
(\million)
Sales of University Spin-offs (FY2003）
250
200 150
241
Average operating income of the companies with capitalization of \10 million or more but less than \20 million*
Average operating income of the companies with capitalization of \5 million or more but less than \10 million*
100
103
98.9
90.3 46.7
37.1 48.1
50
18.0
FY‟98
45/48
0
Respondents to the questionnaire No. of companies replied/ No. of questionnaires sent:
FY‟99
63/72
FY‟00
106/126
FY‟01
126/150
FY‟02
118/144
FY‟03
42/121
*Data from the National Tax Administration Agency (FY2002) Source: METI Survey FY2003
Lack of “Best & Brightest” for University Spin-offs in Japan
ＭＥＴＩ
Ministry of Economy, Trade and Industry
University Spin-offs have been suffering especially from the scarcity of human resources necessary for R&D, sales, and marketing. In fact, two-thirds of the University Spin-off Ventures in operation feel lack of high-talented employees, Best & Brightest.
(Number of companies*)
Types of jobs for which talented people are in shortage.
250
200
150
194
184
100
50
87
66 26
Management planning, Assistant to President
97 46
24
Management of intellectual property rights
Legal affairs Accounting and financing
107
23
Marketing Sales and marketing PR, advertising, advertisement
22
Information system
11
Other
17
No answer
R&D
Manufacturing, production
General affairs, personnel
0
*Of the 799 University Spin-offs, 362 respondent companies constitute the parameter.
Source: METI Survey FY2003
“ est & Brightest”, Hightalented Human Resource is the Most Critical Factor for Successful Ventures.
B
Who joins the US High-tech Start-ups／
Accumulating Tacit-knowledge through recruiting Best and Brightest
23%
24%
Post-graduates
14% 15%
High-school J-college Batcheror Master Doctor
24%
Source： E. Bollands & C. Hoffer, Future Firms, Oxford University Press, 1998, p. 167
Who files Patent in Generic Bio-technologies ? (1990〜97)
（％）
80 70 60 50 40 30 20 10 0
76
53
US Japan
30 17 11
Big Firms Ventures
13
Univ./R. Inst.
Source）JPO White Paper FY 2002
Japanese Economy requires Further
Structural Change to create assisting environment for University Spin-off Ventures.
From Etatistic to Triple Helix Model
Etatistic Model Laissez-faire Model Triple Helix Model
Tri-lateral Networks & Hybrid Organizations
State
Academia Industry
State
State
Academia
Industry Academia
Industry
Structural Change
Source) H. Etzkowitz & L. Leydesdorff, The dynamics of innovation: from National Systems and „Mode 2‟ to a Triple Helix of university-industry-government relations” Research Policy, No. 29, Elsevier, P.111
New Challenge for Japan!
Thank you for hearing.