Colorado Entrepreneurs' Technical Assistance Program For Startup Companies (CETAP)
Frederick J. Fraikor
Colorado Advanced Materials Institute Colorado School of Mines Golden, CO, 80401, USA Ffraikor@mines.edu
Susan K. Purcell
University of Colorado Health Sciences Center School of Nursing Denver, CO, 80262, USA
Susan.Purcell@UCHSC.edu
Rozalind J. Taylor
Colorado Advanced Materials Institute Colorado School of Mines Golden, CO, 80401, USA Rtaylor@mines.edu
Abstract: The Colorado Entrepreneur's Technical Assistance Program (CETAP) was aimed directly at providing help from a large pool of local academic experts in advanced materials (often worldclass authorities in their field and often with cutting-edge equipment) to very small, emerging technology-based companies in the state of Colorado. (Most of the winning companies had fewer than six employees at the time of their proposal.) These new technology-based companies were the type of industry that communities find most desirable and often spend millions to entice from other states whereas a small seed grant program such as CETAP may ultimately spawn a technology giant in the next century. At the same time, CETAP invigorated the university education goals by providing real industry problems in advanced technologies for faculty and graduate students to investigate instead of merely relying on textbook problems. CETAP awarded US$2.4 million to 28 university/small business teams over a four-year period from 1994 to 1999. The program was initially funded by the U.S. Department of Energy to help mitigate the economic impact of closing a large nuclear defense facility near Denver. It has now been successfully extended to help small scrap tire recycling businesses in the state utilize university assistance to develop products that can use large numbers of waste tires that are rapidly accumulating in the United States. Keywords: Entrepreneurs, university/industry partnerships, startup businesses, technology transfer.
1. Background
In 1993, the US Department of Energy (DOE) announced that it would permanently close the Rocky Flats nuclear weapons production plant near Denver. Employment at this facility was approximately 8,500 employees who earned US$300 million annually and generated an estimated 19,000 direct jobs in the region with an additional US$200 million in goods and services purchased each year by the plant. Responding to the threatened loss of a major economic force, local surrounding communities organized a coalition termed the Rocky Flats Local Impacts Initiative (RFLII) to develop and implement strategies that would help mitigate the economic impact of closure. One of the vital aspects of the long-range RFLII plan was a critical need to create opportunities that would diversify and shift the economy of the ten surrounding counties away from their dependency on defense spending.
Recognizing this and coupling that factor with the rocketing changes in technology emerging from research both in local universities and entrepreneurs based in the area, a task team formed by RFLII concluded that startup companies emerging in fast-growing sectors such as telecommunications, biomedical, advanced materials, manufacturing, and environmental technologies would be an opportune target and timely focal point for growth assistance [1][4]. However, one of the dilemmas facing a startup business based on new technology is the fact that most capital venture firms want to enter at the point when an invention is ready for production and marketing. Typically, embryonic companies do not have the cash resources to hire additional expertise or consultant research necessary to develop their intellectual property into a commercial, competitive product. Nor do most entrepreneurs want to give away a substantial equity portion of their intellectual property at this early stage to purchase the engineering development assistance necessary to shape their idea into production readiness. They can however, provide one valuable resource, namely their time and enthusiastic energy. Investigators at the Colorado School of Mines devised an innovative program, the Colorado Entrepreneurs’ Technical Assistance Program (CETAP), to help RFLII address this issue. They understood that the research universities in the area possessed a vast amount of expertise in the designated technologies, often with very unique, expensive equipment that could be very relevant and useful to the entrepreneurs and that CETAP could match these entrepreneurs and university investigators in symbiotic partnerships. The Colorado Entrepreneurs’ Technical Assistance Program was one of the pilot projects funded with an initial RFLII grant of US$300,000. The thrust of CETAP was to fund joint proposals between academic investigators and emerging technology small businesses (fewer than 25 employees) with up to US$75,000 for business-directed university technical consulting assistance to accelerate the development of a commercial product or technology-based service for the emerging small business partner. The grant provided funding for top-notch faculty and their students to work on the technical problems faced by the startup company. In turn, the company was required to provide in-kind, matching resources to the project. Companies had to be located within a 10 county geographical area surrounding the Rocky Flats Plant and be focused on one of the emerging technology areas desired by the RFLII community organization. While RFLII did provide retraining funds, assistance with business plans and other funding for the usual kinds of startup businesses such as family restaurants, CETAP was designed to be their high-risk, long range program focused on technology based companies.
CETAP was administered by the Colorado Advanced Materials Institute (CAMI), a consortium of local industry, research universities, and state government under the auspices of the Colorado Advanced Technology Institute (CATI). CAMI assembled an Advisory Board of leaders from various segments of the Denver Metro Community and the Department of Energy, co-chaired by the CAMI Director and a RFLII representative. The CETAP Board developed appropriate proposal criteria and the CAMI staff issued a Request for Proposals (RFP) on September 6, 1994. Sixteen joint proposals were received, covering diverse technologies ranging from agriculture technology to new titanium alloys for sports applications. Seven semifinalists were selected for oral presentations to the Board. In January, the Board selected four outstanding joint proposals for funding under this pilot program: At the conclusion of this pilot CETAP program, two of the companies reported that they were significantly aided by the CETAP assistance and were underway to commercial products and success. A third company had made progress toward a product but still had technology development work to be completed. The fourth entrepreneur died of cancer shortly after the performance period of the project.
The success of the RFLII pilot CETAP project resulted in CAMI winning a separate competitive grant from DOE at Rocky Flats to continue the program in 1996 in a slightly modified form to accommodate Post-Cold War DOE technology needs. Fourteen grants were awarded to joint university/company teams with investigators from four Colorado universities. Thirteen of these successfully completed their joint projects on schedule in 1997. CETAP III and IV were funded through RFLII and again open to all RFLII target areas of technology. Thirty-two proposals were received for these two solicitations ranging from a proposed new delivery system for AIDS vaccines to arerodynamic research for a supersonic business jet aircraft. Ten proposals were selected for funding, five each in 1997 and 1998. The final CETAP program was completed on schedule and within budget in March 1999 with commendations from DOE and RFLII Board and staff. RFLII also completed its tasks and phased out its operations as scheduled in 1999. A total of 28 university/small business teams were funded under the four competitive solicitations of CETAP I - IV. The US$2,680,000 program involved 24 different technology-based startup companies and 24 professors from all four major research universities in Colorado. (University of Colorado at Boulder, Colorado State University, Colorado School of Mines and the University of Denver.) Thirteen companies had web sites as of Nov. 1999. The program received considerable favorable reviews in the local press [5]. The successful concept of CETAP is now being applied to a new state-wide program, Tire Recycling Technology Assistance Program (TIRE-TAP) whereby university expertise is being applied to help small business tire recyclers develop new uses and products for scrap tires. This program is also being administered by CAMI and is funded from revenue generated by a fee on trade-in used tires. CAMI is now operating under the auspices of The Technology Advancement Group (TAG) of the Colorado Commission on Higher Education (CCHE).
2. Scope of CETAP
Eligibility Joint proposals were accepted from partnerships established between businesses emerging from Rocky Flats or the Denver Metro area and Colorado academic institutions of higher education, in which the emerging business met the following criteria: A. should be organized for profit and have at least 51% of voting stock owned by U.S. citizens if it is not independently owned; B. should have no more than 25 employees, including affiliates (raised to 50 employees for most recent ETAP programs); C. should have its principal place of business or startup operations located in the Denver Statistical Metro Area; and D. should have reached a proposal and intellectual property agreement with any of the Colorado academic institutions of higher education. Principal Investigator and Project Manager Each proposal had to have one principal investigator (PI) designated from the proposing academic institution to lead the technical assistance effort. No Co-PI’s were accepted. The PI’s primary employment had to be with the academic institution at the time of the award and during the conduct of the proposed project.
Each proposal also had one Project Manager (PM) from the participating emerging business to ensure appropriate guidance for the project. The PM had to have the appropriate management and signature authority to provide matching in-kind support from the emerging business and be knowledgeable in the technical aspects of the project. The emerging business concern and the academic institution were required to provide satisfactory evidence in the proposal that the direction and management of the project would be industry-led and that the technical assistance provided by the academic institution would be monitored and evaluated by the participating emerging business. It was also recommended that all agreements between the emerging business and the academic institution reflect the guiding position of the emerging businesses. Property and Commercialization Rights The Request for Proposals (RFP) stipulated that all patents, copyrights, trademarks (etc.) developed and owned by the entrepreneur/emerging business prior to the initiation of work under ETAP would remain with the inventor. Ownership of subsequent inventions, patents (etc.) developed or resulting from the academic technical support under an ETAP project had to be mutually agreed to in a contract between the emerging business and the appropriate academic institution prior to the initiation of any work under this Program. DOE retained non-exclusive rights per 10 CFR Part 600.33. CAMI and the ETAP Board were not to be considered parties to intellectual property agreements. Evaluation Criteria A 10-member evaluation Board selected for award those applications judged to be of the highest overall merit according to the following criteria: A. Technological Innovation The joint proposal had to demonstrate a high degree of technological innovation such as new ideas, inventions, or novel approaches, and the technical merit of the proposed tasks, technical goals, schedules, feasibility, cross-disciplinary integration, potential for technology leadership, etc. B. Viability of Commercialization and Technology Implementation Plans The proposal had to explain how the partnership proposed to commercialize their technology-based product or service and move the results of the technical assistance into profitable commercial applications. They were asked to describe their commercialization strategy including protection of intellectual property, manufacturing path (in-house, licensing, alliances, etc.), financing, and market and profitability analyses. Established emerging businesses also indicated how the results of this technical assistance would benefit their existing product line and business strategy. C. Experience and Qualifications The proposal had to address the qualifications of the PI and the emerging business partner to complete the proposed project, including the adequacy of the equipment and facilities available and level of commitment from the partnership during the performance period. This section was judged on the viability of the academic resources to provide the requested technical assistance and the likelihood of business success based on the commitment and qualifications of the emerging business partner. D. Anticipated Benefits and Economic Impact The proposal had to specifically address the potential for growth of the emerging business and its economic impact on the Denver Metro Area and Colorado, including utilization of displaced Rocky Flats workers, creation of jobs, etc.
3. Examples of CETAP Teams
1. Professor Zoya Popovic at the University of Colorado teaming with Xertex Technologies, Boulder, CO. Xertex Technologies, in conjunction with Dr. Zoya Popovic of the University of Colorado, initiated commercialization of antennas in the wireless communications marketplace. Through the CETAP program, Xertex had the ability to use the facilities, equipment and talent available at the university. Dr. Popovic and her graduate students provided the necessary expertise to two young business student entrepreneurs for the development of a prototype Broadband Quasi Microstrip Antenna (BQMA). Xertex identified potential markets for the BQMA including: Personal Communication Services (PCS), Direct Broadcast Satellites, Cellular Phones, Wireless Local Area Networks (LAN) and Wireless PBX systems. Market research by the company indicated the optimal solution for short-term cash flow was to focus efforts into the recently emerging wireless LAN (WLAN) markets. Xertex completed a wall-mounted WLAN prototype that possessed superior performance to existing competitive products. This prototype was designed to be wall-mounted and located near any LAN personal computer or substation. Benefits of the WLAN include the ability to quickly reconfigure or move a LAN without having to rewire the network system. Potential cash flow generated from the WLAN market funded further antenna development. Xertex is now a division of Centurion Wireless Inc. developing new antennas for the future. 2. Professor Douglas McKnight at the University of Colorado teaming with ColorLink, Boulder, CO. The goal of this project was to replace mechanical color wheels in field-sequence color generation systems with a solid state, high-speed, high-throughput, electro-optic, tunable filter technology. This technology had the potential to make a huge impact on the multi-billion dollar color display and digital photography markets. Solid-state tunable optical filters also had immense broad-based applicability in scientific instrumentation, wavelength multiplexed all-optical networks for telecommunications, product inspection, digital color printing, multi-spectral imaging for environmental monitoring, eye protection and medical diagnostics. ColorLink wanted to expand into 3”x3”, 4”x4” and 5”x5” sized filters to address the need for high resolution displays and color capture systems for applications in avionics, medical diagnostics and photogrammetry markets. In addition, CETAP funding was needed to assist on novel electronic drive schemes for switching liquid crystals with minimal degradation. The project was successful and in January, 2001, RCA unveiled a new Liquid Crystal on Silicon, High Definition Television set utilizing a ColorQuadTM optical prism designed and manufactured by ColorLink. 3. Professor Brajendra Mishra at the Colorado School of Mines teaming with ITN Energy Systems, Inc,. Wheatridge, CO. ITN Energy teamed with Dr. Brajendra Mishra of the Colorado School of Mines (CSM), to develop thin-film storage batteries that could be attached to the company's thin-film solar cells. Such a combination would allow the batteries to be charged and discharged on demand over a large number of cycles and make the solar power feasible under all conditions. This project was focused on the development of specific anodes for the thin-film batteries. Lithium anodes were felt to be of particular interest from the view point of battery efficiency. However this required the use of special controlled atmosphere glove boxes which the small company did not have but were available at the Colorado School of Mines along with the expertise to collaborate on the deposition of thin-films of reactive metal and subsequent analytical techniques and equipment.
By establishing a capability to produce thin-film lithium cells at a pilot-scale level, ITN would also be able to attract potential customers in such product markets as Radio Frequency Identification (RFID) Tags, integrated circuit chips, medical implants and Flexible Integrated Power Packs (FIPP). Today, ITN Energy Systems has expanded into a second facility in Littleton, Colorado and has a solid state-thin-film-rechargeable-lithium battery termed "Lite*StarTM on the market. 4. Professor JoAnn Silverstein at the University of Colorado at Boulder teaming with Nitrate Removal Technology, Golden, CO. The purpose of this research team was to develop a reliable method for rapid startup of denitrifying bacteria in packed tower biofilm reactors such as those manufactured by NRT for denitrification of drinking water. Commercially, the problem of nitrates in water was evident, particularly in rural areas with runoff from fertilized fields. The first part of the problem was to develop a protocol for rapid enrichment of denitrifying bacteria populations in material from an unpolluted natural environment such as stream sediment or "clean dirt." This was important because the enrichment is optimized by using local material at the site of the reactor but at the same time insuring that the biomass was free from pathogenic organisms. The second challenge was to induce attachment of the denitrifying bacteria to the plastic packing in the biofilm reactor. The research was successful and a BioDen TM process patented. Nitrate Removal Technologies completed the first commercial installation in the United States of a biological denitrification unit in the township of Coyle, Oklahoma in 1998. Under the trademark BioDen, the company projected gross revenue of US$7 million within three years and targeted a market penetration of 25% for sales of US$100 to 200 million in ten years. 5. Professor Paul Todd at the University of Colorado at Boulder teaming with FeRx, Inc, Aurora, CO. Magnetic Delivered Therapeutics, Inc, (now named FeRx Inc.) was developing a proprietary magnetically susceptible, micro-particulate drug carrier that could selectively target chemotherapeutic drugs to malignant sites. Preliminary tests had already demonstrated the extremely advantageous pharmacokinetics of this product. The final major hurdle to overcome before its entry into clinical trials was the development of a processing method for particles of uniform small size. This research was to develop and demonstrate a process to further separate and more finely characterize this particulate carrier. By using an inclined settler developed at the University of Colorado, Boulder, University researchers were to develop and demonstrate new process to: 1) Classify single raw iron particle and refine the final product size distribution by inclined sedimentation at laboratory scale, 2) Investigate the augmentation of the inclined settling process using an applied magnetic field, and 3) Test scaling laws and design a pilot-scale inclined separator. The company filed its IND (Investigative New Drug) status with the U.S. Food and Drug Administration and began animal tests. FeRx Inc. has moved into new headquarters at the Fitzsimons Biosciences Center in Aurora, Colorado. The company has also announced that it has begun Phase I/II clinical trials in the U.S. and China on clinical patients with liver cancer. 6. Professor Thomas Cathey at University of Colorado teaming with CDM Optics, Inc., Boulder. This proposal involved an industry-led project to dramatically improve the quality of images from digital color still and video cameras. No digital color still or video camera sold at the time, from US$250 to US$28,000 models, could accurately image the fine details of a scene due to limitations of current anti-aliasing optical filter technology. (Aliasing is a phenomenon that results in severe degradation of color images under certain conditions.) The goal of this CETAP project was to fabricate a prototype anti-aliasing optical filter that could be manufactured cheaply by CDM Optics, Inc. in Boulder, CO. The research was successful.
4. Conclusions
A. CETAP proved to be an effective, innovative way to implement RFLII long-range economic development goals by uniquely coupling university expertise to benefit emerging technologybased entrepreneurs in the Denver Metro area. B. Providing startup companies with the technical expertise of university faculty, graduate students, and equipment was considerably more cost-effective than providing comparable services from the private sector. C. The use of an Advisory Board of experts and leaders from the Colorado business community, academia, and government was a key factor in establishing solid, realistic criteria for awards and selecting winners from the proposal teams. D. Beneficial results from assisting high-tech startups are not normally immediate or even short range. As might be expected from a high-risk, long-range program, several of the companies failed shortly after the completion of the program. However, the successful few have already contributed to the economic health and to the advancement of technology in their fields. E. Risks associated with these startup companies were generally found to increase significantly the more the company relied on a technical breakthrough in the Research and Development phase. In all instances, testimony from the participants was that ETAP provided very crucial technical assistance from world-class experts and advanced equipment at Colorado universities that would have been otherwise unavailable to these tiny companies. Several of the students working on CETAP projects have been hired by the startup companies after graduation. Based on our experience, it is reasonable to assume that a similar partnership program could be established between universities and emerging companies in other industrialized countries [2][3].
5. References
[1] Butterfield, D. (1997) Rocky Flats Local Impacts Initiative Memorandum, Arvada, Colorado USA, Feb. 18. [2] Fraikor, F.J., Purcell, S.K., and Taylor, R.J. (1999) "Entrepreneurs' Technical Assistance Program (ETAP), A successful partnership between universities and startup businesses." Industry & Higher Education, pp. 61-64, (Feb). [3] Fraikor, F.J., Purcell, S.K., and Taylor, R.J. (1997)"Entrepreneurs’ Technical Assistance Program (ETAP): A Unique University/Startup Business Partnership, presented at Techno ’97, St. Petersburg, Russia, July 8. [4] Heaton, T. and Butterfield, D. (1994) The Rocky Flats Community Economic Conversion Plan, Rocky Flats Local Impacts Initiative, Arvada, Colorado USA [5] Lewis, A. (1997) “Positive Fallout: Entrepreneurs Generate Hot Ideas from Rocky Flats,” Rocky Mountain News, Denver, Colorado USA p. 1G, 12G-13G (May 25).