Transition in Tech Transfer: Will MIT Ever Start a Venture Fund?
By the end of June, Lita Nelsen will retire from MIT’s Technology Licensing Office, where she has worked for 30 years. She has been director of the office since 1993 and has seen a lot of things. Nelsen recently sat down with Xconomy to talk about trends in tech transfer and entrepreneurship.
One timely issue: As universities try to figure out the most effective ways to nurture campus entrepreneurship—and reap benefits from it—more institutions are forming their own venture capital funds.
Stanford, NYU, and the University of North Carolina at Chapel Hill are among the schools that in the past few years have launched venture funds to invest in their students’ companies. The University of California system’s $250 million fund, which named Vivek Ranadivé as its leader in December, is perhaps the most ambitious university venture capital initiative in the U.S. to date.
But MIT, one of America’s premier startup and technology engines, has yet to jump in with its own venture fund.
“There’s been no need,” says Nelsen (pictured above), an MIT alumna who joined her professor’s startup after earning a master’s degree in chemical engineering in 1966. “We don’t have a lot of trouble getting decent companies funded.”
MIT’s home city of Cambridge, MA, boasts an enviable cluster of successful tech and life sciences companies and venture capital firms—particularly in and around Kendall Square—that provide much of the talent, money, and expertise that university startups need to get off the ground.
“People say to me, ‘Does MIT have an incubator?’” Nelsen says. “And my classic answer has been, ‘Yes, it’s called the city of Cambridge.’”
MIT could conceivably launch an in-house venture fund in the future, Nelsen says. But administrators would need to address a range of possible concerns before going that route. Among them: navigating conflict of interest issues, clearly defining the mission of the fund, and setting realistic expectations. (There have been a few incubator and fund efforts in recent years, such as the E14 Fund, an independent nonprofit that says it will invest alongside others putting money into startups emerging from the MIT Media Lab.)
“Any internal fund is going to be very complicated,” Nelsen says. “One way or another, this office has been offered investment funds consistently, maybe once every couple of years. We keep saying, ‘No, we don’t need it, and we don’t want to get into the conflicts’” of interest.
She describes a hypothetical scenario in which her office pitches an outside VC firm on investing in a university spinout that didn’t get backed by MIT’s fund. It’d be like saying, “How would you like my leftovers?” she says.
“There’s a negative-select bias there for what we don’t invest in,” she says. “So, better to [create] a level playing field for anybody who wants to play.”
A venture fund could generate revenue for MIT. But any institution starting its own fund must decide if the primary objective is making a return on its investment, or if the goal is “getting companies started that wouldn’t otherwise get started,” Nelsen says.
“You usually get a mixed message if you ask people which it is,” Nelsen says. “And as everybody knows, when you get mixed missions, things get very hard to manage.”
Still, she sees university venture funds like the University of California system’s as a positive development for technology commercialization. “The more money the better,” Nelsen says. “But whether they’re going to pay off is another story.”