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U-M’s Ken Nisbet on Bridging the Gap Between Innovation and Economic Recovery in Michigan

Xconomy Detroit/Ann Arbor — 

With an annual research budget of more than $1 billion, the University of Michigan is a leading hub of new technological inventions and entrepreneurship. It’s serving as a wellspring of new ideas and startups that are helping to lead the economic recovery in the Great Lakes State.

Ken Nisbet plays a key role in advancing technologies developed on campus in Ann Arbor to the marketplace. He’s the executive director of tech transfer at the university, and his office often serves as a conduit between the academic inventors and the business community (composed of corporations, venture investors, and entrepreneurs) that can provide the financing and other resources to commercialize technologies.

Nisbet, 60, joined the tech transfer team at the university in 1996 after a career in various engineering and marketing positions at Ford Motor Company, Digital Equipment Corporation, and Nortel. (He also bleeds maize and blue, having received both his bachelor’s degree in mechanical engineering and his MBA from U-M.)

Recently, Nisbet provided some insights about the importance of his office’s efforts in boosting the Michigan economy and some of the exciting technologies under the hood of the innovation vehicle that the University of Michigan has become. It was no big surprise to hear from him how those technologies could impact the healthcare and auto industries. Read on for his story about how one of the university’s health IT startups became a beachhead for a major healthcare products company.

U-M has proven that economic slowdowns don’t hamper the inventive spirit of researchers and entrepreneurs. In the fiscal year that ended in June 2009, during the worst of the recession, the university’s number of new invention reports hit a six-year high of 350. Yet the poor economy has challenged the university to be innovative in how it aids its researchers in commercializing their inventions, due in part to limited capital available to startups, Nisbet explains.

Here is an excerpt from Xconomy’s recent conversation with Nisbet about bridging the gap between university-based innovation and economic growth in Michigan.

Xconomy: Given the severe economic decline in Michigan, is there more pressure on the University of Michigan and your office to help contribute to the state’s economic recovery?

Kenneth Nisbet: Pressure is maybe not the right word. We feel heightened responsibility to do things that will positively impact the regional and the state economy. But I don’t think it’s pressure, per se; we’ve always felt that obligation and responsibility in a positive sense.

X: How does the University of Michigan stack up with other state universities in terms of volume of inventions and economic impact on your home state?

KN: Very well. We’ve always had one of the highest research volumes of a public university, definitely in the top 10. We haven’t always in the past translated that into tech transfer success, but within the last five or six years in particular, we are now well within the top 10 and maybe in the top five. And we measure that mainly by the number of agreements we have, which are technologies being put to use with our business partners and the number of startups we launch ever year. We’ve had a large number of successful startups that have attracted follow-on funding from investors. The economic impact of this is delayed because a lot of this takes time to fully germinate, but we’ve definitely seen both local and national impact with the technologies and the startups that we’ve created.

X: Your 2009 annual report says that your number of inventions reported at the university was the highest its been in recent years. Given the constraints on investment capital in recent years, has it been challenge to find venture capitalists to help commercialize technologies invented at the University?

KN: Oh, sure. It always is, and it was worse before, and the good news is we’ve seen a recovery. But probably about a year and a half ago, we saw a contraction from our business partners who were definitely impacted by the economy and therefore pulled back from the investments that were necessary to commercialize our technologies. That’s one thing to recognize, that we’re not really selling a finished product. We’re selling technology that requires further investment, we’re creating new companies that need further investment, and it’s often years before there are revenue-producing products and services. In a difficult economy, it’s hard for our venture and business partners to follow through and work with us. So we definitely, a year and a half ago, saw a dramatic contraction, as did most of our peer universities.

X: What’s been the university’s strategy for helping inventions find a home at startups or other companies?

KN: It’s a pretty complete array of services. Basically, we try to increase the value and decrease the risk of technologies to make it more likely that someone would make that follow-on investment. We try to provide really great customer service and professional services both to our inventors, because we want them to trust us with the technology that they’ve been working on, and also great service to these partners because we want them to feel like we’re one of their best vendors. When they’re looking for a technology, it’s well prepared, we know what they’re looking for, and we know their investment criteria, and the type of capital they have.

X: How does the university increase the value, and decrease the risk, of a technology?

KN: We do it by looking at the project and looking at the critical path towards commercialization, and try to identify risk areas that may be technical or commercial. And then we physically use what we call gap capital. Some of our tech transfer proceeds are reinvested in reducing the risk of technologies. We are one of only nine universities in the world to have a Coulter Foundation grant for biomedical projects. Those funds are called translational research funds. They are used post-research to answer some of the technical questions around a particular technology or application, and then we apply human talent. We have mentors, volunteers, and our own staff always looking at these areas and trying to identify the critical areas that need to be addressed to make it more likely that something would reach the marketplace.

X: Obviously, many people think of the U.S. auto industry when they think of Michigan. What is a cool invention that engineers at the university have developed for the auto industry?

KN: We do a lot of research with the auto companies, especially GM and Ford, on work process, on emissions, on batteries. There are a lot of connections with particular startups that have close relationships with the auto companies. One new invention that was invented here, and is going to be applied to not only autos but also elsewhere, is a new type of machining fluid that is based on vegetable oil as opposed to crude oil. It’s cheaper, faster, better; it has a bunch of advantages over the traditional type of machining fluid that is used in a number of industries, not just auto. So we’re actually forming a company around that and have, as one of the first target customers, one of the large autos. [Editor’s note: As of yesterday, Nisbet had provided Xconomy the name of the new startup he described above.]

X: Roughly half of the inventions from the university in 2009 were medical technologies. Could you describe one those inventions that people might find interesting?

KN: There’s many. Probably one of the areas right now that is really hot in the marketplace are biomedical devices—engineering technologies that are applied to the medical field. Actually, I go back in time to one that is interesting because it was a combination of IT, health behaviors, and psychology. It was a company that ended up being HealthMedia. So HealthMedia was formed by a professor who had a joint appointment in public health and cancer research. He had this concept that the therapies for addressing basic drugs for things like smoking cessation and weight control were less effective because of the behavioral aspects around it, the motivation to change peoples’ lifestyles and other things that would impact health. So he formed this company and the technology associated with it. It involved not just the drug—it was the behavioral components, health-risk appraisals, support materials, delivery methods of communications, and a number of things that the company put together based on the work here at the university. That’s an interesting example because it’s not your classic drug or research tool or device.

X: What’s the status of HealthMedia?

KN: It’s been very successful. Johnson & Johnson purchased them about a year and a half ago. This is a nice story because HealthMedia is a local company that ended up doing very well. It took a long time. They had about 150 people. Johnson & Johnson was working with them and liked the product and the company so much that they purchased it and continue to invest in Ann Arbor. So it’s staying here with additional investment, and we’re expecting to see additional employment because of Johnson & Johnson’s presence here. Lastly, it’s a great way to get a large, well-known company like Johnson & Johnson into Michigan by having them work with one of our startups and establish a beachhead for further business expansion. [Editor’s note: New Brunswick, NJ-based Johnson & Johnson (NYSE:JNJ) acquired HealthMedia, a provider Web-based health interventions, for an undisclosed sum in October 2008.]

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