A foundation affiliated with Purdue University in West Lafayette, IN, is raising $10 million for a new venture fund that would help the school’s spinouts. That doesn’t seem like much, but Indiana companies received $53 million in total venture funding last year. Assuming Purdue’s spinouts stay local—according to the school, 75 percent of those founded in the past three years are still in Indiana—it would be a significant capital source.
The new Purdue Startup Fund, first announced in February, would benefit startups of all disciplines coming out of Purdue. But the timing is auspicious for Purdue’s recent attempts to catch up to academic peers in the life sciences. It is historically a powerhouse in engineering; the school’s mascot is a boilermaker, a name for a skilled steelworker before it became a bar order for a shot of whiskey and a beer. But earlier this year, the school committed $250 million for facilities and salaries to raise its life sciences profile.
To focus the school’s life science research on commercial potential, Purdue recently hired a pharmaceutical industry veteran, Thomas Verhoeven, to a newly created title: President’s Fellow for Pharmaceuticals Development and Partnerships. Verhoeven, who spent more than a decade at Eli Lilly (NYSE: LLY) of Indianapolis and two decades before that at Merck (NYSE: MRK), says his top priority is to connect researchers across the school’s disciplines—information science, biology, and materials science, for example. “These sciences are all converging,” Verhoeven says. “Interdisciplinary work must become the norm of operation.”
The school wants to give top priority to research that falls into four broad biomedical areas: cancer, immunology and inflammation, infectious disease, and neuroscience. “Even in an academic setting, focus is critical,” Verhoeven says. He acknowledges that pushing academics in certain directions could irk some researchers who are used to unfettered intellectual freedom. “You’d be naive to think there [wouldn’t be] tension,” he says. But he notes the four areas in question were chosen with the input of faculty, not through a “top-down” edict.
One of the school’s life-science success stories helped contribute to one of its existing venture funds. Purdue scientists discovered that the extracellular matrix—the goo that cells live in—contained proteins crucial to wound healing. Purdue spun out the work in 1995 into Cook Biotech, which was majority owned by Indiana medical device firm Cook Medical.
When the parent company bought out Purdue’s interest a few years ago, the cash helped form the life sciences-only Foundry Investment Fund. It holds $12 million and in a few years of existence has invested an average of $200,000 in a half-dozen startups, says Purdue Ventures managing director John Hanak. Cook’s tissue-repair products have rendered one of the highest royalty returns to Purdue for any technology, according to former Cook Biotech president Mark Bleyer, who recently retired and is one of two Cook affiliates on the Foundry fund board. (Purdue holds the other three board seats.)
The Foundry fund—named after a three-year-old Purdue group that helps faculty and students turn their research and ideas into companies—is the main source of seed funding for Purdue life science spinouts.
The new startup fund will likely contribute, too, but it’s unclear how much will go toward biomedical efforts. Hanak, who will oversee the new fund and already manages the Purdue Research Foundation’s other funds, is out raising $5 million from private contributors and as a carrot can use $5 million in matching funds offered by an anonymous contributor.
Hanak says those investors will have a big say in the fund’s direction. They can earmark an area of research for their contributions, but they cannot tab companies. “I’ve already had to say no to a donor” who had a specific company in mind, Hanak says. He adds that he’ll be making his pitch to Purdue’s alumni diaspora, including the well-organized Silicon Valley Boilermaker Innovation Group.
Hanak suspects the fund will end up being life-science heavy, which means a lot of investments that take a long time to pay off. To make the fund self-sustaining, the managers will need flexibility to seek investments with faster returns. “The primary obligation is to make sure funds are deployed into the technologies the donors want, but I’d like to think it doesn’t hamstring us,” Hanak says.
If the startup fund reaches its $10 million goal, it would bring total funds under Purdue Ventures management to $37 million. That would mean more resources to continue Purdue’s startup-building momentum. The university reported Thursday that 27 companies were formed in fiscal 2016 with Purdue intellectual property, up from 24 in 2014 and 25 last year. That’s a notable boost—Purdue spun out fewer than 15 companies per year from 2000 through 2013.
Photo “Purdue student union” courtesy of JojolaE via a Creative Commons license.