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Startups, Jobs, Economic Impact: An Analysis of Commercialization at UW

Xconomy Seattle — 

Ever since a landmark law passed in 1980, universities have been able to reap financial rewards from federally funded technologies they develop by patenting them and selling licenses to companies large and small. Some universities have hit pay dirt, such as the University of Wisconsin with its anti-clotting drug warfarin and the University of Florida with Gatorade.

But tech transfer is a tough business. Most university commercialization efforts are actually unprofitable.  And even universities that have produced lucrative technologies can find themselves struggling when the patents run out. That’s why the business of commercializing university inventions is changing across the country. One trend has been a greater emphasis on nurturing startup companies based on university technologies. Universities want to show their communities that they are economic engines, creating new, high-potential companies and lots of local jobs. Another trend is encouraging entrepreneurship and innovation across campus and beyond. But funding these activities remains a challenge at a time of diminished state support for higher education and stiff resistance to tuition increases.

The University of Washington is confronting all of this at once. Its biggest technology licensing success—which returned almost $354 million over the last 24 years, helping pay for research and the UW’s commercialization activities, among other things—went off patent earlier this year. With goals of transferring university innovations to society, as well as increasing revenue and prestige, the university has been stepping up its efforts to spin off new companies. That accelerated when new president Michael Young challenged the university in 2012 to double its startup output.

So how is the UW doing?

Inslee at the UW startup celebration

Gov. Inslee at the UW startup celebration in July.

By some measures, the university appears to be hitting its commercialization stride. It recently announced a record of 18 new startup companies in the 2014 fiscal year.

But a closer look at the UW’s public statements reveals that the commercialization success may not be as impressive as the university claims. For example, the UW could provide little to substantiate statements that its startups have an historical average of 60 employees, though commercialization leaders say they are undertaking a larger study of economic impact now. Also, a committee convened by Young to advise him on commercialization policy reported to him last fall that efforts to generate more revenue from university intellectual property (IP) may be driving up transaction costs for licensing, thus hampering technology transfer and hindering startups.

The report, which was not released to the public, found systems that “inhibit commercialization,” a view that is at odds with the headline-grabbing startup numbers coming out of the UW in the last two years. It also called for a change in the culture of the institution to better encourage commercialization, something the UW appears to be taking to heart. (The full report can be found at the end of this article.)

And those startup numbers themselves raise thorny questions.

Xconomy examined the 18 new companies the UW said it “launched” last year and found that at least two-thirds of them had filed business registration paperwork prior to the start of the 2014 fiscal year, two of them several years earlier. The UW counts all of these as its own startups because they did license at least some technology from the university in 2014. Such claims follow the guidelines of the Association of University Technology Managers, which tracks commercialization through surveys of institutions across North America.

But the UW has failed to point out this distinction. Young asserts that this way of tracking startup activity actually results in a more conservative count. It also leaves out some companies that most people would consider UW startups.

Critics see signs that the startup numbers have been inflated at a time when the university is looking for outside support for its commercialization operations and new ambitions. Young vehemently denies this, insisting that it has little to do with money.

Still, it’s important to have a clear understanding of how the UW counts its startups and their economic impact at a time when scarce public funds—as well as private contributions—are being sought to support new and existing commercialization programs.

In an interview with Xconomy, Young acknowledged that the committee report points out some areas that need improving. (The full interview is here.)

“In the last few years we’ve made real strides,” Young said. “You can’t help but look at the data and say anything else. When you lead the nation in the number of licenses and active technology under license and when you’re in the top handful of universities in terms of spin-off companies, you’ve got to be pleased. But my view is you never should be so pleased, you’re not looking to improve.”

Vikram Jandhyala is charged with making improvements, as well as an ambitious agenda of initiatives around commercialization, entrepreneurship, and innovation that would reach far beyond the current UW technology transfer office, known as the Center For Commercialization (C4C). Jandhyala, a UW professor of electrical engineering and an entrepreneur himself, was appointed this summer to the new position of vice provost of innovation. His goals include exposing undergraduates across the campus to new resources and education models meant to encourage entrepreneurship, and supporting redevelopment of the University District neighborhood, which UW leaders envision as an “innovation district” where technology companies would tap university expertise and provide opportunities for students.

These broader ambitions require more funding, however, at a time when the university is staring at the bottom of its once-in-a-generation technology licensing jackpot.

The Hall patents: A rare home run

In the early 1980s, UW professor Benjamin Hall discovered a method for producing recombinant proteins in yeast. Patents around this discovery created an important building block of the biotech industry, licensed by GlaxoSmithKline for its hepatitis B vaccine, among others. The Hall patents are on the scale of other technology transfer outliers like Gatorade, warfarin, and Stanford search technology licensed by Google, that return hundreds of millions of dollars to the universities where they were invented. Former UW vice provost of commercialization Linden Rhoads referred to the April day that the Hall patents expired as “Black Tuesday.”

The Hall patents generated royalties of $39.5 million in the university’s 2013 fiscal year, or about three-quarters of the total revenue the UW received from technology commercialization, according to a C4C financial summary. That’s a relatively small sum in a nearly $6 billion university budget, which includes the health system, UW Medicine, and $1.2 billion dollars in federal research funding. The UW consistently ranks at or near the top among public university recipients of federal research money.

But these royalties—unlike tightly focused federal research dollars—are the primary source of financing for the patent lawyers, technology managers, grant writers, business incubator space, and other C4C employees and programs that help usher UW innovations from campus laboratories to companies through licenses and the formation of startups. A large share of royalty revenue also flows back to the researchers and departments that produced the innovations—providing an incentive for commercialization—and funds other university research. Money from the Hall patents may continue to arrive in the coming year as licensees sell off inventory made while the patents were still in force. But then what?

‘Enormous results, but not for free’

On a beautiful Seattle day in late July, Rhoads, who headed the C4C for the last six years, stood before hundreds of invited guests, including Gov. Jay Inslee, and explained how the fiscal 2014 startups benefitted from a suite of programs developed during her tenure and paid for largely by patent royalties.

“I want to share a few facts about these 18 startup companies for the benefit of other UW supporters here, members of our Washington legislature and their staffs, because it’s important that we all recognize that the results we’re here to celebrate, which are so important for our state, don’t spontaneously occur, but require investment by our university and our partners,” Rhoads said.

Two-thirds of the 18 startups counted in fiscal year 2014 received so-called commercialization gap fund awards that allow researchers to continue work on innovations beyond the scope of federal research funding. The awards enable researchers to prove concepts, design prototypes, and test markets in hope of attracting private investment. Four of the 18 benefitted from commercialization post-doctoral fellowships, a mechanism to allow PhD graduates to continue working on innovations with market potential after other funding runs out, Rhoads said.

Lab space in the New Ventures Facility.

Lab space in the New Ventures Facility.

Half of the companies are led by CEOs introduced to them through the C4C’s entrepreneur-in-residence or other programs. Six companies have been housed in the New Ventures Facility, a C4C-run business incubator in Fluke Hall, where they enjoy flexible leases on office and laboratory space as they make the transition from academic projects to stand-alone businesses.

The C4C now wants to expand the incubator. That will require “much more significant investments over the next couple of years if we are to create the kind of compartmentalized wet lab space, for example, that our life science and materials startups really need,” said Rhoads, who is now a special advisor to Jandhyala. (The UW’s fiscal year 2014 capital budget—PDF—pegs the cost of improvements to Fluke Hall at $31.5 million.) “We’re working with university leadership and many of you in the donor community, and among the legislators, to consider whether another building, in what is rapidly becoming the innovation district outside the university, is financially feasible. Incubation space close enough to our spinout faculty founders to keep them engaged is one factor that’s going to help our startup companies, our spinouts, not only be numerous, but be very impressively successful.”

Rhoads

Rhoads

Later that day, Rhoads stood in a New Ventures Facility room packed full of C4C supporters—members of the local entrepreneurship and technology community whom she credits with improving the quality of startups emerging from the UW, in addition to the quantity—mingling with startup founders. I asked her about funding for the C4C, which had a budget of $10.5 million in 2013, about 60 percent of which came from Hall patent royalties.

She pointed to the university’s equity in startup companies and its portfolio of licensed technologies. “We did see an uptick in non-Hall patent revenue, but it will still take some number of years to rebuild, so the community will have to think about the cost of commercialization,” Rhoads said. “I think the good news is that we’ve been able to show that even at the current level of funding, we’ve produced enormous results for the region, but not for free.”

New goals, new business models

Vice provost of innovation Jandhyala, a former chair of electrical engineering who spun a company out of UW, provided more nuance in subsequent interviews this summer.

He said that the UW has seen the end of the Hall patents revenue coming and has prepared. “It was planned for,” Jandhyala said. “There was money put aside for smoothing the transition. But it’s time to look for new business models. Honestly, whether we had the [Hall] patents or not, just in terms of the service we want to do, it’s time to look for new business models.”

In addition to continuing traditional tech transfer functions at the Center for Commercialization—which is likely to see a name change—Jandhyala’s job is to spread entrepreneurship and innovation across the campus beyond the traditional strongholds like business, engineering, and computer science, and to undergraduate and master’s students.

“Obviously, we know that the old way of doing tech transfer is going to change,” Jandhyala said. “Many universities are in a position where they had one or two amazing big hits, in our case the Hall patents, which funded a lot of what we were doing. And very often the tech transfer offices were formed to manage this kind of a windfall. The role is completely different now. The role is how do we educate students to think differently from, ‘I’m going to be a cog in the wheel of a big company.’ Now it’s about, ‘I’m going to do a startup. I want to be an innovator.'”

Specific plans are still taking shape, but ideas include things like a maker space for students in Maple Hall, one of the new dorms being built along Campus Parkway; bringing more entrepreneurs to campus to provide training; a greater emphasis on experiential and project-based learning; and just-in-time education models.

Jandhyala sees C4C using its expertise and network for these and other initiatives—“disruptive experiments,” he called them—to supplement existing programs, and to fill gaps, particularly where multiple disciplines come together, such as in e-health and urban science and engineering.

“All the new ideas come at the intersection of old areas,” he said. “How do we get that mix going? And one way is certainly to have these cross-curriculum activities. So this is startups [that] students might do on their own time. If it’s in the dorm, they can go use that maker space. And the just-in-time education might be a two-hour online lecture followed by a day of hacking somewhere.”

Jandhyala

Jandhyala

There will be “alternate ways to support this enterprise,” he said. That could mean everything from different models for revenue sharing among departments to cultivating closer ties to alumni entrepreneurs and major technology companies including Google, Microsoft, and “hopefully Amazon as well,” Jandhyala said.

The UW is also likely to seek more state funding, not necessarily as a direct replacement for the Hall patent royalties to fund C4C, but for this broader set of goals, including ambitions for fostering an innovation district in the neighborhood west of the main Seattle campus. The neighborhood is being connected to the rest of the city by new light rail service due to be completed in the early 2020s, and has already seen the arrival of companies such as startup incubator Techstars Seattle in the former law school building now known as Startup Hall.

Young said that a tighter integration of commercialization and innovation with the university’s “foremost core value”—learning—will be a boon to technology transfer.

“I want to create an opportunity for every school around the university to have the resources: if they want to run innovation classes and entrepreneurial-oriented classes or curricula, if they want to have competitions, if they want to have ways in which business students link with engineering students, link with law students, link with students from the college of environment—I want to create resources that help that happen seamlessly, so the students become much more the centerpiece of this,” Young said, adding that this is “our next step.”

Focus on startups

Even before Young’s arrival, the C4C had begun to focus more on startups. In a 2010 strategic planning document, one of the unit’s stated goals was to spin out “significantly more high-value start-ups.” The plan offers this additional context (PDF): “Technology transfers offices traditionally focus on less resource-intensive, less economically risky licensing of technology to (often large, and out-of-state) existing companies. C4C focuses resources on attempting to increase the number of companies spinning-out of UW around UW innovations/IP. We see start-ups as having a greater potential for creating revenue, good will, and reputational gain [to] UW and WA.” The strategic plan adds that C4C’s contributions to the UW include increased gifts from “successful faculty founders,” research funding, and “increased political support resulting from UW generating jobs that stay in WA.”

Startups reported by UW

In February 2012, about six months after Young arrived from University of Utah (where he had made commercialization and startup formation a priority), he challenged the UW to double the number of startups it produced over the coming three years, from an average of 10 a year to 20, according to a UW news release. “We are today committing ourselves to over the next few years doubling the number of disclosures and companies that will be spun out of the technology of this university,” Young said at the opening of the New Ventures Facility.

So far, Young says he’s pleased with the C4C’s results. The 18 companies UW announced in fiscal 2014, ending June 30, follow a record 17 announced the year before.

The C4C has trumpeted other technology transfer wins—leading the nation in active technology licenses and doubling the number of patents filed on behalf of UW researchers—but the headlines have been all about the startups.

I asked Young why startup formation is such a high priority. After all, universities have several avenues for moving the knowledge they generate into practical use beyond campus, including the training of students, publication of research in academic journals, and industry-sponsored contract research and consulting. A 2010 National Research Council study of university tech transfer on the 30-year anniversary of the Bayh-Dole Act—which gave researchers, and ultimately universities, title to inventions made in the course of federally funded research and launched the modern tech transfer era—listed eight such mechanisms, including the licensing of university-owned intellectual property to startups and existing businesses. “All eight mechanisms, often operating in a complementary fashion, offer significant contributions to the economy,” the authors of the study, Managing Intellectual Property in the Public Interest, found. “The licensing of IP, although not the most important of these mechanisms, is more often discussed, measured, quantified, and debated than all other mechanisms combined.”

For Young, though, startups serve as a useful indicator to track the UW’s myriad commercialization activities.

“It’s as much as anything else a barometer of the way in which you are providing services to support the faculty and students who want to commercialize something,” Young said. “Are we linking our professors up with the venture community in an appropriate way? Are we helping our students develop the skill set they need to interact with the technology on the one hand and the business community on the other to get it out? Are we providing services that help with the IP protection? Are we creating a smooth enough glide-path out of the university that the transaction costs are not so debilitating that you can’t do it?”

The UW also uses startup formation as a way to keep score with other universities. Provost Ana Mari Cauce told the audience at the July startup celebration that the combined total of 35 startups over the last two years “puts us at No. 1 in the country,” and the UW’s news releases draw comparisons to MIT, University of Utah, and University of Pennsylvania. No doubt, this is a feather in the cap for the UW as it competes for sought-after entrepreneurial researchers, who are attracted not only by a university’s academic rigor, but also its support systems for transferring research from the laboratory to society.

Inslee, Cauce, and Young talk at the startup celebration.

Inslee, Cauce, and Young talk at the startup celebration.

Said Rhoads at that event: “Our entrepreneurial faculty need to know that UW can and will invest in the potential of their good ideas. That’s part of what we hold out as making UW the best place for the world’s most important translational researchers to choose as the place to come and innovate, and that’s the part that requires a budget.”

How to count to 18

So startups do matter, both for the university’s national reputation and as a way to demonstrate local economic impact. But the way universities count their startups is perplexing to say the least, and falls short of communicating a clear picture of that economic impact.

A case can be made that by counting university startups using the guidelines of the 40-year-old Association of University Technology Managers (AUTM), universities actually understate their role in new business formation. But a case can also be made that these numbers—which AUTM does not attempt to independently verify—are open to manipulation.

According to guidelines for responding to the AUTM licensing survey in 2012, a university startup is a new company that was dependent on licensing the institution’s technology for its formation. The startup should be counted by the university in the year it licenses the technology, not the year it was formed, an AUTM spokesman said in an e-mail.

When the UW says: “University of Washington launched 18 new start-up companies in the past fiscal year based on UW research technologies, surpassing last year’s previous record of 17 spin-outs, and making FY14 the UW’s single most productive year for start-up formation,” it actually means: 18 companies formed at some point in the past to commercialize UW technologies took licenses in the 2014 fiscal year. While most of the companies were formed no more than six months prior to the start of the fiscal year, at least two had corporate registrations dating back more than three years.

Xconomy attempted to contact all the startups to confirm that they did indeed sign a license to a UW technology in fiscal year 2014. Each of the eight that responded said they did; C4C says all 18 did take a license.

The UW’s public statements about startup formation over the last two years have made little if any effort to point out the nuanced AUTM definition of a startup. The C4C told Xconomy, “For a general audience, we have felt that a discussion of AUTM standards would distract from the news at hand.”

I asked Young whether the public at large understands this nuance.

“We certainly don’t intend to be misleading about that,” he said. He added that the numbers smooth out over time, and what’s important is the long-term trend. Moreover, this way of talking about startups seems to keep with the practices of other universities that report commercialization activities to AUTM.

“I’m a little less concerned when they actually signed the incorporation papers,” Young said. “I’m really concerned with when they became a business. And that’s when we try to count from. … A lot of companies incorporate and set themselves up and then never do anything. You can look at some universities where you’ve got quite a few companies, but they’re really, honestly speaking, still shells. Now maybe they’ll come to a business and maybe they won’t. I’m more interested in counting when there actually is a sense there’s a business there as opposed to a shell.”

He adds that there may well have been half-a-dozen more companies that incorporated in the last fiscal year around the university, but haven’t yet licensed a technology and so aren’t counted (more on that below).

“By counting it that way, what we really are doing, I think, is trying to actually be conservative—not particularly aggressive—in counting,” Young said.

A local economic impact?

The UW also touts the local economic impact of its startup companies, noting as Young did in an August blog post, that “UW startups also average 60 employees per company, increasing the opportunities for students to find a job after graduation. ” None of the 2014 UW startup companies that responded to Xconomy’s questions reported more than 10 full-time employees, and most consist of just the founders, some working part-time.

Of course, startups are almost by definition small, and most startups fail. Young said in the interview that the average employee number is over the long-term, and added the caveat that including successful and failed startups, “the numbers might look different. But of the ones that have survived, it looks like the average is about 60 employees.”

When asked for examples of UW startup companies with 60 or more employees, the C4C said, “accurately and comprehensively surveying startup companies is a significant undertaking. We have not done this for UW startups; instead, when Utah performed this analysis in 2012, we incorporated their conclusion as analogous to what comparable regions would experience.”

And what about a company’s location? Presumably, UW startups that establish themselves outside of Washington would not have the same local economic impact as those located here.

Two startups among the UW’s 18 last fiscal year are based elsewhere. TaggPic, which developed technology to spot landmarks and other features in digital photos, was founded in Ithaca, NY, where a UW computer science PhD had moved to become a professor at Cornell University, which also counts TaggPic as one of its startups. It had a handful of employees, including computer vision experts with ties to Cornell, before it was quietly acquired earlier this year by Google. The C4C said it licensed UW technology to TaggPic that was “pivotal in executing on its business model.” But the UW never had equity in TaggPic. The company’s founder declined to be interviewed.

Another fiscal year 2014 UW startup, Ennaid Therapeutics, was incorporated in Georgia in May 2013, and has offices in Atlanta and New York City. The company, which is working on cures for mosquito-borne illnesses such as dengue, lists on its website milestones including licensing technology in October 2012 from Tulane and Rockefeller, and in July 2013 from Florida Gulf Coast University. There was no mention of UW technology on the site, but Ennaid founder and CEO Darnisha Grant Harrison said in an e-mail that it licensed UW flavivirus inhibitor technology in 2014, which “has helped Ennaid Therapeutics develop a much stronger intellectual patent portfolio. Also, being recognized as a UW start-up has helped bring good press our way.”

The rest of the 2014 startups appear to be based in Washington state, including several in the C4C’s New Ventures Facility, which has hosted 19 companies since its opening. Those companies had a combined total of 140 employees—not including consultants and volunteers—during their stays in the incubator, according to the C4C. (That was the closest I could get to an actual employment figure for recent UW startups. The C4C said that it is currently “in the process of collecting economic impact data.”)

But if UW’s startup numbers and the boost provided to the local economy seem inflated by some measures, there’s also a case to be made that the impact is sometimes understated. Take the example of GraphLab, Inc., which makes tools for developing predictive apps using a variety of data types. Co-founded by Carlos Guestrin, a computer science professor recruited to the UW in 2012, GraphLab was housed until June in the New Ventures Facility. It outgrew the space and found an office in the Fremont neighborhood for its 25 employees. GraphLab emerged from work Guestrin led at Carnegie Mellon University. No technology was licensed from the UW, so it is not a UW startup by AUTM’s standard, and the UW has not touted GraphLab as such.

A poster of GraphLab in the New Ventures Facility.

A poster of GraphLab in the New Ventures Facility.

Likewise, startups formed by UW faculty based on their expertise or insights, but not on a defined piece of intellectual property licensed from the university, aren’t counted as university startups—regardless of whether they received help launching the business. The UW can also license a technology to an existing company that might completely change its course and prospects, but because the company wasn’t established for the purpose of licensing the technology in the first place, it doesn’t count as a UW startup. (It did some 250 licensing deals in  2013, according to the AUTM survey data.)

AUTM recently began asking universities to report how many other new companies—apart from the strictly defined university startups—received support from the institution, a question that seems to provide much more latitude to measure UW’s various roles in new business formation and growth. The UW reported 69 such companies in the 2013 AUTM survey, but it hasn’t highlighted that statistic and doesn’t plan to. The C4C said “other new companies” is “not a well-defined term.”

Young said he’s delighted to see companies like GraphLab supported by the university, but doesn’t count them because they don’t measure what he’s concerned about.

“What I’m concerned about is [that] the great work we do on this university campus does good,” Young said. “I’m not concerned about the money. I’m not concerned about who gets credit. I’m concerned about doing good. And that’s Carnegie Mellon’s stuff doing good. And that’s great. And if we can help facilitate that, I hope someday Carnegie Mellon will help create a company that will use our technology.”

Debate over the startup numbers

There are critics who look at the UW’s numbers from the last two years and see a much dimmer picture. One of them is Gerald Barnett, who worked in the UW’s tech transfer office for more than a decade beginning in the early 1990s and more recently led a Kauffman Foundation-funded initiative to research and develop new approaches to university innovation and economic development.

Barnett disputes the number of UW startups formed in the last two fiscal years. He believes that a company should be counted in the year it was formed, and that licensing the university technology is a separate commercialization activity that should be counted as such in the year it occurs. By his count, there have been 13 UW startup companies in the last two fiscal years, not 35. “C4C cannot count past startups for FY14 just because they did some deal with those companies in FY14 and then claim they are out-performing most everyone else in startups,” Barnett said via e-mail.

Barnett also believes the AUTM licensing survey “is defective” in its reporting of national university commercialization activities, because the group does not appear to correct for the fact that multiple universities may count the same startup company, as in the case of TaggPic, as theirs. An AUTM spokesman said, “Ultimately it is up to the survey respondents—the research institutions—to provide the data.”

In addition, Barnett suggests that several startups counted by UW are merely stubs without substantial employment or operations, or repackaged research projects, or efforts to commercialize existing services the UW was already selling or providing free.He argues that the UW’s startup numbers have been intentionally inflated to meet Young’s challenge and to create the appearance of a big, successful commercialization operation.

“It appears that C4C is trying to puff itself up so that the University can justify funding it from sources other than its share of royalty income,” Barnett wrote in one of several stinging blog posts over the summer. “C4C is pitching the idea it is too important to dismantle.”

Young calls Barnett’s critique “nonsense,” noting that commercialization has been a focus of his throughout his career. “I’ve got a long track record of caring about this for all the reasons I’ve stated,” Young said. “It matters that we make the world a better place. And this is one of a number of vehicles for doing that… My history entirely belies the fact that the expiration of the Hall patents has anything to do with it.”

A natural tension

While there is no black and white conclusion to the debate over the numbers, the dispute does raise a fundamental question: Should university tech transfer and commercialization efforts be self-sustaining activities, or should they be subsidized?

The 2010 C4C strategic plan noted that until the Hall patents expired this year, it would “continue to be a ‘self-sustaining unit,'” one of “the relatively few” around the country to have that good fortune. The plan called for establishing “a sustainable model for UW C4C, covering C4C operations and providing revenues to the University,” by reducing costs and diversifying revenue sources. Two specific targets: “increased, earlier proceeds from equity liquidations,” which should result from the increased emphasis on startups, and increased licensing agreements with “terms more favorable to UW.”

But Young’s advisory committee on commercialization found that approach to be wrongheaded. “Don’t focus on maximizing licensing terms in favor of the university,” the committee wrote in its report last fall, noting seven examples of companies that experienced “delayed financing and higher costs due to the license negotiating process at UW.” A particular stumbling block was the UW’s anti-dilution terms, which ultimately serve to reduce founders’ stakes in their companies.

Instead, the committee recommended the UW aim to simplify and standardize its licensing terms with an eye toward making them “generous to entrepreneurs,” reducing transaction costs, and maximizing the number of funded companies emerging from the university.

“The goals of technology commercialization are broader than revenues from IP licenses and should primarily be the diffusion of knowledge and innovation developed at the university and the contribution to economic development,” the committee wrote, as Xconomy first reported in June.

(Committee members were: Jeremy Jaech, a UW regent and CEO of UW startup SNUPI Technologies; Tom Alberg, co-founder and managing director of Madrona Venture Group; Neal Dempsey, co-founder of venture firm Bay Partners and a major UW donor; Emer Dooley, a lecturer on entrepreneurship at UW and executive director of the Alliance of Angels Seed Fund; Sonya Erickson, a partner at law firm Cooley specializing in emerging companies and life sciences; Ron Howell, president and CEO of the Washington Research Foundation, which manages the Hall patents; and Matt O’Donnell, a UW professor and former dean of engineering.)

Clearly, there’s a natural tension between the need to generate revenue from university IP to pay for commercialization functions, and the goal of speeding the transfer of IP out of the university as quickly and smoothly as possible.

“I think getting the balance right is critical,” Young said. “Whether we’ve got the balance right or not, I’m not 100 percent sure.”

Young said that in his review of the data, the UW’s licensing fees and equity percentages—the commercialization committee reported that the UW takes on average, 10 percent of the startups it licenses to—“are in the ballpark.” He suggested that UW licensing fees and equity percentages should be flexible to accommodate different companies’ diverse technologies and capital needs. He said that “anti-dilution provisions need to be revisited.”

Young said he’d love to be able to subsidize commercialization—and will, to the extent possible—but the financial realities, including a dramatic drop in state support and strong resistance to tuition increases, means activities that can create revenue must do so.

“This is just one of a large number of university priorities, and where we can find sources of revenue to pay for important, useful things, we will look for it, and we’ll do it,” he said. “But whatever happens with respect to the amount of money made through the commercialization process, we are not going to let these services go away.”