1 Cultivating Technology Transfer to Accelerate Regional Economic Development
2 Project Overview Goal: Enhance Greater Philadelphia’s commercialization potential Conceived by the CEO Council Venture Capital Working Group Commissioned the Economy League of Greater Philadelphia
3 Project Methodology Literature review (32 studies)Benchmarking (9 peer regions) Stakeholder input (21 interviews)
4 How Greater Philadelphia Stacks UpKey Indicators Research & Development Invention Disclosure Patenting Licensing Company Formation Venture Capital Peer Regions Baltimore Boston New York Pittsburgh Raleigh-Durham San Diego San Francisco Seattle Washington, D.C. Key Indicators: Chosen to describe specific points along this continuum. Research and development funding: A measure of scientific prowess and productivity Invention disclosures: A measure of scientific interest and engagement in commercialization Patents: A measure of technology potential and technology transfer office productivity Licenses: A measure of technology transfer office productivity, but more importantly represent a critical linkage between academia and the private sector Company formation: (referring to start-ups based on university research) A measure of entrepreneurialism associated with technology commercialization Venture capital: A measure of private sector investment and can indicate the presence (or lack thereof) of serial entrepreneurialism Peer Regions: Benchmark regions were chosen based on characteristic similarities to Greater Philadelphia, including size, regional proximity, and industry strengths. Quantitative analysis updated and expanded upon the “Innovation and Entrepreneurial Index” released by Innovation Philadelphia in 2002.
5 Research & DevelopmentLagging federal funding (NIH, etc.) Grant & publication pressures on scientists Paucity of funds for proof-of-concept research Source: The National Science Foundation tracks academic R&D by source and by subject area. Graph Text: This graph illustrates academic R&D by subject area. In 2005, Greater Philadelphia devoted 62 percent of its total R&D funds to the life sciences. Engineering received 14 percent and physical sciences 8 percent. Of regions included in the study, New York devoted the highest percentage of R&D funds to life sciences at 79 percent, while Baltimore devoted the highest percentage to engineering at 24 percent and San Francisco the highest to physical sciences at 13 percent. Overall, in 2005 Greater Philadelphia’s $1.36 billion in R&D funds ranked fifth out of the ten peer regions, at a similar level as Raleigh-Durham, San Diego, and New York, but well behind Baltimore, Boston, and San Francisco. Policy Considerations: Life sciences and federal R&D funding have lagged in recent years due to cutbacks at the National Institutes of Health (NIH). The grant process has become increasingly competitive, and grants awarded are smaller than they have been in the past. The increasingly competitive grant process has put more pressure on scientists, who must spend additional time writing grant proposals just to cover laboratory costs. Publications, a key indicator of scientific productivity, have become more important as competition has stiffened. As a result, scientists have little time for anything else. Grants typically expire before an innovation has developed into a commercializable product. A shortage in proof-of-concept funding has inhibited the marketability of many technologies with commercialization potential. Source: National Science Foundation
6 Invention Disclosure Cultural gap between tech transfer officers & scientists Disincentives for scientist engagement Source: The Association of University Technology Managers (AUTM) tracks invention disclosures by institution. Aggregating institutions allows for regional comparison. However, only select institutions respond to the AUTM survey each year. This has two effects: 1) an understating of the actual number of invention disclosures that occur within each region; and 2) large fluctuations of total regional invention disclosures from year to year. Graph Text: This graph illustrates invention disclosures by region, averaging the three years of compiled data (1996, 2000, and 2004) to mitigate the effect of annual fluctuations. Over this period, Greater Philadelphia had the second highest average rate of invention disclosure at 520 per year, well behind Boston at 1,226 but ahead of San Francisco (423) and Baltimore (397). Policy Considerations: The academic environment is one of a perpetual search for new knowledge. Traditionally, entrepreneurialism has not factored into the research process. For this reason, technology transfer professionals have found it difficult to convey the benefits of commercialization to scientists. Institutional incentives also discourage scientists from engaging in technology transfer. A researcher concerned with keeping his or her job will focus on churning out publications, a key indicator of research productivity and influential factor in tenure review. A researcher concerned with getting paid will focus on grant applications, as awards typically comprise over fifty percent of a scientist’s salary. Most scientists are inclined to pay no attention to invention disclosure. Source: AUTM Licensing Surveys
7 Patenting Skyrocketing legal fees & other patenting costsDifficult to budget patenting costs against uncertain long-term revenue potential Source: The Institute for Strategy and Competitiveness at the Harvard Business School tracks regional patents grated to both universities and private companies. Graph Text: This graph illustrates patents received by region, grouping regional patent totals from into five-year intervals to account for annual fluctuations. The San Francisco-Bay Area has far outpaced any other region in patent production, patenting over 50 thousand technologies between 2000 and 2004, twice that of the next highest region. Greater Philadelphia patented nearly 10 thousand technologies during that time, behind the Bay Area, New York and Boston. Interestingly, Philadelphia was the only region included in this study to experience a decline in total patents from to Policy Considerations: Skyrocketing legal costs have imposed a significant impediment to patenting efforts. University technology transfer offices typically operate under tight budgets and are forced to make difficult decisions, frequently shelving technologies with commercialization potential due to lack of funding. Funding needs are highly variable and are therefore very difficult to budget. At least one Philadelphia university has experimented with separating patent expenditures from fixed office operating costs, essentially creating a second technology transfer budget that matches patenting costs to licensing revenues. However, this introduces a new dilemma, as licensing revenues also experience large fluctuations and are frequently unrealized for many years, if at all. Source: Institute for Strategy and Competitiveness, Harvard Business School
8 Licensing Cultural gap between academia & industryInstitutional protection of intellectual property Lack of licensing official incentives Source: AUTM also reports licenses and options executed. AUTM definition for a “license agreement” and “option agreement” – License agreement: formalizes the transfer of technology between two parties, where the owner of the technology (licensor) permits the other party (licensee) to share the rights to use the technology. Option agreement – grants the potential licensee a time period during which it may evaluate the technology and negotiate the terms of a license agreement. Graph Text: This graph illustrates licenses and options executed by region, averaging the three years (1996, 2000, and 2004) of compiled data. Over this period, Greater Philadelphia had the third highest average rate of licenses and options executed at 146 per year, behind Boston (351) and San Francisco (174) but ahead of Raleigh-Durham (116), Baltimore (108), and New York (101). Policy Considerations: A culture gap between technology transfer professionals – who work in an academic setting – and entrepreneurs – who work to increase profits – can inhibit license negotiations. The technology transfer office is charged first and foremost with protecting institutional intellectual property rights. This can prove frustrating to interested entrepreneurs. Unlike entrepreneurs who stand to make money on striking a licensing deal, salaried licensing officials rarely have monetary incentives to aggressively pursue a deal. This disconnect can hinder license negotiations. Source: AUTM Licensing Surveys
9 Company Formation Lack of incubator & lab spaceChallenge finding capable leadership (CEOs, etc.) Source: AUTM also reports start-up companies formed based on university research. Graph Text: This graph illustrates start-up companies formed by region, averaging the three years (1996, 2000, and 2004) of compiled data. Over this period, Greater Philadelphia had the second highest average rate of start-ups at 14 per year, well behind Boston (40) but narrowly ahead of San Francisco (13) and Raleigh Durham (10). Policy Considerations: New companies based on university innovations require incubator space to develop technologies. Incubators are in short supply and are frequently over-stretch the resources of a new business. Entrepreneurs typically lack the leadership expertise necessary for to develop a small company. Finding executives to run new businesses can be difficult. Without experienced leadership, a start-up is unlikely to flourish. Source: AUTM Licensing Surveys
10 Venture Capital Lack of entrepreneurial culture (serial entrepreneurialism) Funding gap for early-stage technologies Source: PriceWaterhouseCoopers tracks total regional venture capital investment. Its regions differ slightly from those employed for other measures in this study. (Baltimore-Washington grouped into one region; the term Research Triangle is used instead of Raleigh-Durham) Graph Text: This graph illustrates total venture capital investment by region, reporting VC from 2002 through 2006 as a five-year average to mitigate the effect of large annual fluctuations. Over this period, Greater Philadelphia had the third worst rate of venture capital investment among benchmark regions, at an average of $414 million per year. The San Francisco-Bay Area more than tripled any other region, with an average of $7.7 billion invested per year. Boston ($2.4 billion), New York ($1.7 billion), and San Diego ($1.1 billion) also averaged more than $1 billion per year in VC. Policy Considerations: The most important ingredient for developing a region’s venture capital presence is an entrepreneurial culture that promotes serial entrepreneurialism. Without a pervasive entrepreneurial culture, a region will have difficulty developing its venture capital presence. A very large funding gap exists for early-stage technologies not yet ready for a major round of venture capital. An infusion of pre-seed and seed funding would help to bridge this gap and improve the marketability of early-stage technologies. Source: PriceWaterhouseCoopers LLP
11 Overall RecommendationsFoster a culture of entrepreneurship in the region Accelerate connections between researchers & entrepreneurs Build talent & capital resources to support & grow new companies Based on quantitative analysis and associated policy considerations, a series of recommendations were generated that target specific stakeholder groups with an opportunity to accelerate commercialization in Greater Philadelphia.
12 Recommendations – Private SectorAdvocate for increased federal & state funding Market region as center of innovation Support serial entrepreneurs Provide resources to stimulate support for entrepreneurship Foster partnerships among business community, public & private sectors
13 Recommendations – Public/Non Profit SectorCreate a venue to serve as a “clubhouse” for innovation Provide affordable incubator & lab space Develop collaborations to improve accessibility, aid funding applications, & market technologies Use awards & recognition programs to highlight achievements
14 Recommendations – Academic SectorEstablish a clear institutional goal to foster entrepreneurship Facilitate connections among researchers & entrepreneurs Encourage faculty technology transfer & entrepreneurial support by valuing the work in tenure review
15 Regional Models North Carolina Biotechnology CenterUCSD Connect (San Diego) The Technology Collaborative (Pittsburgh) The Nanotechnology Institute (Philadelphia) Several U.S. regions have created institutions designed to enhance some aspect of the commercialization process. Highlighted here are four models that exemplify collaborative efforts to accelerate regional technology transfer.
16 Specific Action Items for CEO CouncilRegional Proof-of-Concept Fund/Grant Pool – collaboratively pursue securing public and private funds for translational research Clubhouse(s) – virtual and/or real intersection environments and entrepreneurial networking Promoting the region’s commercialization strengths and opportunities both to internal and external audiences Advocacy for funding and support of research and commercialization at the State and Federal levels Entrepreneurial support and development.
17 Questions for the groupHow to sustain interest and momentum—what are the easy wins/short-term successes? How to get University leaders’ attention? Should we take a group to visit other ‘national’ models How to not get stuck in the morass of ‘cultural change’ which is incremental