Beyond the Breakthrough: Tony Armstrong

We talk to Tony Armstrong, president and chief executive of IU Ventures, about how the organisation supports Indiana University spinouts and startups.

Subscribe

Transcript

Please note that the intro and outro have been omitted.

Tony Armstrong, thank you very much for joining us on the Leadership Series Podcast today.

Thanks for having me.

To kick things off, maybe you can give us a brief overview of what IU Ventures is, what it does.

We are an affiliate of Indiana University, we are a separate not-for-profit, a 501(c)(3). Really, primarily what we try to do is work with faculty, with our students, with staff members here, and more and more these days with our alumni around the world, to really try to help accelerate their innovations, to try to help them wherever they are in that process of trying to accelerate that, if that is helping them find funding, helping provide funding, helping with networking, with talent, with beta testing for some of those.

So, it is really trying to build and utilize our network of IU intellectual firepower, you might say, and really try to help move these technologies into the marketplace and really build a network then of alums and different folks that we can then help and work with, again, like I said, across the world, and we have some things that we are working on primarily right now in Southeast Asia that I can talk about. But really it is a separate entity the university has created just to try to help accelerate innovation.

Amazing. Just to turn back the clock a little bit, a few years, you used to also handle tech transfer for IU. You decided to set up a new office for that, IU Innovation and Commercialization office, in 2017. Can you tell me a little bit about what the rationale was behind that decision?

When our group was created back in 1997, we really did a number of different things and the primary function had been the tech transfer, the traditional licensing and protection of intellectual property, and we did that, like you said, it was 2017, so for about 20 years. We have had some changes internally at the university.

The thought was that if we took the tech transfer piece and moved that back into our vice president for research’s office, it would really free up our group, now IU Ventures, to really focus more outward. So, with tech transfer, as many people that are a part of it know, is such an, in some ways, inwardly-focused endeavour and I have to say, most of my time at the university I have been a part of that and I found that you think once you get a deal done with a licensing deal, you are done. But now that I am not doing it, I was spending a lot of time on deals that were five years old or 10 years old, or we were in a fight about this, or we were trying to do that.

So, it really is an inward-focused endeavour. But it made sense too to get it back in with our sponsored research and corporate relations, to really have that as sort of a one stop shop, that is all together, and it then freed us up to really then face outward. One of the things that I mentioned, our alumni focus, and really trying to get folks reengaged with the university and not just financially, but really their Rolodexes and their expertise and their networks around the world that we can draw on. So, it has really freed us up to reach out from the university and try to do more.

One of the first initiatives that you did there to bring alumni back in was the Philanthropic Venture Fund. I think it is at $11m at the moment, but it has a $50m target.

Correct. Ha, on our way we hope.

Was that specifically the engagement with alumni, what you wanted there? Was it getting more money for startups? Both?

Both in a way. I think it really was, but you have it in the right order. As I have been on this, I sometimes say, non-linear career path where I have done a number of different things, I have found in interacting with our alums that they are interested in giving back in a different way. Sometimes the development officers, we talk about time, talent, and treasure, and sometimes we have those in the other way. We have it as maybe they are the treasure piece and then the others. Really what we have decided is to think about their networks and their expertise and their ability really to mentor.

It is interesting, before the pandemic, we had been out, my colleague Jason Whitney and I, and we have created what we call these nodes in different cities around the country; Boston, Boulder, Denver, I say California, it is up and down the coast there. We were on our way to Seattle and actually Dallas and Austin, Texas, and we have created not giant groups of the hundreds of alums we have in those places, but really what we call IU founders and funders. So, really IU alums we have in those cities that are either in venture or private equity or seed investing and then our alums that are either starting companies or they are in the C-suite in some way.

We really try to bring them together. It is interesting, the nodes were starting to interact without us. So, the Boston group was interacting with the LA group, and we were really starting to get this amazing connection. But what was happening too is any alum who was plugged into that, we had two I can think of in Boston who are younger alums, I think everybody is younger than me these days, but younger, around 30ish or so, that have successful companies that have raised a fair amount of venture capital, that they truly want to give back and work with students.

They also see the value of this, and they want to plug in and in some ways work their way up the chain and find alums that have been successful, that have exited or are in those spaces. So, they really see a way to plug in and give back at the same time as they learn. So, it is a little bit of a different model that it is, I sometimes say in a way, a win-win, that you are able to give back and be a part, but also reap some benefit from that. And as we have done that, we have started to see then that people are interested in supporting us financially.

So, it is a little bit of a dual thing. But you are right, the philanthropic fund, we had a fund before that we called the Innovate Indiana Fund, that really the majority of that money came from an exit we had. A company that had been started prior to my joining that was sold. It was one of the first learning management systems. It was called ANGEL Learning, and it was purchased by Blackboard and the team had done an amazing job of bootstrapping that. So, the company was sold for a hundred million. The university still had 25% of the company. So, as I say, sometimes it was a good time to come back and be president of the IURTC.

I got to go around and talk about this story. I had been there three months and this happens, and so I think maybe I set the bar a little high. But we took some of that money and actually started the Innovate Indiana Fund and really that one, this was back in 2009 and 2010 around there, and really there our idea was, especially we have the only medical school in the state of Indiana, turns out it is one of the largest, I think it is the largest medical school in the country. But really working with faculty there, and that, talk about the Valley of Death. It is one thing with IT companies and SaaS companies, but on the life sciences side, it is such a challenge to go, as our faculty say, from the bench to the bedside. So, that early stage is so challenging and so we really just thought we would use some of this money from the Angel Learning exit and try to help at least move these life sciences ideas down the road far enough that we could get federal funding or grant funding or get them ready for even licensing, just a little more data. We were pretty successful with that, but we started getting inquiries from alums and we started to broaden our net for the Innovate Indiana fund, and we found really in Chicago and closer places that we started to do some deals, and this all started to happen.

Then as we started to get towards the end of that initial $10 million, we started thinking, a), we need more funding, but b), why do not we open this up and give our alums a chance to contribute and reap the tax benefit, but also maybe more deeply engage them? And that has been the case. So, sometimes it is funny, I think of it as a startup, but we have been at this for now 12 or 15 years. So, it is not much of a startup anymore. But we are learning along the way of what our kind of our customers are looking for.

You have mentioned nodes there. Was that the basis and your angel network as well that you launched earlier this year?

It was, yes. So, as we have been out meeting with our alums and asking about the fund, many of them, it is funny, they are interested in supporting the university however they can, but they are also entrepreneurs, and money, right? So, they are saying, Wow, these are great deals. We would love to be a part of these as well. So, we had interacted a little bit with the folks in North Carolina. Duke, UNC and North Carolina State each have their own unique angel funds, and then they work really well together down there in the triangle of working together on deals. Notre Dame has a fund, Purdue has a fund, we have a fund.

So, we are talking to those guys all the time. But it really did lead to this idea of giving our alums a chance to invest in the companies. Really what we have found, and again, this is one of those I wish I were smart enough to have seen this, but really there is no better way to have somebody be excited about and deeply engaged in these companies when you have even a modest amount of money invested in it. They have really been great mentors and so we have probably, with the Angel Network, we have just now I think we are about to complete our sixth investment. Jason Whitney helps to run this.

We just really kicked it off. It is funny, we kicked it off toward the end of February of this year. We did a live event. It was the only time we had a chance to get everybody together and do a live event, and then the rest of them have been virtual. We really were worried that that was going to change the dynamic, but we have done, I think, six deals. Every one of them has raised between $100,000 and $200,000. We have one big one that we have got a different set of folks together that could raise a bunch, but it has really been a great group to come together. Now we have done two or three social hours in some ways, so not a deal, but really just to get the angels together and have a guest speaker, or have people just share what they are doing really to build this network. So, the deals have been all the way from, I am trying to think, we have two, one in LA, one in San Francisco, Chicago.

We have one in Bloomington, but they are all over the country as well. Our angels are all over. So, now we use Zoom to do the meetings and then we also even include some deals. So, once a month we pitch live, we record it, but then we also load other deals that we think our angels will be interested in. We just load those so people can look at those as well. So, we have really tried to be this source of deal flow, but really in some ways too just awareness of what the university is doing or what other alums are doing.

I think people really enjoy, especially folks that have been away from Indiana, for some for decades, and they just are not aware of what is happening here, what they are doing, and it is another way to give back. If they help another alum that really helps the university in a way, and then they have a chance, hopefully, to make some money as well there. They have been investors all their lives and I think this is just another way for them to do it and do it together with a number of other alums.

That sounds fantastic. If I had the money, that is at least something that I would want to pursue.

It is interesting, as you mentioned, in the US we now have these accredited investor rules set up by the SCC and actually, I think it was last week, they made it a little easier. So, we are hoping to be able to broaden the net and let a number of other folks be a part of the network that would not have been able to before. But you are right, we do hear that a lot, that there is only a certain set of folks that can meet, in the past, this accredited investor standard.

But I think these new rules will give us a chance to include younger alums and people that want to learn how to do it, but they could not before. So, there is an educational piece as well. As an institution of higher learning, we are trying to always help people get what is happening and learn new things, not only about us, but how this investing works.

Amazing. Going back to the source, maybe a little bit, you have also set up The Quarry together with the ICO. Can you tell me a little bit more about that programme?

Yes, that is an evolution as well. It is interesting. So, a few years ago we started a programme. At the beginning we called it the Spin Up programme, and it was really a chance, as I mentioned, going back to this life sciences investing, we probably had not done, even as a state, but certainly our institution, of taking advantage of federal funding. We have the Small Business Innovation Research programme. There is an STTR Small Business Tech Transfer programme, but it is really peer reviewed. It is really in our wheelhouse, but it is grant funding to help, and the NIH has a big budget for that. So, Spin Up started as a way really for us hopefully to put some of these minimally viable entities together to make application for this SBIR/STTR money.

The idea being that we would have a faculty member as a lead and then we would have the PhD students actually maybe be a part of the company and find a way to really find their way to entrepreneurship. So, we worked that programme for a while and we had some success and then it morphed into The Quarry, which then linked with the Angel Network and the other funds as really this, almost this continuum of now, even from the point where we either recruit a faculty member or have a graduate student that is interested. We have now almost a complete process from the inception, the idea of a company or an innovation.

So, The Quarry helps to really think about that, even fundamentally, Should this be a company or should this be a licensing opportunity? And let us go through that. So, it is a decision tree, and then if you are going down the company path, you really need to do this, you need talent, we need these kinds of people to be a part of it. So, it really is a process of helping the ICO and us and the faculty member evaluate this opportunity and figure out what is the best path for it. So, that is one that it is really a partnership. It is with our friends at tech transfer, with our group, and then we use these outside experts that we are cultivating, other capital providers or alums we have in this space, and it really is great feedback. We learn a lot. But the faculty members really benefit by getting these outside perspectives of what is happening.

It is not just us sharing, it is really this collective. It helps them maybe go in a different direction in what they are doing, find talent, find, down the road, the financial piece. But it really now is collaborative. So, it has brought us closer together. We have used it not just in life sciences, but more on the IT side too these days with work we are doing. I am here in Bloomington. Our Indianapolis campus is really where the majority of the research is done for the med school. But here with artificial intelligence, machine learning, some of those kinds of things, we have started to be able to use this process to find CEO talent, to pair with our faculty. It is a pretty powerful combination when we are able to do that.

That sounds amazing. You have certainly been busy in the last few years.

Yes. It has all been from my room here in a way. We have been covering a lot on the ground.

You briefly mentioned doing something in Southeast Asia. Are there more programmes that you are working on? Are you trying to focus on those three at the moment? What is the plan?

That is a good point. This is an offshoot in a way of the Angel Network. So, Jason, who I mentioned, got connected with the university, has created gateway centres really around the world. I think we have seven now. Mexico City, Malaysia, Germany, Beijing. So, all around where we have a physical space, India is one, and in some of those we actually have a staff member who helps the university get connected in those parts of the world. But also then again, is a place for our alums in those countries. I think we are the third largest living alumni base for US universities.

It is over 770,000 alums around the world, obviously many of them overseas. So, we were working with an angel group in India just to try to figure out if we could share ideas and if they had ideas and it led to our gateway centre that serves Southeast Asia. So, we started to get these inbound requests and on October 1st, we are going to host our first virtual Southeast Asia pitch competition. So, we have got a bunch of ideas, our alums that are starting companies all over Southeast Asia, we are going to do, not a prize kind of thing, but just really a chance for them to pitch these ideas and then we have a number of alums and a number of folks that are joining and then a set of judges and we will just give feedback and hopefully have a chance for some of the companies to find supporters and find interaction.

But it really, again, was the result of these interactions we have started to have with some of the resources the university has in different parts of the world and really now gathering our alums there too. So, in the beginning it was, Jason and I could get on a plane and go to Boulder, Denver or go to California, or go to Boston. And now I think that for us, in some ways, is a silver lining of this pandemic in a way that we have got so adept.

We are here together on Zoom doing this. So, we have had a number of these meetings and so this might have seemed more daunting back in February. How could you put a virtual pitch competition together for Southeast Asia? But it has happened almost seamlessly. It has been amazing the resources we have as a university and the ease that we can do it. I think the desire of people to do this now, this becomes another way to do business. So, it really has opened up these other parts of the world that we can be a part of. This will be the first one, but once we get this model perfected, this will be easy for us to then replicate at every one of our gateway centres around the world and really try to again, have a chance for our alums to reconnect and be a part of this broader, it is almost going to encircle the globe. Not much broader and it will be all the way around the world that we will have folks connected.

Amazing. You have mentioned Zoom calls there, other than spending too many hours on Zoom, how has the pandemic affected your work?

It really has changed. It is funny what we do, as you know, it really is a contact sport, I call it sometimes. I mean, it really is being out, and not just here in the state. For us, we really had been on the road. Jason and I were in San Francisco the day the mayor declared an emergency for Covid. We were there, the big cyber conference was there, but we were meeting with alums and had a bunch of meetings. We had been in Palo Alto to meet with folks down at Stanford and other alums. Then we were in Miami, in Naples, meeting with alums in Florida. Yes, I think just the week before that, and then I was in DC for meetings right at the beginning of March. I mentioned we, in the next week or two after that, we were going to Texas, to Dallas and Austin. I bet we have been to Boulder, Denver four or five times, the coast.

At one of the meetings we were at, one of the guys said it was so good for us to come because he only saw some of these people when we came because we do a lunch or we will do, not big events, but just gather 10 or 20 people. And it really does, it brings people together and it is a different interaction. So that has ceased. I do not see us doing that in the near future. So, we have gone to many of these Zoom calls and outreach, which is, it is good, but it is just not the same. It is never going to be the same of being able to sit with somebody and really feel what they are doing and share things and all that. So, we are anxious to get back on the road. We are hopeful for a vaccine or whatever it takes for us all to feel comfortable getting out again.

Maybe as a final question. I think you were at Indiana for a little bit at the end of the 90s, then you went and worked for the government for a while, came back to Indiana. What prompted the decision to come back to IU?

Yes, it is interesting. That is a good question. Sometimes, I think I have said this to you, I describe myself as, I use bad penny sometimes, and you can see I have got, I used to have red hair, it is not anymore. But I was a student and left, and I came back to law school and left, and I came back to work and left, and I came back. It just really is, I really love IU. I went here, my sisters went here. It is really this amazing institution. But it is this amazing platform that we are able to do. I did mention one, I just got an email with Jason this morning.

We are thinking about a sports focused effort. We have in Indiana, we did not have any tech stars, now we have two in Indianapolis. One of them is focused solely on sports. It is an hour up the road. We at IU have a ton of sports things going on. Our alumni base in sports is amazing, and our Kelley School of Business just yesterday announced a sports focused institute for undergrads. So, we are putting together a subset of our Angel Network of folks that are in sports, to look at sports broadly. So, performance, analytics, apparel, marketing and media, all those kinds of things.

But where else could you do that other than an institution like Indiana University, where you have all these different really neat things to do and these people that love the institution want to give back and so I get to be in that mix and help people. So, it really is exciting, and it is fun and I meet a lot of amazing people that I would not otherwise, They probably would not take my call if I just called them out of the blue and said I wanted to talk. But when we are calling on behalf of IU and we really want to get them back in in the mix and helping, everybody is willing to do it.

So, it was really that, and it has just evolved into what we do now. And the institution gives us the freedom to do that, and I think they are very encouraging for us. So, it really is an amazing platform. I hope I do not crash and burn it or wreck it or something that they let me keep doing it.

They have let you be in charge for over a decade now, so I assume they are happy with your work.

I have not taken this over the cliff yet, so we will see.

Amazing. I had one more that was basically just anything else that we have not covered that you wanted to talk about?

I think the newest one I was going to try to mention at the end is this idea around sports and really now that we have got this broad network together, I think we can now focus in. So, the next one for us will probably be, we have got a lot in the defence area in some ways, but where we take the AI work and the machine learning work and all these kinds of things we have been doing and try to dual use those. So, we have a naval research station just south of Bloomington. It is odd to have a naval base just south, but there is a long history.

It was basically in World War II. It was inland enough. It started as just a place to store a lot of bombs and things. It has evolved into this amazing electronic warfare and cyber security and all kinds of research is done down there and so we are working more closely with them. So, we are able to do research with them on what we do, but they are also doing research that we can try to dual use and put together. It is amazing when you think about then sports, a soldier or sailor or airman or something, the physical piece of that where there is overlap, or cybersecurity or AI.

So, that is probably the next one for us. It is really now the ability to drill down in these specific areas and start to focus there and then bring people together, which hopefully brings more funding and different kinds of things. So, we turned Southern Indiana into this launching pad for things that go around the world.

Wow, that sounds amazing.

Or bring the world to southern Indiana. Maybe that is the other way.

I have never been, but I would certainly like to actually see Indiana one day.

We will get you over here, and this time of year, the leaves are starting to turn, it is just starting to turn to fall. So, maybe next year when we get things more settled, knock on wood, the next one from here.

Yes. Fingers crossed. Amazing. Tony, thank you very much for taking the time to join us today to talk about IU Ventures. I appreciate it.

Thanks Thierry, and thanks for all the things you guys do and keeping us all connected and together and sharing all the different things that we are up to, you and James. I mean, it has been terrific, and we much appreciate you giving us a chance to share what we are doing.

Awesome. It is our pleasure. Thank you, Tony.