Tech transfer regions: Central US and Canada

As we cast our focus on tech transfer regions away from California and towards the US bustling East Coast, GUV stops in on central US and America’s northern neighbour.

Canada

Global Competiveness Ranking: 14

Global Innovation Rankings: 11

R&D spend as % of GDP: 1.8%

Canada is no stranger to innovation. A whole range of technologies have come out of the country and its inhabitants, including the electric wheelchair, the hydrofoil boat, SONAR, gas masks, and medicinal insulin – to name but a few.

And yet, Canadian innovation finds itself in an interesting position.

The country features all round good education with excellent universities producing top tier research and a strong support network. The economy, whilst not quite cracking out its sprinting shoes, grew around 1.7% last year with many economists suggesting 2014 will provide similar or even more robust results. To add to that, Canada was one of the few western countries to make it through 2008’s financial crisis without becoming a scarred and beaten mess, with a largely unscathed banking sector, no major issues on the housing market, and its economy recovering faster than most other developed nations. Today, fresh companies have access to investment, and business on the whole is in a good position with more jobs to go round and access to strong infrastructure and supporting institutions.

That said, innovation in the country is somewhat stagnant, despite a steady increase on public spending on R&D over the past 20 years. Although it managed to climb a place in this year’s global innovation rankings, Canada has slipped in recent history. In addition, Canada’s universities still lag behind their counterparts in the south in terms of transferring technologies from institutions to companies, and business spend on R&D has been falling consistently.

A similar story can be told for Canadian global competiveness. In terms of global ranking, the commonwealth country has seen its position drop from 9^th in 2009 to 14^th this past year. The response so far has been one of muted alarm bells, with underperforming business innovation highlighted as a cause for concern.

However, more specific to this report, Canada does perform well in terms of technology transfer. An Association of University Technology Managers survey has shown rapid growth in the period between 1991 and 2010 for tech transfer programmes, with the average number of inventions and discoveries per university increasing by 70% and the average number of patents applied for rising from 6.4 to 24.4. Furthermore, licensing income has doubled, and the average number of spin-outs annually generated per university has gone from zero to 1.3.

However, Canada’s technology transfer needs a certain degree of fine tuning in order to get it fired up. A recent report on the country’s tech transfer, From Curiosity to Wealth Creation: How University Research Can Boost Economic Growth, suggests that there are a few ways in which Canada can achieve this.

First and foremost are the incentives offered to researchers, and how they can be extended to attract further talent from around the world. The report indicates that the Canadian Government should looking at directing researchers away from business-related research, and on to research issues that are the most challenging from a scientific standpoint. It suggests that the greatest benefits to society will come from scientists who consider financial rewards and practical utility as secondary issues (see What motivates a scientist).

The report also recommends that the Government builds on recent business-focused reforms to the National Research Council with an eye to eventually turn the organisation into a pan-Canadian technology transfer institution, as well as taking new measures to encourage businesses to up their R&D spend and invest in the commercialisation process.

It is also suggested that tech transfer offices should spend less time focusing on generating licensing revenue, and more on acting as intermediaries between academia and the business world. Further, it points out that individual TTOs for individual universities create a monopoly effect within an institution, and suggests that more organisations such as MaRS Innovation (see box out) should be brought about to foster competitiveness at the tech transfer level by adding free agents to the mix.

So, overall, Canada finds itself in a strong, if somewhat flat position. In the short term, Canada has little to worry about in terms of innovation. However, Canada is going to have to shake up the innovation bag and attempt to liven things up if it wishes to take the front foot and extend its intellectual longevity.

Central US

Dubbed the “fly-over states”, institutions situated in central US have the unenviable position of being located between the two innovation power houses of California and the East Coast. However, while some states do offer little in terms of tech transfer, several are becoming big players in their own right.

Texas

Universities in the US’ second most populated state are broadly split into several groups, or systems, not too dissimilar from the University of California system and others like it around the US. These are the University of Houston system, the University of North Texas system, the University of Texas System, the Texas A&M University system, the Texas State University system, and the Texas Tech University system – the largest being the University of Texas.

There are also four independent public universities and plenty of private universities, although only Rice and Baylor Universities stand out in terms of research with the remainder generally being religious universities or liberal arts.

Yet despite this size, Texas has yet to translate itself into a booming centre for technology startups on par with the US coasts. However, it is still a hotbed for startups, as anyone attending the annual South by SouthWest (SXSW) tech festival held in Austin will attest to. Along with the San Antonio and Houston, SXSW’s host city have steadily been size in terms of tech startups recently.

Accelerators too have become more prominent in the Lone Star state, with Rice University scooping the top spot in the inaugural University Business Incubator Index rankings (as well as having its spin-out Rebellion Photonics named the Wall Street Journal’s startup of the year). Funding, too, doesn’t seem an issue, with universities taking an active stance on university venturing. The most recent example being two unnamed universities contributing $65m towards an overall $75m early-stage venture fund managed by Silverton Partners announced in November.

Colorado

Colorado may have been making plenty of headlines since the start of the year when, along with Washington, it legalised cannabis. The move has seen numerous publications point to how profitable the move has been for the state in terms of launching businesses and sales, but GUV readers will undoubtedly already be aware of Colorado’s focus on the entrepreneurial.

Compared to Texas, Colorado’s list of institutions is relatively small, with only the efforts of the systems of the University of Colorado (CU) and Colorado State University (CSU) really offering much in the way of technology transfer.

Despite the smaller size, CU has delivered a consistently strong performance. Of the 124 firms based on CU intellectual property (IP) formed over the past 18 years, 98 are still in operation, and seven have gone public. In 2012, CU formed 10 new companies, and took in $32.8m in revenues with $5.1 in expenditure.

Over at CSU, its tech transfer unit CSU Ventures launched eight new firms in 2013 – a rapid escalation conside
ring its five-year total of 21. Over the period of 2007-2011, CSU Ventures has seen a remarkable impact compared to the periods of 1997-2001 and 2002-2006, substantially increasing income, startup generation, inventions disclosed, and patents filed. CSU also launched a university venturing fund worth $1.5m in 2013.

Michigan

Of the 93 universities and colleges in Michigan, eight are research intensive and active on the tech transfer scene. Of these, the main ones to look out for are Michigan State University, Wayne State University, Western Michigan University, Michigan Technological University, and, most prominent of the lot, University of Michigan at Ann Arbor (UM).

UM is one of the top ranked universities in the world (18th by Times Higher Education’s rankings). It possesses the seventh largest university endowment in the US, valued at $8.83bn, and has just embarked on a further fundraising campaign, Victors for Michigan, with a $4bn goal.

Over the past year, UM’s tech transfer unit has brought in $14.4m in equity sales and royalties and supported the launch of nine spin-outs. Since 2001, the unit’s stats add up to 3869 discoveries reported, 1161 license agreements, 1746 patents, 126 spin-outs, and $210.9m in royalties and equity sales.

Michigan launched its internally managed venture fund in 2011. As opposed to going it alone or using an incubator to test the water, the Michigan Investment in New Technology Startups (MINTS) has set aside $25m of UM’s endowment to be co-invested in its spin-outs alongside traditional VCs in sums of up to $500,000, but only once an independent investor has come on board. UM also has the somewhat unique position of not only maintaining one student-led venture fund, but three: the $6.5m Wolverine Venture Fund, Zell Lurie Commercialisation Fund, and the Social Venture Fund. It’s also a partner of the Osage University Partners, a consortium of leading US universities investing in spin-outs.

Box-out: What motivates a scientist?

Sample taken from 771 scientists based in UK research universities.

Source: What Motivates Academic Scientists to Engage Research Commercialization: ‘Gold’, ‘Ribbon’ or ‘Puzzle’? Alice Lamb. 2011.

Box-out: MaRS Innovation

Centred around Toronto, Canada’s most prominent region of innovation, is the commercialisation firm MaRS Innovation.

Founded in 2008, the company has built up 16 partnerships with institutions in the area, including York, Ryerson, and Toronto universities. A result of an innovation agenda in Canada, the unit was formed with $30m in backing, $15m from Government and the remaining half from member institutions.

MaRS aims to identify research with commercial potential and to build the links with business to get that technology out of the labs. Through its collective partners and funding, it has considerable mass, which has helped bring over 500 technologies up to licensing stage and launch over a dozen spin-outs while raising over CAN$350m in external funding and assisted in the creation over 4,000 jobs.

The unit also supports early-stage companies financially through its Investment Accelerator Fund, which provides investments of up to CAN$500,000, as well as managing a $30m cleantech venture fund.

Box-out: The American chip on the Canadian shoulder

Throughout our research into Canada’s position, we noticed an urgency for Canadian institutions to compare themselves to their US counterparts. While this is understandable due to the proximity and close history of the two countries, it often ends up with Canada selling itself short.

What needs to be kept in mind is that Canada and the US are two very different animals. In terms of academic excellence, Canada only has three universities placed in the top 50 World University Rankings compared to America’s 18. Likewise, the US averages much higher in terms of research expenditure, and Canada has a smaller population combined to draw on than California alone (34.88m vs 38.04m). Canada also lacks tech clusters the size and scope of America’s east coast or Silicon Valley.

Combined, the statistics make comparing Canadian innovation against US innovation a battle the northern country is unlikely to win. While it is important for Canada to aspire, a fairer comparison of output could and should be measured against similar European nations, or up and coming tech transfer regions like Australia.