VentureLab:A University Innovation System

Lee HerronVice President of CommercializationGeorgia Research Alliance

Background• The GRA is a public-private partnership in its 22nd year• Receives an annual allocation from the State of Georgia

for redeployment in Georgia’s research universities with the goal of stimulating innovation-based economic development

• Strong board incorporates business and academic leaders

• Coalition of major research universities• Three programs: Eminent Scholars, Infrastructure

Development, VentureLab

Focused investments in research capability lead to commercial outputs

GRA invests in recruiting world-class Eminent Scholars to universities

Scholars build research teams that attract major R&D grants/contracts

Teams generate discoveries with commercial potential

TALENT

GRA invests in specialized R&D equipment and facilities

Helps universities recruit and support Scholars, land major R&D grants

Promotes collaboration across universities and with industry

INFRASTRUCTURE

GRA invests in most promising discoveries to encourage formation of new companies

Tiered investment approach provides seed funding to “best of the best” projects

GRA Venture Fund, LLC fills gap in available early-stage venture capital

COMMERCIALIZATION

What is VentureLab?

• Program for commercialization of science and technology inventions from the labs of Georgia’s research universities

• Milestone-based, providing funding and advice to facilitate commercialization

• Focused on creating sustainable, Georgia-based companies• Covers the innovation continuum from idea generation to

seed investment• University partners: University of Georgia, Georgia Regents

University, Georgia Tech, Emory University, Morehouse School of Medicine, Georgia State University

VentureLab starting point

Knowledge and Invention

Innovation New Venture

Uncertainty Risk

Little or no information, difficult to manage

Risk can be measured and managed

VentureLab helps to convert uncertainty to risk and manage risk to create value

How does VentureLab work?• VentureLab directors at each institution identify

opportunities and help faculty design and implement a development plan.

• Assessment includes:– Intellectual property– Technical feasibility– Market dimensions and dynamics– Funding feasibility– Regulatory and reimbursement issues as appropriate– Management requirements

VentureLab process• Project management– Relevant and measurable milestones identified for each

project– Budget developed and allocated to phases:

• Phase I – feasibility, proof of concept• Phase II – prototype manufacture, demonstration in relevant

animal model• Phase III – initial customers, recruit management, initiate IND-

enabling studies

– Funding• Phases I and II are grants to the institution• Phase III – loan to the company • GRA Venture Fund – dedicated to companies emerging from

VentureLab

Commercialization process and VentureLab role

Commercialization Catalysts

Technology Transfer

Technologyopportunity

identification and evaluation

Business strategy and

model

Company formation, technology

licensing

Company scale-up

incubation

Venture capital funded

Proof of ConceptPhase I

Company LaunchPhase II

Company Scale-upPhase III

University Partners

Incubators(e.g. ATDC, BioBusiness Center)

Start-up team

Investors, other fund sources

Stage-appropriate management

▪ Phase 1 funds ▪ Phase 2 funds ▪ Phase 3 loan

Seed Funding

GRA Industry Fellows and Distinguished Entrepreneurs

VentureLab functions

GRAVenture Fund

GRAVentureLab

Community Resources

VentureLab project management• VentureLab Fellows– Serial entrepreneurs and other business people who work

with faculty as a business coach or launch CEO

• External advisory board– Members consist of experienced industry representatives

and venture capitalists– Review projects at Phase transitions– Provide critical advice and contacts

• Industry Fellows and Distinguished Entrepreneurs – FY2014

GRA Venture Fund

• Seed venture fund captive to companies emerging from the VentureLab program

• First close in July 2009 at $20 million with target of $30 million

• 6 investments to date with three follow-on investments and one exit

VentureLab Project Pipeline: FY 2003 – FY 2012

Proof of Concept

Phase 1Company Launch

Phase 2Scaling Company

Phase 3

3

1

3

122

88

9 1

18

6

39

2

15

58 Active

64 6 2

56 Active

32

33 Active 17 Active

32 Active 15 Active

Company Acceleration

GRAVF

13 2

Due Diligence

Due Diligence

30

Investments Made5

Investments Made

Bioscience companies

Technology companies

Results to date• More than 1,000 university technologies/inventions

reviewed since 2002• 370 awards administered to 265 companies/projects– Awards and loans total over $25 Million

• More than 100 companies formed– Over 650 employees– Greater than $550 million in equity investment– Revenue: $111 million in 2011, $298 million since

2002

Lessons learnedRun out of

funds

• Cash mismanagement ability• Unable to attract follow-on funds• Adverse funding market conditions

Poor business model

• Model inconsistent with market structure• Inappropriate pricing model

Technology fails

• Development takes too long• Failure in trials• Non-reproducible product

Management dysfunction

• Poor start-up team “chemistry”• Incomplete or non-complementary

skill set of team

Failed IP protection

• Misjudgment during due diligence• Insufficient claims awarded

Market related issues

• Misjudged market dimensions or dynamics• “Stolen market” (i.e., new competitor)• Adverse market dynamics

Relocation• Faculty member relocates• Company moves out of state

Start-up failure modes

7

12

34

32

4

24

6

VentureLab: Critical success factors• Manage expectations • Team – stage appropriate, industry experienced

management to complement the knowledge and skills of the faculty inventor

• A focus on relevant risk factors – prioritization of commercially relevant activities– Should be guided by a well-thought out commercialization

strategy rather than scholarly preferences– Prioritization forms the basis for milestone development

• Realistic assessment of commercial viability– Preferably prior to formation of company

Observations from 10 years of experience

Factors for success Rationale

▪ Hiring experienced, “fundable” entrepreneurs must occur in concert with active technology sourcing and scale-up

▪ These actions are self-reinforcing and address multiple bottlenecks

▪ Patience is necessary when assessing performance, since university-based projects take time to show job creation results

▪ Typical time to market for a bioscience start-up can easily exceed 5-7 years

▪ Active sourcing of technologies is critical to find the strongest commercialization opportunities

▪ Prudent scale-up depends on finding more strong ideas, not simply funding a higher percentage of applicants

▪ Investing in connectivity and networking is required, despite seemingly ambiguous benefits

▪ Benefits of “critical mass” generally occur through interconnections in the ecosystem

2013 – A focus on outcomes• Incorporate new program elements– Formalize Industrial Fellows program– Distinguished Entrepreneurs– Host forum to showcase VentureLab projects and

companies • Fund to milestones rather than to an amount

per phase of development• Greater emphasis on Venture Development

VentureLab: Part of a dynamic, interrelated ecosystem

UniversityResearch

and Invention

Angels, F&F, SBIR/STTR

GRA Venture Fund

Venture CapitalStrategic Partners

VentureLab: Up to $400,000

Sustainable Business

Contact information

H. Lee Herron, DVMVice President of CommercializationGeorgia Research Alliance50 Hurt Plaza, Suite 1220Atlanta, GA 30303Direct : 404-443-2650Telephone: 404-332-9770, ext 2650Mobile: 404-386-7929 Lee.herron@gra.org; www.gra.org