Venture Capital News
St. Louis Universities Aim For More Spin Offs
Washington University 's Office of Technology Management, which oversees technology transfer, recorded $8 million to $10 million in licensing revenue in 2004.
The office annually processes 1,500 to 2,400 license agreements and spins off three to four companies every year. But Michael Douglas, vice chancellor and director of Washington University's Office of Technology Management, said that the university could be forming more companies.
"We should spin off five to six companies every year," he said, based on the amount of research funding the university receives. The shortfall may reflect the fact that the university traditionally has less interest in the commercialization process and more in conducting the academic research, Douglas said.
Now, as the National Institutes of Health (NIH) and the federal government increasingly want to see more commercialization of technology from the research money they send to universities, Douglas said changes are under way.
Two of the companies spun off from Washington University are Kereos, a biotech company that develops products to more effectively detect and treat cancer, and Exegy, formed to commercialize technology for data storage and high-speed data searching that was developed at the university.
At Saint Louis University, $2.5 million in licensing revenue was generated in 2004, and three companies were formed: Auxagen, Cervimark and ChemBionix.
The University of Missouri-St. Louis has been setting up two companies on campus, but would not disclose their names as the university is still in the process of wrapping up the agreements, according to Nasser Arshadi, vice provost for research. The University of Missouri system had annual licensing revenue of $9.2 million.
Universities are increasingly investing in technology transfer at campuses nationwide. According to the Association of University Technology Managers (AUTM) Licensing Survey for 2003, 195 U.S. institutions reported that 4,516 new licenses and options were executed in fiscal 2003, up from 4,312 the year before. Of 189 institutions, 25,979 licenses and options were active in 2003, and 374 new companies based on academic discoveries were reported by 190 institutions, according to the survey.
According to the AUTM survey, 188 U.S. institutions reported $38.53 billion in sponsored research expenditures in 2003, up 10.1 percent from the year before.
Washington University receives about 80 percent of the government funding that flows into Missouri universities, according to Jon Kratochvil, business development manager at the university. He said that in fiscal year 2004 the university received $468 million in total external research funding.
It also receives funding from the Kansas City-based Ewing Marion Kauffman Foundation's program to promote entrepreneurship education, the Kauffman Campuses Initiative.
Douglas said the trick for universities is to capture the value of the intellectual property and protect it through patents while also ensuring it reaches the public in a timely manner. "We have an academic duty to see that the value of discoveries is properly delivered for the public good," he said.
When a discovery is licensed, universities usually receive royalties from the licensing fee. At Washington University, the creator receives 35 percent of the revenue, the creator's school receives 40 percent and the Office of Technology Management gets 25 percent.
At Saint Louis University, the inventor receives 40 percent of the royalties while the inventor's college, department and the university each receive 20 percent.
At UM-St. Louis, the inventor receives one-third of the licensing fee, and the inventor's department, the tech transfer office and the research office each receive two-ninths of the money.
When a company is formed around an academic discovery and spun off, the universities can take equity in the company, which they usually limit to about 10 percent, Douglas said. The companies will then move off campus, often to a business incubator such as the Center for Emerging Technologies. Of the center's nine companies, Simon said only a few are spinoffs from universities, although most of them have connections to universities through research agreements.
That is also the case at the Nidus Center for Scientific Enterprise at 893 N. Warson Road, where about three of nine companies at the center are spinoffs from universities, according to Robert Calcaterra, president and chief executive.
To further the opportunities for companies built around technology, UM-St. Louis is close to breaking ground on a $5 million information technology incubator that will house up to 12 IT startup companies. The center is scheduled for completion in the fall of 2006.
The center's location has not yet been determined, as the university is awaiting Express Scripts' decision on where to move its headquarters. If the St. Louis-based pharmacy benefits management company leases space from the university at a location south of Highway 40, Arshadi said they want to build the center in that area. If that does not happen, the center will be built at the former Normandy Hospital, which the university owns.
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Sevin Rosen Inks Deal With Vesalius For Entry Into Telemedicine Market
Venture investor Sevin Rosen Funds has signed a partnership with Vesalius Ventures Inc., a firm with expertise in the emerging telemedicine market, to make its first investments in that space.
Sevin Rosen Partner Ram Velidi said his firm's interest in the partnership stems from its desire "to participate in this growing trend towards telemedicine and the medical informatics space." He specifically mentioned market forces such as higher healthcare costs, fewer nurses and patients who want increasingly more specialized treatments as some of the forces driving the market. Meanwhile, less reimbursement obstacles are facing doctors providing telemedical services and improvements to bandwidth associated with the telecommunications industry have increased the capacity of such services, Velidi said.
Vesalius President and Chief Executive Bernard Harris described his company as a "VC accelerator created to take advantage of an emerging market, which we believe telemedicine is," indicating that because of advances in technology that market has become increasingly more diverse. The space "covers devices, telecommunication and information technology," he said.
In 2002, Vesalius signed on its first three partners, Vanguard Ventures, Guidant Corp. and Fremont Ventures. While the accelerator does not have its own fund, it has access to the funds of its partners. Harris said, "We are the due diligence arm for them." Vesalius will recommend companies to its partners, who can then choose whether or not to invest in a particular company. If they invest, Vesalius receives part of the equity of a company that receives an investment, while its operations costs are covered by its partners.
In the medical informatics space, Harris is particularly interested in the mining of data in electronic medical records. In the network IT space, he mentioned changes in reimbursement regulations and the ability to wirelessly perform such things as coding operations. In addition, Bluetooth and other technological advances have allowed the development of telediagnostics.
Sevin Rosen's Velidi mentioned that Vesalius' other partners are individuals and firms who understand the convergence of medical informatics with technology, and any investment will have "a good syndicate of partners built in." Other members of Vesalius' board include Robert Ulrich, general partner at Vanguard, William McConnel, the vice president and chief information officer of Guidant, and Blake Winchell, general partner at Fremont.
Harris said Vesalius is currently closing on its first investment and has term sheets out on two additional companies.
Sevin Rosen has yet to make an investment in the telemedicine space, Velidi said, but he believes the firm's background in telecommunications, semiconductors and information technology, as well as a handful of life science investments made by the firm, could make this space increasingly important to it.
Velidi mentioned remote consultation as one of the most interesting aspects of telemedicine. Venture-backed Visicu Inc., a provider of software and services for the off-site management of intensive care units, has this year added Indiana-based Clarian Health Partners and Ohio-based OhioHealth to the list of healthcare providers it serves. Visicu, which monitors the condition of ICU patients of different hospitals from one facility, is expecting to file an IPO in the first half of 2005. Another company looking for an IPO window in 2005 is US Labs, a cancer diagnostics company growing at an annual rate of 40% that uses the Internet to allow oncology specialists to interpret test results from various locations. Also, FutureHealth Corp., a provider of remote disease management services, recently raised a $3.5 million Series B. The company's nurses provide off-site consultations to chronically-diseased employees of self-insured companies.
Velidi said that typical of Sevin Rosen, no specific amount has been allocated to the telemedicine space. For the moment the firm only has plans to invest in one or two companies through its partnership with Vesalius.
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Former Secretary Colin Powell named Strategic Limited Partner at Kleiner Perkins Caufield & Byers
Kleiner Perkins Caufield & Byers (KPCB) – an innovator in providing venture and relationship capital services to entrepreneurs – announced former Secretary of State Colin Powell has become a KPCB strategic limited partner.
General Powell said, “I’ve been privileged to work with good people on important missions, and have known KPCB entrepreneurs and partners for years. Those entrepreneurs have passion for clear missions — building innovative, global businesses that better the world. I welcome the opportunity to help develop global leaders who deliver powerful innovation where we need it most.”
General Powell, 68, was sworn in as the 65 th Secretary of State in 2001 after unanimous confirmation by the U.S. Senate. He served in the military for 35 years, and rose to the rank of 4-star General. His last assignment, from October 1989 to September 1993, was as Chairman of the Joint Chiefs of Staff, the highest military position in the Department of Defense. During this time, he oversaw 28 crises, including Operation Desert Storm in the 1991 Persian Gulf War.
General Powell earned a bachelor’s degree in geology from the City College of New York and a Master of Business Administration degree from George Washington University . He also holds honorary degrees from universities and colleges across the country.
The recipient of numerous U.S. and foreign military awards, General Powell has also been recognized with several civilian awards, including two Presidential Medals of Freedom, the President’s Citizens Medal, the Congressional Gold Medal, the Secretary of State Distinguished Service Medal, and the Secretary of Energy Distinguished Service Medal.
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Sevin Rosen Funds Adds Brian Berliner as Entrepreneur in Residence
Representatives of Sevin Rosen announced the addition of Brian Berliner, successful entrepreneur and noted open source contributor, as their latest Entrepreneur in Residence (EIR). Berliner will leverage his two decades of expertise and pursue new business ideas in the areas of enterprise software, open source, distributed computing and social networking. In his role as EIR, Berliner works with the Sevin Rosen partners on evaluating new markets, performing due diligence and bringing additional deal flow to the firm.
Berliner has held prominent leadership roles in senior management and software products engineering in addition to co-founding three companies. He is the well-known creator of Concurrent Versions System (CVS), the most popular source code control product in the world, which supports more than 100,000 projects on the SourceForge.net environment alone.
Berliner maintains that such industry dislocations include the maturing open source arena, commodity hardware and blade systems, utility computing and virtualization, next-generation application architectures (facilitated by Web 2.0, AJAX and RSS/Atom) and social/collaboration platforms.
Berliner comes most recently from Cassatt Corporation, a leading IT automation software company, where he was co-founder, EVP and founding CTO. Leading the company's strategic research and development, he defined the product design center, architecture and product roadmap. Prior to this, Berliner was co-founder and EVP of engineering and product architecture at Allocity (acquired by EMC in 2004), a network storage and storage resource management company. He also was senior software engineer at Convex Computer Corporation, a vector processing supercomputer company, which went public in 1986.
Berliner served as a senior staff engineer at Sun Microsystems, Inc., where he built storage and caching file system products for Solaris. He was awarded 10 software patents for network file system caching technologies under Microsoft Windows.
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Austin Ventures Announces Addition of Venture Partner; Thomas Ball to Focus Efforts on Information Technology Investments
Representatives of Austin Ventures, one of the most established early-stage venture capital firms, announced the addition of venture partner, Thomas Ball. Ball will focus his efforts on early-stage information technology companies, with a focus on application and infrastructure software and technology-enabled business and consumer services.
Most recently, Tom was CEO and co-founder of Openfield Technologies. Prior to the merger of Openfield with Razorgator, Tom was instrumental in transforming an entire industry's technology infrastructure. He also played a key role in securing partnership deals including Yahoo!, MSN, eBay, and KnightRidder. Prior to Openfield, Tom was the chairman, CEO and founder of eCoupons (acquired by Lifeminders, NASDAQ:LFMN). Tom also has experience in private equity investing and strategy consulting from his time as a principal at Discovery Capital and as an engagement manager at Mitchell Madison Group.
Tom is currently completing the two-year Kauffman Fellows Program at the Center for Venture Education. He received an MBA from the Stanford University Graduate School of Business and a B.S. in Finance with honors from the University of Florida.
