TechStar

State budget funds could boost efforts to promote tech transfer
When it comes to the state’s biennial budget, there is little suspense among the academic and business professionals involved in TechStar, a seminal organization to link academic research with private entities in the state.
Funding to fuel start-up of the technology-transfer operation — designed to keep the fruits of Wisconsin’s research universities in the state — came through the conference committee of the legislature intact. Gov. Scott McCallum is a strong supporter of the concept, and William Hendee, senior associate dean and vice president of Wisconsin Medical College in Wauwatosa, said the governor’s approval is a given.
Techstar was organized cooperatively by several southeastern Wisconsin universities, including the Medical College of Wisconsin, the University of Wisconsin-Milwaukee, Milwaukee School of Engineering, Marquette University and the University of Wisconsin-Parkside.
“We have a small amount of money that was granted several months ago by the Milwaukee business community,” Hendee said. “Other than that, we have not looked for other sources of money. We are very confident this is going to happen. It is true that, ultimately, Techstar will be self-sustaining.”
A McCallum staffer implied that Hendee’s confidence is well-justified, and the governor himself said he specifically looks forward to signing a biennial budget that includes Techstar.
“The TechStar program is an essential part of our plan to bring high-tech, high-skill and high-wage jobs to Wisconsin, and keep those jobs here,” McCallum said. “I’m very pleased that my $1.5 million budget provision for TechStar came through the Legislature intact.
“TechStar will turn the research efforts of southeastern Wisconsin’s universities into marketable products, benefiting both the academic and business communities. By matching entrepreneurs and existing businesses with researchers and professors, TechStar ensures that good ideas can always translate into good jobs for Wisconsin’s working families.”
Hendee said that Techstar board members have been confident enough in their success that they have gone ahead — informally — with the groundwork necessary to launch operations.
“Since we know it’s going to happen, we are already doing a lot,” Hendee said. “We have generated a letter of agreement to authorize the Milwaukee Metropolitan Association of Commerce (MMAC) to be the voice on behalf of institution, and have already secured some space in the building housed by MMAC. And we are beginning to interview candidates — unofficially — for the position of director. All of these things are starting to happen. So we are not sitting idly by waiting for the money. We hope to be in operation with an office by late fall.”
Up and running … then what?
While Hendee and the governor’s office are confident that Techstar will receive the $1.5 million in start-up money, Hendee gets hazier on the details of how Techstar will sustain itself once the state money runs out.
“We will be developing an office staff to spearhead this effort under a governing board from the academic and business/financial communities,” Hendee said. “Once the group gets into an office, the director of that office will have his or her own ideas.”
There are no initial plans to charge private companies directly for TechStar services, according to Hendee.
“We had not anticipated charging fees for services,” Hendee said. “We need to document the usefulness of those services first. For the time being we need to simply encourage entrepreneurialism and facilitate technology transfer.”
In the interim, Hendee said the organization would look to disparate funding sources until a balance can be struck. The first three years should be the determining factor, he implied.
“We are looking at asking for contributions from industry and business — perhaps foundation help — and will be looking to see if the state would continue to help us,” Hendee said. “We will have to see what individual contributions would do. Ultimately — some equity investments in start-up companies could help pay for operations. Down the road, we could charge fees as well.”
Mark Mone, associate dean of executive programs at the University of Wisconsin-Milwaukee, said technology-transfer organizations elsewhere operate on a variety of business models.
“When we look at some of the other operations, one of the models we like a lot is the Washington Technology Center model,” Mone said. “They receive state money that gets put out in different types of grants. For different-sized businesses they have different payback policies. Originally, we had requested $6 million in the biennial budget — which would have included $4 million for grants to entrepreneurs. Because the budget got cut to $1.5 million, we don’t have that type of capacity. How we actually operate, to what extent we charge for things — we don’t know. We haven’t taken it that far yet.”
Mone confirmed Hendee’s statement that members of Techstar’s board have expressed support for Techstar becoming, in effect, a venture capitalist.
“I could see down the road, three to five years, Techstar could have a larger stake in some of those companies,” Mone said. “Techstar could get involved in capital provision as well as providing other types of assistance. It would be dependent on other sources of funding.”
Change necessary
While the source of revenue for TechStar is up in the air, there is no doubt about what the organization needs to accomplish. Recent history is full of stories that all end the same — with great ideas the state subsidized disappearing across state lines.
Hendee relays the story of MedinOX — a start-up company in San Diego. MedinOX was established a few years ago by a former Medical College of Wisconsin academic who developed a technology to test the amount of nitrous oxide in the bloodstream. Nitrous oxide collects in the tissues of the body prior to the onset of septic shock — an often-fatal condition that can result from major surgery or multiple organ failures. By detecting the chemical early, doctors can intervene and prevent fatalities.
Another reverse-success story is InterImmune, a San Francisco-area company exploring the application of research completed at the Medical College of Wisconsin’s microbiology and human genetics department.
Hendee relayed two stories that end with Wisconsin research going to Boston. A catheter that was developed here, he said, is now being marketed by Boston Scientific. Another case history involves technology used to prevent recurrence of stenosis in blood vessels after angioplasty. The invention originated at the Medical College of Wisconsin but was licensed to a company in Colorodo. Later, the license was sold to a company in Boston.
“Communities that benefit from this technology have not been communities in Wisconsin,” Hendee said. “In the last two or three years, we have been seeing a changing environment, with more venture capital and more seed capital becoming available. We are having some success with that.”
More than money
In the end, Hendee said, technology will follow the money.
“There needs to be venture and seed capital — the whole spectrum of financial opportunity for investing in start-ups,” Hendee said. “We need everything from angel to seed capital to long-term capital investments. And we need to encourage these types of start-up companies by making life as easy as possible on them when they don’t have much capital. We will have to look for ways to reduce taxes.”
Mone said he was encouraged by developments in southeastern Wisconsin that seem to be making more capital available locally.
“There is a belief that a lot of the venture capital folks would like close scrutiny,” Mone said. “And we are beginning to see angel investment groups like Jeff Torinus’ group out of West Bend and Jeff Rusinow with Silicon Pastures.”
Apart from tax and financial issues, Hendee said tech start-ups also need basic business consulting services, which could be provided by TechStar.
“We need to have ways that they can network with individuals who can help them with strategic planning,” Hendee said. “Many entrepreneurs don’t have experience in business planning. They have the idea, but need help to turn into a valid business. They will need legal advice. They need to know how do you get incorporated, how to handle benefits packages. Right now they all have to reinvent the wheel because there is not a good place to go to find out what they need to know.”
August 31, 2001 Small Business Times, Milwaukee