[MUSIC] Hello again and welcome back to Beyond Silicon Valley. I'm Michael Goldberg. In previous lectures, we've discussed government support for entrepreneurship, the role of philanthropy and intermediary organizations. This week, we'll explore ways to leverage Anchor Institutions. Some key points you'll learn about are, supporting increased commercialization activity, licensing versus new company formation and measuring success. Cleveland, like many communities around the world, is fortunate to have outstanding research institutions including universities and hospitals. My home university Case Western Reserve attracts over $400 million each year in research funding. And the region is also home to several other strong research universities such as Cleveland State, the University of Akron and Kent State just to name a few. The Cleveland Clinic is the number one ranked hospital in the world for cardiovascular disease. And University Hospitals is another leading health care provider in our region. 10 years ago Cleveland's anchor institutions were struggling to translate their research into commercially viable technologies or companies. There was not a culture of entrepreneurship, or was their a vibrant system for creating, promoting, or nurturing innovation. Institutions were focused on licensing their technologies to large corporations, typically outside the region. Rather than creating local startup companies. New initiatives, funded by the Third Frontier and donors, focused on strengthening the commercialization process at key institutions. As a result, the pace of new company formation increased. In this lecture, we will discuss how communities can work with their anchor institutions. To link their engines of innovation, such as universities, to a connected web of support that includes entrepreneurs, investors, and talent. The combination of political will, a long view, and investment capital can improve the pipeline of start up companies. Dave Neundorfer is the CEO of LineStream Technologies LineStream Technologies is an embedded software company. And we are changing the way that automated products are controlled by delivering easy to use software that delivers advanced performance. >> LineStream's technology was buried in a research lab for 12 years, until a venture capitalist, backed with investment capital from the State of Ohio, and several foundations. Provided the resources of mentoring and management talent to turn it into a stand alone startup company. >> LineStream spun out of Cleveland State University in 2008. I believe we were if not the first, one of the first spin out companies that they, that they had. And the catalyst for this spin out was actually a business planning competition. Where the Professor Dr. Zhiqiang Gao who had been leading about 10 to 12 years of research in the space, put together a presentation to show how, his technology could apply to industry. And how they could potentially build business around it in our current investors happened to be in the audience. For that meeting, the stars aligned. They were able to meet and discuss the blueprint for taking it, out of the research realm at CSU, and beginning it on the path towards commercialization. For decades it was well understood that universities and hospitals were developing innovative ideas and cutting edge research. But turning this into a pipeline of independent high growth companies was a struggle. Frank Samuel, the state of Ohio's former Science and Technology Advisor, explains why the Third Frontier focused on this opportunity. Well the institutions are important for two reasons. One is that they create intellectual property through their research, and they're the source of highly qualified individuals, often young individuals who can contribute to entrepreneurial enterprise. Jackie Acho, then a McKinsey partner working on the regional strategy to support entrepeneurship, recalls why their recommendations pushed for Cleveland to try to take better advantage of its university. >> We really wanted to create a pathway through which technological ideas coming out of universities or. From, you know, people in businesses who wanted to go off on their own, could find uh,a market, and a place to get capital, and some support to be able to start their company and grow it. >> Baiju Shah, former CEO of Bio Enterprise argues that in the past the region had not appropriately invested in the commercialization of technology out of the Institution. One of the clear strengths that we had. That we have probably under invested in, from an economic development perspective, was our region's great clinical and research institutions, in healthcare. We are known in the United States for... Our political institutions. They're considered to be among the best in the country. We've got a great research university that has a whole host of research but in spite of that, unlike, again, other regions where similar ingredients existed, we hadn't seen the growth of our healthcare economy. The products and services that supply those types of institutions and, ultimately, supply institutions across the country and the world. Why were Cleveland's leading institutions struggling to turn their research into new company. Steven Girouard was formerly a Vice President of Johnson and Johnson's Corporate Office of Science and Technology. >> Why don't universities do a great job of commercializing technology. It's really not their expertise. You know, they're great at educating. They're great at publishing papers and writing grants and getting. Basic research funded but they really are not good at design and wrapping business models around designs that will be successful in the in the real world. >> An example of Cleveland's attempt to change the velocity of commercialization activity coming out of the institutions was the creation of the Global Cardiovascular Innovation Center or GCIC. housed at the Cleveland Clinic. The GCIC was funded by a grant from the third frontier matched with investment from institution partners, including the Cleveland Clinic. Mark Low, GCIC's executive director, provides an overview. >> Step back a minute, GCIC was formed with a very generous. $60 million grant from the state of Ohio to establish the organization. And of that roughly half is dedicated to in turn provide support to new technology development and new company formation. >> Charu Ramanathan's CardioInsight whose technology was developed in a lab at Case Western Reserve University. With one of the companies that benefited from GCIC's grants. >> So, so the another vehicle that we use state funded money, is, GCIC. So, the GCIC and the Cleveland Clinic Foundation, it was right on because we were cardiovascular innovative technology. So we actually develop three different clinical applications in heart failure, in catheter navigations signalling the location of the catheter which is a very important clinical impact. As well as building our first commercial software. All of these three key aspects of the product were developed with money invested through the GCIC. >> Although some start up companies grab the headlines for how quickly they are able to scale and grow. Most early stage companies, particularly those in the medical industry, take many years to develop. Mark Low argues the grants that the GCIC provides, help companies like CardioInsight survive, until private funding is secured. >> So the financing continuum or resources for any particular technology Has become a multi step, multi source process that spans a development timeline of biomedical products of anywhere from three to five to 10 years. So it's a long process, requires significant. Amounts of funding and a continuum of availability of that funding to move the products forward. Well that leaves the very early stage technologies without much support. >> Joe Jankowski Case Western Reserve's Chief Innovation Officer, describes why he believes that Cardio Insight made investment sense as a spin off company. >> Cardio Insight was really a technology that had existed a case for almost a decade prior to the company being created. And the company was created by two students, who then were still working on their PhDs in the lab of the original, inventor, and realized that there was value here. The thing that made it easy to consider it a local spin off was, was two factors. One is, it couldn't go to a large company, the Medtronic for Johnson and Johnson, it was too early, there was too much technical risk, so it wasn't as though we had a tough choice to make. The second reason was, because it's early stage um,developments, commercial development would need to be, in the field of what we call clinical translation of getting that sort of first in man study of the term. We had one of the worlds great, you know, cardiology sectors here in Cleveland. >> Since private companies such as Johnson & Johnson tend to only invest in companies that are more well established, Steve Girouard sees the importance that government programs like The Third Frontier, filling the early stage capital gap. >> So The Third Frontier and programs like it are, I think are really important. They're organized in a way that can really make an impact. First of all, they're substantial in terms of their size, the total magnitude of financial resources put behind that program are, can make a difference. They're also Have a long view, which I think is really critical for programs like this. >> Bruce Katz of the Brookings Institution, believes that Northeast Ohio has acted wisely by trying to leverage the strength of its Innovative Institutions. >> So, Northeast Ohio is really fortunate to have this network of advanced research institutions, medical campuses, that are really at the cutting edge of innovation. They're service institutions right? They're teaching the next generation of workers, students, I mean leaders. They're providing health care, but they're also very innovative. Right, they're at the next stage of biotech, biomed, and cracking the code on a wide range of diseases. And that plays itself out, into the private sector as we commercialize Innovation. >> Brad Whitehead, of The Fund for Our Economic Future, concurs with Katz, about trying to harness the innovation of anchor institutions to boost entrepreneurship. >> Anchor institutions sit at the foundation of most economic development strategies of regions around the country and frankly around the world. Part of the kind of, well recognized reason for that is that is because they're a source of ideas, a source of talent a source of innovation and so forth. One of the, I think unsung roles that our anchor institutions in Northeast Ohio have played has, it's provided us. The foundation for which we can also serve the rest of the region. >> Communities outside the U.S. face many of the same challenges we have heard about in Cleveland regarding how to commercialize research from their leading institutions. Chris Zobrist is a professor at the Vietnman National University. >> Until now, I think most government research institutes and haven't had that much interaction in terms of commerce. I think most of the research so far that's come out is largely driven by Government Initiatives and whatever the professors in the university could, could get [SOUND] Government sponsorship for. And typically it wasn't that marketed oriented. >> Yi Zhang is a venture capitalist with Kaiwu Capital in China. Compared to the university in US. They're still not very good at converting R&D into real commercial available product. I know recently, they've been spending lots of effort in that direction. Every university has a patent office. And help with tech IP, and also give you specific instruction on how you can commercialize this part. >> In Cleveland and other communities around the world anchor institutions are trying to translate their research strengths into commercial viable entities. Ultimately the private market determines the commercial success of a technology. The ability of companies like CardioInsight and LineStream Technologies to raise private venture capital financing. Validates the initial investment by government and donors in the commercialization process. As with other forms of early stage investment the final measurement of success and support will be determined over the long term. With the necessary support, anchor institutions are showing the ability to leverage their ideas and talent, instead of letting them gather dust in lab. Success is measured in terms of the number of startup companies launched, the amount of outside private capital raised, the creation of good local jobs, and ultimately, revenue back to the institution after an exit event or through licensing fee. That's it for this lecture of Beyond Silicon Valley. In the next lecture, we'll focus on the emergence of Seed Accelerators and how government and donors support is fueling their growth and transitioning economy. See you next time. [MUSIC]
