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TECHNOLOGY TRANSFER IN TENNESSEE
COMMENTS ON CURRENT COMMERCIALIZATION AND TECHNOLOGY TRANSFER IN
TENNESSEE AND RECOMMENDATIONS FOR IMPROVING CURRENT PROCESS
INTRODUCTION
Life Science Tennessee (LifeSciTN) is a member-‐driven association representing a vast array of companies, institutions and enterprises engaged in the life sciences throughout the state. LifeSciTN members and life sciences companies are located in all nine geographical regions of Tennessee and include industry subsectors: biotechnology, pharmaceuticals, medical devices, diagnostics, agricultural biosciences, research and educational institutions, clinical research
organizations and other related activities. LifeSciTN collaborates with State of Tennessee leadership, including the
Governor’s ofDice, Department of Economic and Community Development and legislative leadership, in a vigorous effort to determine statewide strategies that will boost innovation and commercialization in Tennessee.
A region’s prosperity is determined by the ability of that region to identify, create and commercialize innovation. This is true not only in Tennessee, for this relationship is a universal phenomenon. For Tennessee to be a successful leader in innovation, it is imperative that we act now and not wait until others have blazed all the trails before us. We will forge ahead in a pro-‐active yet logical manner by employing novel approaches that are tempered with fundamentally sound principles inciting us to engage the free-‐market process and the entrepreneurial spirit. This spirit has been a hallmark of Tennessee culture for decades. An area of weakness that we would like to address is that Tennessee research institutions are currently underutilized inhibiting innovation-‐based job creation for our state.
To establish a framework for its contribution to these discussions, Life Science Tennessee’s Economic Development and Entrepreneurship Development Subcommittee was charged with identifying existing challenges that impede
commercialization, creating top-‐line strategic recommendations to address those challenges, and, as a key component, presenting a set of observations and recommendations that can help propel Tennessee forward in an era of bright hope, but constrained resources. Members of this Subcommittee are experienced professionals and strategists that deal with research and commercialization regularly through their daily work – including professionals and directors at the state’s technology transfer ofDices, members of the state’s venture community and industry representatives.
The Committee identiDied seven barriers to commercialization and innovation-‐based job creation in Tennessee and then made top-‐line recommendations to begin the process of addressing these challenges. In drafting the barriers as well as the recommendations, the Subcommittee came to better understand that there was not one single approach to the challenges that exists for Tennessee in commercialization. Rather the challenges, stakeholders and the cultures and operations of all the major parties should be considered and addressed – each playing a role in the Dinal solution. Under LifeSciTN, the state’s life science community is becoming highly organized and mobilized. Our industry, as well as Tennessee’s other technology based sectors, stand to grow and prosper exponentially from a review and change in Tennessee’s commercialization and technology transfer activities. This report is generated solely from the life science sector; other sectors may wish to evaluate the innovation process as well, so that commercialization strategies can be uniquely customized to each of the state’s major industries. The Committee agrees that much of what is developed in this report can be directly transferable to other technology industries both in our state and beyond.
BACKGROUND
On March 14, 2011 in his Dirst State of the State Address, Governor Bill Haslam said, “Universities should work together with the private sector to Dind ways to effectively translate the investment in ongoing research into businesses.” Just a few weeks later the Governor announced the Jobs4TN plan which included a strong focus on innovation as one of four
strategies to make Tennessee the number one state for high-‐quality job creation in the Southeast. Within a short span of time following the Governor’s address and announcement, Speaker Beth Harwell visited Memphis Bioworks Foundation for a Life Science Tennessee event, and subsequently became interested in improving technology commercialization in our public universities.
As the Governor and legislative leadership look for ways to improve the state’s economy, they committed to make innovation a policy priority. Through programs such as the INCITE initiative announced in May and StartUp Tennessee, the new administration has certainly placed an important “Dlag in the ground” that they are very serious about innovation, commercialization, investment, technology and entrepreneurship.
LifeSciTN asserts that with the alignment of the State’s leadership, in partnership with a powerful life sciences sector and other technology-‐focused organizations, the state of Tennessee is strategically well positioned for transformational progress.
A CALL TO ACTION
As with any transformational process, leadership is the lynchpin to success. The message regarding Tennessee’s potential to expand its core technology clusters is already evident, and it needs to be delivered with campaign-‐ style purpose and with speci>ic recommendations.
With regard to commercialization, technology transfer and entrepreneur and business creation, a strong position and call to action from the highest levels of government will be needed to secure the buy in, support and systemic change required at both the state’s public and private institutions. This leadership, demonstrated at the
Governor and ECD Commissioner’s of>ices, should be transferred to a call to action to include leadership at all the major stakeholder layers – from university trustees and presidents, to chancellors, to directors of technology transfer of>ices to industry.
Some good models for this approach are initiatives created under Governor Lamar Alexander (term 1979-‐1987). These examples include the Memphis Jobs Conference, an economic development summit and initiative led by Bill Gibbons in the 1980s. This conference helped shaped Memphis’ messages as an international logistics hub. Governor Lamar Alexander also convened a major “Education Summit” at Opryland in the early 1980s. The leaders of K-‐12, the Tennessee Board of
THE MESSAGE
Both the Governor and Commissioner regularly speak with pride about the rich foundation for technology innovation that exists in Tennessee. They cite the state’s generators of intellectual assets – Oak Ridge National Laboratory, the U.S. Department of Energy’s largest science and energy lab; Vanderbilt University, one of the nation’s most prestigious institutions of higher education; St. Jude Children’s Research Hospital, an internationally known center focused on research for pediatric cancer and other catastrophic diseases; The University of Tennessee, the state’s land-‐grant institution with a stated goal of moving into the Top 25 research universities in the U.S.; Tennessee Board of Regents, the nation’s sixth largest system of public higher education with research institutions like the University of Memphis, East Tennessee State and Tennessee State; and the various private universities that are afDiliated with the Tennessee Association of Independent Colleges and Schools.
With a major national lab, a top private university and a rich mix of public universities, Tennessee has the right foundation for success in capitalizing on the research conducted at these entities and intellectual property that their researchers generate. Tennessee is also better positioned than it ever has been to pursue an aggressive program to link Tennessee-‐ based entrepreneurs to these Tennessee-‐generated inventions through the Startup Tennessee initiative and capitalize on the 10 new TNInvestcos that were established in the past year.
An old farmer once said, “We’re not farming half as well as we know how.” The same can be said for the independent ways in which Tennessee’s generators on inventions have worked in the past. Through the leadership of the Governor and Commissioner, Tennessee has a real opportunity to move forward to address critical needs that are impacting our success. Public and private leaders working together can make a difference.
JOB CREATION:
Steps Through Commercialization
LifeSciTN has adopted a simpliDied process model for technology moving from innovation to commercialization into a sustainable business. This report reDlects on each of these areas, which collectively can materially improve the creation of jobs and investments in life sciences in Tennessee.
In the Development stage an innovation is researched and identiDied for commercial applicability. For the purpose of this report, this phase is done primarily at our state’s research institutions.
The Maturation stage brings market assessment, prototyping and modeling for the continued evaluation of how the innovation may be applied. It is during this phase that innovation normally takes on “an investable proposition”
perspective. In other words, enough risk has been eliminated to warrant the allocation of limited resources such as skilled scientists and engineers, risk oriented capital and executive leadership to the basic idea of the enterprise being
considered.
In the Commercialization stage, the innovation is patented by the research institution and licensed to an existing company or an entrepreneur. Many important inventions are licensed to existing companies and some are licensed to an entrepreneur for the creation of a company. The licensing creates a path to marketplace, including negotiation of business terms between the entrepreneur and the research institution. It should be noted that the use of the word
Commercialization in this process does not mean the introduction of an item or service into commerce but the “commercialization” of the idea out of the research institution into a commercial entity.
Finally, the innovation or business is introduced to market and processes are established to Sustain the business model and the industry as a whole. This stage should foster sound policy and activity to support the innovation and, in turn, the entire industry, from early stage companies to established corporations. This is often the most challenging and complex phase but it normally falls outside the scope of the research institutions and upon the shoulders of the management team and stakeholders in the commercial entity.
CHALLENGE #1: LIMITED ACCESS TO CAPITAL FROM SOURCES THAT SUPPORT EARLY-STAGE ACTIVITIES
The nature of inventions emanating from many of Tennessee’s research centers can best be described as “early stage.” Strategically focused public investments can advance these technologies and increase their attractiveness to
entrepreneurs. At this time, Tennessee trails many states in its support of proof-‐of-‐concept activities. Increased resources for late-‐stage research, early stage development, and technology prototyping would contribute to the continued
development of technologies and commercialization.
Recommendation: Increase access to capital for early-stage innovation activities
Increase funding avenues for early-‐stage activities that can be used to demonstrate the viability of new ideas, which will then serve as a multiplier by allowing for more competitive SBIR and STTR proposals. Proof-‐of-‐concept funding supports companies that have a longer start-‐up cycle and high capital requirements, as generally seen in the life sciences industry. In this model, we suggest the implementation of several rounds of staggered funding, built around meeting strategic milestones. This would allot the company the entire amount over time to allow for Diltering and mentoring of the innovation and the company during this important stage.
CHALLENGE #2: BECAUSE COMMERCIALIZATION AND ECONOMIC DEVELOPMENT HAVE BEEN OF SECONDARY IMPORTANCE WITHIN MOST PUBLIC INSTITUTIONS THE CULTURE AND INFRASTRUCTURE AREN’T IN PLACE TO MAXIMIZE SUCCESS
Tennessee’s public institutions have engaged in technology transfer for many years, but with a diversity of goals and wide variety of importance placed on commercialization of research discoveries. What was viable in the past is insufDicient to grow Tennessee’s economy in the information age, when new businesses are built around knowledge workers more than manual laborers. We suggest that all public institutions develop a culture and infrastructure that serves to identify and support commercialization and economic development. Simultaneously, we need to support and incentivize research institutions to allow them to reduce their focus on the short-‐term revenue generation from their innovations. This will allow better academic alignment with the entrepreneurs who need to invest scarce funds into R&D, manufacturing, and marketing.
Recommendation: Governor Haslam should continue to champion improving commercialization practices at Tennessee’s research institutions
Transformational change requires a vision and a game plan from top leadership. The State of Tennessee can set a horizon that fosters all of Tennessee’s public universities to focus on commercialization within their campus leadership and champion additional engagement by private universities, private research institutions and ORNL. There is a wide range of recommendations that could change the culture to be more favorable to commercialization at our research institutions. The state’s university system should foster policies that enable innovations to be brought to the marketplace with the purpose to improve the quality of life for Tennesseans, the nation and the world.
As part of the call for commercialization and the Governor’s general efforts to reduce bureaucracy and make Tennessee friendlier to businesses, Universities should identify policies and practices that are impeding commercialization and or interfering with industry partnerships.
CHALLENGE #3: LACK OF COMMUNITY AND COLLABORATION – BOTH FORMAL AND INFORMAL – BETWEEN THE STATE’S INNOVATORS, RESEARCH INSTITUTIONS AND ENTREPRENEURS
Driven by the call to action for commercialization from state and institutional leadership, Tennessee’s entrepreneurship community, industries and research institutions should create more pathways for communication and collaboration. This daily activity and collaboration should be done on numerous levels to support and grow a culture that fosters the life sciences industry, including research, commercialization and workforce development activities.
Recommendations: Communication and collaboration needs to take place with a multi-dimensional approach
The state and its commercialization stakeholders should identify pathways – both formal and informal – for more activity between innovator and entrepreneur. To begin, several models exist in this space and should be considered for statewide adoption. LifeSciTN is implementing a regular informal function in the middle Tennessee region where Vanderbilt’s researchers will regularly meet with the venture capital community.
CHALLENGE #4: LACK OF ACTIVITIES THAT SUPPORT A CULTURE OF ENTREPRENEURSHIP
Historically, Tennessee has lacked programming to support, mentor, recruit and retain entrepreneurs. Programs such as TNInvestcos and the Haslam Administration’s new INCITE fund and Startup Tennessee initiative are positive steps to support and nurture entrepreneurs through direct support as well as access to the always critical capital.
Recommendation: Continue and expand the current path to encourage and mentor entrepreneurs
Starting companies in Tennessee from Tennessee-‐created technologies is an important goal. The state should continue to focus on a high-‐impact, statewide initiative that encourages, mentors and trains promising entrepreneurs like what we have begun with the Regional Entrepreneurial Accelerator Program and Startup Tennessee. It is also important that the state nurture and develop key technology clusters by strategically focusing on recruitments that could help grow a speciDic vertical. Therefore, the state should focus on programs that increase retention and recruitment of life science industry entrepreneurs to build momentum. A secondary goal should be to use these programs to increase the frequency of contact between entrepreneurs and academic researchers.
CHALLENGE #5: LACK OF A ROBUST WORKFORCE PREPARED TO SUPPORT THE LIFE SCIENCES INDUSTRY, AS WELL AS THE STATE’S OTHER MAJOR INDUSTRY CLUSTERS
Tennessee falls well short in STEM education and much is being done by the state to focus those efforts in secondary education. There is also much work that needs to be done creating partnerships between the life sciences industry and our universities and institutions of higher learning. The intent of the partnership is to build a workforce with the right skills to be attractive and productive employees for Tennessee’s growth industries.
Additionally, industry should be more engaged with our state’s research institutions in sponsored research. The recent 2010 Kauffman New Economy Index cites that Tennessee is currently 8th in non-‐industry research funding (federal, state, non-‐proDit) and 35th in industry-‐invested R&D.
CHALLENGE #6: HISTORIC LACK OF EFFORTS ON RETENTION OF SMALL BUSINESS AND STARTUPS, PARTICULARLY IN THE LIFE SCIENCES INDUSTRY.
As noted in Challenge #2 above, Tennessee’s recruitment and retention efforts have not been structured to support the existing life science industry in Tennessee – and this is particularly true of its small companies. Life science and technology startups may spend an extended period small and unproDitable, until the achievement of key technology or regulatory milestones allows them to grow exponentially. Tennessee needs to recognize that losing a life science startup is not just losing the 5 jobs that exist, but is also losing the potential 100 or 1000 jobs that would be created if the medical device or drug succeeds in gaining FDA approval.
Recommendation: Foster incentive programs and expand incubators to support existing small business activity.
Some retention efforts could be solved through the creation of a more robust innovation culture in our state – which can be advanced through much of what is outlined in this document. The State’s activities through the regional accelerators are certainly a great beginning and noteworthy. However, Tennessee should also consider other programs, such as grants, to further stimulate growth in commercialization and innovation in Tennessee.
CHALLENGE #7: HISTORIC LACK OF RECRUITMENT EFFORTS IN THE LIFE SCIENCES INDUSTRY, AS WELL AS OTHER TECHNOLOGY-BASED SECTORS.
Historically, Tennessee has not placed an emphasis on recruitment of the life sciences industry. Certainly not in the way that Tennessee has targeted automobile manufacturing and logistics, for example. Tennessee’s economic recruitment efforts have traditionally focused on large manufacturing. In fact, Tennessee currently offers no recruitment incentives for small and emerging businesses, which accounts for much of the life sciences industry. The primary incentives offered by the state for recruitment are based on number of employees and total investment – neither of which are compelling for an emerging business in the life sciences space.
However, the new Haslam administration is certainly changing that prospective. The clusters identiDied by the Governor and the Department of Economic and Community Development certainly represent the life sciences industry, including Healthcare, Energy Technologies and Logistics.
Recommendation: Focus recruitment efforts on the life sciences industry, as well as emerging and mid-sized business.
Tennessee has extraordinarily strong life science industry fundamentals – a statewide presence, big-‐brand assets, professional talent and immense Dinancial resources. There is opportunity to recruit nationally and internationally to build around current assets and to collaborate with Tennessee’s innovators and commercial prospects.
LIFE SCIENCE TENNESSEE
Life Science Tennessee is a statewide, non-‐proDit, member organization whose mission is to advance and grow the life science industry in Tennessee through advocacy, partnerships and alignment with economic and workforce development.
The organization’s members include companies, universities, research institutions, government and economic development groups, graduate students and other industry associations involved in discovery and application of life sciences products and related services that improve the health and well-‐being of people throughout the world. Life Science Tennessee conducts business and economic development activities; advocates on behalf of the industry; educates the public about the beneDits of life sciences research and product development; and provides a network for the exchange of ideas, information and opportunities.
