University of Washington president Michael Young gave a ten-minute talk in February 2012 at the opening of a business incubator on the UW campus. The talk is fascinating as a rationalization for the $100M effort to flip faculty and student startups to investors for UW profit. I am providing annotations to draw out the implications of the talk, in a series of posts. President Young’s talk is in purple and my comments follow in brown, in square brackets.
Here is a fifth installment, a series of statements and comments, as Mr. Young moves to his dedicatory thoughts.
Uh, all of this is a very long-winded way of saying that this is a complicated process that requires deep, intimate and profound partnerships, and so today we really stand here thanking you for your willingness to be partners in this, in this enterprise. Um, we have made tremendous strides in our capacity to commercialize, and the work that has gone on under Linden’s office uh in terms of uh connecting to the business community, creating much uh smoother transitions, reducing transaction costs, being able to help people see what the possibilities are in terms of research has been nothing short of extraordinary. Absolutely nothing short of extraordinary. Uh, there is only so much we can do within the university because ultimately we have to connect with the business community uh to do the other half of this, of this operation.
[Comment: Mr. Young does not elaborate on what "deep, intimate and profound" partnerships might mean. Nor why the process has to be complicated--other than that administrators insist that partnering with business must follow a process run by administrators. While Mr. Young is willing to say pleasant things about the Center for Commercialization, as is suited to a ceremony of this sort, the actual metrics appear to point to the Center for Commercialization being less effective than UW TechTrans, the previous version of UW's technology transfer operation. More on that soon.
The business community, and apparently especially the investment community, is the object of Mr. Young's thanks and appeal to do "the other half of this operation"--presumably meaning the effort to start companies that can be flipped for equity value to a new set of investors, once students have added sufficient value. The investment community's role, apparently, is to buy out UW's equity interest, pay UW's patenting costs, and pay a royalty on sales for the life of the company or the life of UW's last to expire IP position, whichever comes first.]
The exciting thing about this building today is it provides us a wonderful physical manifestation of both our commitment to do this, uh, and of um uh the kind of connections that are essential. The fact that a professor gets to stroll down here rather than frantically riding his bicycle for miles is powerful and profound. The fact that our students have access uh to this makes a difference. The fact that we have some parking spaces for the business people who come up here is absolutely critical uh because it is that, it is that, uh the geography will be to some degree destiny in our capacity create.
[Comment: While having a business incubator on campus is no doubt convenient, but I expect relatively few faculty members ride their bicycles to work anyway. In any event, the picture of faculty members wobbling frantically on bicycles, like little Einsteins, is another gesture at the expense of the faculty. The successful, productive ones have Porsches. The rest are just frantic bike-riders. Fluke Hall will allow the unsuccessful to stroll.
What Mr. Young does not point out is that the School of Medicine is over a half mile away and the Applied Physics Lab is three quarters of a mile. No doubt faculty will have to ride their bicycles, if they have them, and so will students, as there isn't any free parking at Fluke for them (it costs $15 to park on campus for the day). The point of course, is that the incubator is on campus--convenient for some UW folks, but much less so for, say, customers, clients, investors, and anyone who might think to manage any of these companies. For companies starting on-campus, Fluke Hall is a cocoon, isolated from the working world. The companies that could use Fluke Hall are those that have operations elsewhere, but would benefit from working closely with UW faculty, students, and research staff. Fluke is represented as an export operation, but it ought to be an import operation, and in reality, it is a delaying operation, for which, read on.]
It also provides another opportunity, which is allowing the University’s professors and the work that goes on in the laboratories to remain for some significant period of time connected to the business operation. Uh, at the end of the day as we, as you all know much better than I do, very often it is the second, third, fourth generation of technology that really turns the corner of business. Um, if, if the business goes, spins away from the university too quickly, we lose that capacity for that connection and that real value-added. We also lose it in the state, uh, when businesses spin too quickly out of their university uh, uh, uh geography. Uh, the reasons for staying in the state begin to reduce and all of a sudden sunny sunny climates and higher degrees of venture capital and so forth begin to appeal.
[Comment: Here Mr. Young develops an argument for the slow spin out. A startup will have to stay parked at the university through multiple iterations of technology. It is a fascinating concept that I have not heard in the venture community, that the slow startup is desirable. Apparently, however, a startup cannot develop new technology without staying geospatially connected to the university. If a company were to spin out quickly, according to Mr. Young, then it could move out of state in search of better investors. The argument to Seattle-area investors is that the university is working to keep valuable technology from finding better investors. ]
Uh, and that is despite the fact that the real value added is staying connected with the university for some period of time until it really has proved its worth and has shown what that market niche is, and has developed that technology that truly is significant and truly is transformative.
[Comment: Despite the value added by students providing an interface between faculty and companies, Mr. Young now announces that the real value added comes by keeping companies in the university incubator until their technology is "truly" significant. The figure of thought here is fascinating: the technology that companies start with is not significant or transformative, but somehow messing around in the incubator will change that, where messing around in university research labs won't. That is, why start companies based on "technology" that is half-finished? Why not simply take whatever patent positions one feels compelled to take, and wait to see what further research produces?
The undercurrent of Mr. Young's argument here is that no one should expect results from the incubated companies any time soon. The startups represent an extraordinary educational opportunity for students, but anything significant is years out. What message is that for the investors in the audience? How much money will have to be provided to these startups? And who but the state and the university is going to pony up the money?
I have not seen any figures published by UW about the amount of private investment that Fluke Hall has attracted in the past two and half years. It would appear to be $0, with the only money coming from the state (Life Sciences Discovery Fund), the UW (Commercialization Gap Fund, and related funds), the Washington Research Foundation, and the WRF-controlled W Fund, in which UW has apparently invested $3M of public money that is then invested in UW's own startups). ]
Uh, so this is much more than a building for us. This is a flag-raising exercise. This is an opportunity for us to say that this is an important part of what we do. As a university our central animating theme and passion is to do good. And this is a vehicle, a tremendous vehicle and uh a recognition of the centrality of that particular mission here on this campus.
[Comment: It is entirely appropriate at the dedication of a campus business incubator to take the opportunity to acknowledge that helping new companies is something important. The challenge is connecting that help with doing good. It is another thing to argue that helping startups by first taking their IP and then a hundred hours of attorney time later licensing it back to them for a share of their upside is "helping." While a business incubator may be every bit an exciting resource to have on campus, is Fluke Hall really a "recognition of that particular mission"? Of all the good that a university does, is starting companies at the center of a university's public good? I tend to believe that Mr. Young really believes it. Everything faculty and students do is focused on creating startups that one day will be the next Google or Microsoft, creating jobs and products and money for UW. The rest is frantic bike riding.
The central animating theme may be to do good, but the C4C strategic plan is to flip companies to investors and pocket the upside as a new source of revenue. Plan B may be to present C4C program to the state legislature as so full of potential that the state should become the primary investor, or at least subsidize the efforts of venture capital funds, if a new round of investors does not appear to buy the startup companies.
A business incubator is made to stand for the passion to do good. One might accept that a university should offer charity even to startup companies with two or three more iterations of technology before they have anything significant, but it's hard to see how anyone would view a business incubator as anything other than a business proposition--offering venture investors a low-cost place to park companies until someone does something worthy of the notice of private investment.]
And so I echo Linden’s thanks ah to everybody who made this possible. These things do not happen by accident, they don’t happen by the enthusiasm of of of one person and uh it doesn’t matter what my commitment is, it doesn’t matter what Linden’s commitment is. What matters in the end is how many we can draw into this process with us uh to engage in an exercise like this. So this is an exciting day in the University uh and we are very pleased uh to be able to open this and to thank you, all of you who have made such a difference in making this possible.
[Comment: It is unclear who in the audience has made the university business incubator possible, or who has made a difference. It appears that UW chased out the Washington Technology Center programs on its own, financed the renovation of Fluke Hall with its own money, and has stuffed its own startups into the space. So who is it who has made the business incubator possible?
One might wonder why the commitment of the university president and the (now former) head of the licensing program does not matter. It is an odd gesture. "Whether we are committed or not, the goal is to get others to commit to the program." In short, if we build it, you will pay. Or, we hope you will pay. Or, we hope you will help us look good so the state legislature will pay.]
