By Claudia Capos, Guest Editor
New opportunities for launching startup companies spun out of the University of Michigan are popping up all around the Ann Arbor campus, according to Mike Psarouthakis, director of the Venture Center at the U-M Office of Technology Transfer.
“Most of our startups still come primarily out of the School of Medicine and the College of Engineering,” he explains. “But in addition to life sciences and engineering, we’re starting to see a lot more activity in software, artificial intelligence and Big Data analysis. That activity is opening up doors in other schools. In the last couple of years, we’ve spun out companies from the Law School, and we have even had talks with the School of Music, Theatre and Dance.”
Psarouthakis also sees a wellspring of opportunities emerging in the area of autonomous vehicles. “Not just software and artificial intelligence, but also new materials and electrification of vehicles,” he says. “We have a great deal of electric technologies, battery technologies and wireless technologies in the University pipeline.”
In 2017, U-M Tech Transfer received 444 invention disclosures, issued 172 patents, signed 173 license and option agreements and launched 12 startups. To date in 2018, Tech Transfer has spun out seven new startups.
Approximately 90 percent of the licensing agreements for U-M technologies are signed by large companies, such as General Motors Company and Dow Chemical. The remaining 10 percent go down the startup pathway and typically work with the Venture Center team. Currently, the center’s Venture Accelerator in the North Campus Research Complex is hosting 17 startup companies, which receive guidance from mentors-in-residence drawn from the local entrepreneurial and investment community.
“Most of our new spinouts and startups don’t raise money right away, because they are just formed and still have a lot of business development to do before they can get substantial funding,” Psarouthakis explains. “Our team helps founders develop the business concept to commercialize their technology.” Among the biggest challenges, he says, are ensuring: 1) there is an appropriate market for the company’s product or service; 2) the startup has enough capital to survive until its sales reach a sustainable level; and 3) the company has the business talent on board to provide leadership. The Venture Center also offers guidance through the startup’s initial rounds of funding and engages with the venture community.
“In the last year or two, our companies have been relatively successful in raising funding after they’ve been spun out,” Psarouthakis reports. In 2012, the Jumpstart Our Business Startups Act (JOBS Act) established crowdfunding provisions that allow early-stage businesses to offer and sell securities. This opened up another fundraising avenue. Court Innovations, a 2014 spinout from the Law School, successfully raised $499,000 through Netcapital, an equity crowdfunding portal registered with the U.S. Securities and Exchange Commission.
The Venture Center’s strong partnership with the Michigan Growth Capital Symposium has created a valuable two-way channel that allows U-M spinouts to gain an early entrée to the investment community and in turn provides investors with an early glimpse at emerging technologies and companies at the University.
“The MGCS is an incredible opportunity for us to showcase what is being developed at the University,” Psarouthakis says. “It’s also a great networking event for the entire entrepreneurial community, which can get exposure to venture capital and angel investors.” He and his team meet with VCs during the symposium to provide broad brush stokes or fine details about technology projects that may be relevant to the sectors in which they invest.
“The MGCS is an important entrepreneurial and investment component for the entire state of Michigan, because the companies that present are not just University of Michigan companies ─ they are companies from around the Midwest,” Psarouthakis remarks. “The quality is good, and many deals have come out of first meetings at this event.”
Nevertheless, securing venture capital is still quite a challenge in the state of Michigan. “The more exposure we can get with VCs and the more exposure our companies can get with VCs, the better it is for our state’s entrepreneurial economy,” he concludes.