The Kauffman Foundation: Bringing Entrepreneurship Up to Date in Kansas City

10/16/09Follow @wroush

Before I came to Xconomy, I didn’t know much about the Kansas City-based Kauffman Foundation beyond what I heard on the radio. If you’re an NPR listener like me, you’ve probably heard their underwriting plug that says it’s the “Foundation of Entrepreneurship.”

But then I started covering stories like the foundation’s annual New Economy Index, in which Massachusetts and Washington nabbed the top two spots last year, and its sponsorship of projects like Ed Roberts’ study last February showing that companies founded by MIT graduates have an annual economic output of more than $2 trillion. I began to see that the Kauffman Foundation, to a far greater extent than any of the 116,000 other private foundations in the U.S., is focused on the relationship between company formation and general economic growth—and not just in a theoretical or academic way, but on a very practical level.

It’s a focus that happens to overlap quite a bit with our own obsessions here at Xconomy. In fact, we’re now partnering directly with the foundation, which has become one of the underwriters of our new Startups Channel, a gathering place for startup-related stories from all of the cities in Xconomy’s network. And last week I had an opportunity to visit the foundation’s campus near the University of Missouri, Kansas City, to attend a reception and dinner honoring the inaugural class of Kauffman Entrepreneur Postdoctoral Fellows. The fellows are a group of 13 scientific researchers singled out for their ambitions to commercialize their laboratory discoveries. (Full disclosure: the foundation picked up the costs of my trip.)

Statue of the Kauffmans The foundation was established in 1966 by Ewing Kauffman, an entrepreneurial pharmaceutical salesman who founded Marion Laboratories in 1950 and built it into a multi-billion dollar company. It’s now one of the 30 largest foundations in the U.S., with roughly $2 billion in assets.

Under the leadership of Carl Schramm, its president and CEO since 2002, the Kauffman Foundation has been aggressively searching for new ways to help entrepreneurs build high-growth companies. In remarks at last week’s dinner, Schramm noted that roughly one-third of the nation’s gross domestic product comes from companies that are less than 30 years old. Research by the foundation, he said, has shown that just 300 to 1,000 new startups each year account for most of that one-third. So the question the foundation has set out to answer, through a new initiative called the Kauffman Labs for Enterprise Creation, is “how can we create another 300 to 1,000 high growth firms per year,” Schramm said.

The postdoctoral fellowship program is part of the Kauffman Labs project. Sandra Miller, a senior fellow at the foundation who was brought in from Stanford to run the fellowship program, says one premise is that the existing structure of American graduate and postgraduate training means that technical founders for new science- and technology-driven companies are always in short supply. “You have these people who are so incredibly trained, and are at the forefront of pioneering research, and yet their hands are almost tied behind their backs, just because of the responsibilities they have in the lab,” Miller says. The fellowship program seeks to remedy that problem by giving promising postdoctoral researchers who are already leaning toward entrepreneurship the freedom to develop their business ideas.

The program pays the fellows’ usual salary and benefits for a year; in return, the principal investigator in each postdoc’s lab is required to release them for at least 20 hours per week to work on launching new ventures around their scientific or engineering findings. The fellows are also paired with local businesses for hands-on internships, and they gather four times per year for intensive week-long workshops at the Kauffman Foundation. (The first such workshop was held last week.)

Two members of the first class of Kauffman Entrepreneur Postdoctoral Fellows are based in Cambridge, MA, Xconomy’s first hometown, and I got to meet them at the reception. Both, not too surprisingly, are from the family of MIT and Harvard laboratories sometimes collectively referred to as the “Langer Lab,” after Robert Langer, the prolific MIT biomedical engineer (and Xconomist) who has trained so many of the area’s leading researchers and entrepreneurs.

Carolina Salvador Morales, an immunoengineering expert, is a postdoc in Langer’s lab at MIT and is developing ways to stimulate the complement system, part of the human immune system, using physically and chemically manipulated nanoparticles. Praveen Kumar Vemula, a postdoc in the laboratory of Langer protege Jeffrey Karp in the Harvard-MIT Division of Health Science and Technology at Harvard Medical School, is investigating the use of drug-infused polymers called hydrogel to treat inflammatory conditions and brain tumors.

Both researchers, before the year-long Kauffman fellowships are over, could find themselves as chief scientific officers at new pharmaceutical startups—but they’ll need help doing it. “The Langer Lab has a pretty good track record at commercialization and entrepreneurship, but the thing is, the postdocs are in there cranking things out, and they still need help with how to take the next steps” toward creating companies, says Miller. “Bob Langer and Jeffrey Karp have been really supportive, giving Carolina and Praveen this time away from the bench. Both Praveen and Carolina have really proven their scientific chops and have made some fascinating discoveries, and have such a strong passion to see their research become real and ultimately to help patients.”

The whole idea of the fellowships is to help the researchers past the practical hurdles they’ll face as they pursue their passions—the better to ensure that fast-growing, job-generating companies come out the other end. But while the majority of the fellows in the inaugural class already have specific technologies they want to pursue, Miller says she doesn’t expect that every single one of those ideas will lead to a company. “A few of them will go through the process and determine that the idea they were working on, thinking that they were going to start a company, might not make the most sense,” she says. “But the fact that we’ve helped them to get there is huge—we call it ‘failing fast.’ They’ll then have a better understanding of how to evaluate their next idea.”

On my way to Kansas City, I also happened to meet Eddie Martucci, a senior analyst at Boston-based PureTech Ventures who is one of the first two Kauffman Entrepreneur Fellows. Unlike the postdoctoral program, this part of the Kauffman Labs initiative focuses on budding entrepreneurs who are already part of a commercial technology incubator or accelerator such as PureTech or the California-based medical device incubators ExploraMed and The Foundry, which are also hosting fellows. Martucci has a PhD from the Departments of Pharmacology and Molecular Biophysics & Biochemistry at Yale, where he did proof-of-concept work on new chemical scaffolds for antiparasitic drugs. Whether that’s still his focus at PureTech is hush-hush—but Miller says “I’m sure he’ll be coming out of this in the next year or two with a viable company.”

Learning from existing centers of entrepreneurship expertise like PureTech is part of Kauffman Labs’ mission, Miller says. “There are a lot of incubators and accelerators…and they all come at this activity differently, but at the end of the day they have all been succesful in forming companies, so we thought it was important to partner with a few of these organizations and document that process,” she says. The foundation is selecting Entrepeneur Fellows both for their business savvy and for their skill at observation and self-reflection, Miller says. “I have seen a couple of Eddie’s reports from his experiences at PureTech so far, and from what he is capturing and the observations he’s making as he goes through this process with an amazingly sophisticated group around him, we are learning a ton.”

The foundation is already debriefing all of its new fellows regularly, and will eventually start to share its findings at places like Entrepreneurship.org and Growthology.org, two startup-oriented blogs published by the foundation. One point of the Kauffman Labs initiative, after all, is to establish what Schramm calls “the science of startups”—an understanding of the factors that really account for the success (and failure) of high-growth firms. “Our job is to describe and develop a science so successful that it is copied everywhere,” Schramm said at last week’s dinner. “It’s not like we know what we’re doing—but we have enormous hopes, and we have resources, drive, partners, and stick-to-it-iveness.” For the sake of the entrepreneurs Xconomy covers, and the economy in general, I hope the Kauffman folks succeed—and I’m looking forward to writing more about their work as it progresses.

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Wade Roush is a contributing editor at Xconomy. Follow @wroush

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  • http://euonymous.wordpress.com euonymous

    Nice article on the Kaufman Foundation. Their focus years ago was largely in educational programs from grammar schools to college level. It’s interesting to see them moving toward actually helping tech entrepreneurs. No question that’s where tomorrow’s new new thing will come from. If we as a country are to stop job losses and regain our position in the world, this activity is ever so important. I wish you well in your work with them.

  • http://www.mitenterpriseforum.org Christine Tempesta

    The Kauffman Foundation has been a wonderful partner to the MIT Enterprise Forum. We’ll welcome Bo Fishback of Kauffman as moderator for our next global broadcast on November 16 as the kick-off to Global Entrepreneurship Week (GEW) at MIT. GEW is a great way to engage everyone in thinking about innovation and entrepreneurship and its important place in our economy.

  • Little Guy

    The Kauffman fondation is a joke! There is no “real” help there. As long as they appear that they are doing something they will contiune to get there funding. Kansas City Entrepreneurs are left oustide trying to find capital and network on there own! Kauffman Foundation = Big Name with little help!
    What “real” help means: Helping up and coming business find funding and meeeting goals, actually doing something. Not showing some web sites that anyone can find by using google!

  • http://www.sitepie.com Niels

    Nice article. I totaly agree with the opinion of the Kauffman foundation. In Europe we should have similar initiatives. I also liked the intervieuw with Carl Schramm on Charlie Rose