The University of Washington is in the final stages of putting together a $20 million investment fund, backed by wealthy individuals and foundations, that will rely heavily on business students to spin more startups out of university labs, Xconomy has learned.
The new source of capital, called the Husky Bridge Investment Fund, has received commitments of more than $13 million toward what is expected to become a $20 million fund, according to Linden Rhoads, the UW’s vice provost of the Center for Commercialization. The fund should be complete by early 2011 at the latest. Rhoads disclosed the new development at the end of a talk yesterday at the UW’s Computer Science & Engineering industrial affiliates meeting.
“We want to cut that first check and start the outside investment momentum,” Rhoads said. “If we are successful, the University of Washington will have the premier student-managed university-affiliated venture fund in the country.”
The UW conducts more than $1 billion worth of research each year, paid for mostly by the federal government, charitable foundations, and corporations. Despite all that creative work, the UW has long lagged behind such places as MIT and Stanford University at turning promising research breakthroughs into startup companies. More recently, the University of Utah, which conducts about one-fourth as much research as the UW, built a system that is now creating more than 20 companies a year. That’s about “10 times as many companies as we are,” Rhoads said.
It’s not an easy statistic for Rhoads to stomach, given that she’s an experienced Seattle high tech entrepreneur herself, and was hired in the summer of 2008 to shake up the university’s tech transfer operation. So the Husky Bridge Innovation Fund is a key part of her strategy to inject some entrepreneurial life into a campus that’s traditionally been more focused on the basics of research and teaching.
Rhoads only touched on this startup fund in passing during her talk, so I followed up with her directly afterwards to find out more details. The Husky fund is built on a partnership between the UW Center for Commercialization, which she leads, and the UW Foster School of Business’ Center for Innovation and Entrepreneurship, run by Connie Bourassa-Shaw.
Rhoads didn’t have much to say about the mechanics of how the Husky fund is supposed to work, although it is influenced in part by the “Utah model,” which involves students, Rhoads says. There will be a board of overseers who make investment decisions, but much of the early stage due diligence on prospective investments will be done by students. Business students will also be involved in doing some fundamental business tasks, such as helping researchers apply for federal Small Business Innovation Research (SBIR) grants, which can help researchers refine prototypes and generate proof-of-concept data that angel and venture investors want to see before they will write checks, she said.
By getting students involved, this fund will have an educational mission along with an economic development goal of spinning out more companies from UW research, Rhoads says.
She wasn’t yet ready to say precisely where the money is coming from, other than it is from private sources—venture capitalists, wealthy individuals, and foundations. There will be an advisory committee to the Husky fund composed of senior executives, venture capitalists, and entrepreneurs “with great track records,” Rhoads says.
The UW already has a fund that’s supposed to help startup ideas cross the infamous “funding gap,” where basic research grants tail off, yet angel and venture investors aren’t yet ready to tread. The UW has a Commercialization Gap Fund to serve a similar purpose, although those grants are worth just $50,000 for a year, plus another $50,000 worth of other services and resources. The Husky fund will seek to put more horsepower behind companies, by typically making investments of $250,000 to $500,000, Rhoads says.
I got the impression that many of the details are still being worked out, so things could change a bit by the time this program is up and running. But Rhoads was definitely confident enough to start talking publicly that it will happen.
“This is a turning point for the UW, in its decision to really start getting behind more of its entrepreneurial faculty,” Rhoads says.