UT Horizon Fund Aims to Build, and Capture, Value from Its Startups

5/21/13Follow @Tansey_Xconomy

Campuses at the University of Texas, such as the MD Anderson Cancer Center in Houston, can boast of star-studded faculties to rival the innovative scientific leadership at UC San Francisco, UC Berkeley and Stanford University. In 2009, the 15-institution University of Texas system was second only to the powerhouse University of California system in the number of patent applications filed, startups spun out from campus inventions, and research dollars raised.

Yet UT ranked only 19th that year in terms of income from licensing its innovations, the Association of University Technology Managers found. That means while there are plenty of inventions coming out of  Texas, few have generated big returns for the original institution, like Google’s success did for Stanford. The Texas university system has been taking steps to change that ranking and nurture its young companies in an environment much more challenging than California’s.

The state of Texas is thinner on the kind of venture capital firms that hover near the big California research universities, eager to finance the next Google or Genentech that springs from the mind of a professor or student.

Wei Chen of the UT Horizon Fund

“The VC environment is less active than Silicon Valley or New York or Boston,” says Wei Chen, a UT technology commercialization official.

The UT system sought to change that in 2011 when Bryan Allinson of the UT System Office of Technology Commercialization began working to create a fund that could help UT startups get off the ground. That was the beginning of what’s now called the UT Horizon Fund.

“Starting the UT Horizon Fund fitted perfectly within our strategic mission to improve commercialization of technologies out of research at UT System institutions,” says Allinson, the founder and executive director of the UT Horizon Fund. “Importantly, it also fits our financial mission to provide a positive return on investment back to UT.”

Like other universities, UT has already acquired ownership stakes in spinoff companies by accepting equity as part of the compensation for licensing its intellectual property to startups. Since the Horizon Fund began operations last year, it has been able to invest aggressively, at a time when many universities can’t. The UT Horizon Fund has also pumped more money into seven of the 154 companies that were already part of UT’s portfolio. Among those is Rapamycin Holdings of San Antonio, TX, which is evaluating rapamycin, a drug approved to prevent organ rejection, as a treatment for diseases of aging.

The Horizon Fund has also brought two new companies to life by linking innovative faculty members and students with the resources they needed to go into business. One of those is Austin, TX-based M87, founded by a professor-student team that uses software instead of expensive infrastructure improvements to expand cellular coverage for telecommuncations networks.

University venture funds are not new. Back in 1985, for example, the Stanford School of Engineering initiated plans for a venture fund to … Next Page »

Bernadette Tansey is Xconomy's San Francisco Editor. You can reach her at btansey@xconomy.com. Follow @Tansey_Xconomy

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