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As the co-founder of an emerging technology company, I constantly talk with successful entrepreneurs to learn how they built their companies.  In most cases I admire what they've been able to do, but I often find that my experience is dramatically different from theirs.  Why?  Because instead of coming from a background in private industry, my background is in academia, and the company that I co-founded is actually a commercialization of a technology that I helped develop as a professor at Caltech.  In fact, universities are an excellent source of ideas that have significant commercial potential.

It wasn't always like this.  Up until 1980 innovations developed with government funding at American colleges were considered to be the property of the federal government.  It is estimated that only 5% of government-held patents were actually brought to market, and as a result a large number of potentially viable innovations never had the chance to see the light of day. Amid concerns about the United States losing ground to Japan and other countries, the bipartisan University and Small Business Patent Procedures Act (almost always called the Bayh-Dole Act after the two senators who sponsored it) gave colleges the right to commercialize their innovations.

BAYH-DOLE

Although "Bayh-Dole Act" isn't exactly a household phrase, it has proven to be one of the most important developments in the history of intellectual property law and a major driver of technological entrepreneurship in this country.  Whereas business leaders in the 1950s, 60s and 70s often mocked academics for living in ivory towers far removed from the "real world" of innovation, Bayh-Dole essentially obliterated the walls between universities and the business community.

If you want to see what Bayh-Dole looks like in the real world, look no further than Google.  Whereas earlier generations of Silicon Valley entrepreneurs such as David Hewlett and Bill Packard quit their jobs to work hand-to-mouth in their garages, Google founders Sergey Brin and Larry Page had the luxury of developing their groundbreaking search technology while pursuing their graduate studies at Stanford.  After honing the early versions of Google (early versions went by decidedly less hip names such as Rankdex and BackRub), Page and Brin were able to line up investment capital and subsequently left school to build their company.  The rest, as they say, is history.

One of the interesting things about Bayh-Dole is how thoroughly it has been accepted by just about everyone. The act was drawn up by Kansas Republican Bob Dole (who would later run for president in 1996) and Indiana Democrat Birch Bayh, and in more than 25 years on the books, the law has not faced any significant legal challenges or opposition.  It's not hard to understand why it's such a popular piece of legislation: it's the perfect cross-pollination of academia and business and a "win-win" for everyone involved.

SYNERGY

One of the fears that some academics have about the increased collaboration with the private sector is that their innovations will be "exploited" for profit.  In fact, there are a number of benefits that this synergy can create for colleges.  One of the biggest is that industry feeds academic institutions with good problems for research.  In other words, instead of working on problems that may only exist in the theoretical realm, university researchers can devote their time to making a strong and sometimes long-lasting impact to the industry and society at large.  And, of course, successful entrepreneurs are important sources of university funding thanks to their generous donations!

The ecosystem that exists between the academy, industry and government has been extremely important to the growth of the technology boom in the United States over the last two decades.  One of the major benefits for industry is that university research has been - and will continue to be - the center for long-term fundamental and pre-competitive research.  This research is critical in maintaining technological leadership of the technology sector in large part because industrial labs typically have a much shorter term development focus.  In other words, colleges can spend 7-10 years working on a vexing problem, whereas most private ventures want results in a far shorter timeframe.  There might be VCs willing to invest in a decade of R&D before selling a single product, but I haven't met any!

CHALLLENGES

While incubating in a university lab can provide a great head start for new companies, it's not a guaranteed recipe for commercial success. Bayh-Dole was an important step in the process to bring academic research to the marketplace, but it's not a panacea.  One of the major challenges that university spin-offs face is that they are more likely to have a technology looking for a market.  Newly formed companies with academic pedigrees need to transition from being technology-focused to sales-focused as quickly as possible. This can be difficult, especially because the founders are likely to have strong technical expertise rather than proven sales and marketing skills.  Hiring good people to manage those aspects of the business can mean the difference between success and failure.

It's also important to remember that no matter how brilliant a technology is, the distance between a prototype and a commercial product is far greater than most people realize.

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