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POLICY SHOULD BE FRIENDLY TO ENTREPRENEURS
( The Arizona Republic ) Scott Clark; 10-14-1999
Commentary
COMPANY DOCTOR
The University of Iowa has one of the finest entrepreneurship programs in
the country, thanks to the vision of - and generous donations from -
world-class venture capitalist John Pappajohn.
The John Pappajohn Entrepreneurial Center, in the university's College of
Business, offers a core of more than 15 entrepreneurial classes in several
courses of study leading to an entrepreneurial certificate.
The university awards entrepreneurship certificates to students completing
a curriculum that offers entrepreneurial business management, marketing,
capital acquisition and cash-flow management. Inc. magazine identifies this
program as ''the first of its kind in the country.''
Yet for universities striving to excel at encouraging future entrepreneurs,
education is only part of the equation.
In this era of tight budgets, some colleges and universities create
aggressive technology-transfer organizations to provide an additional source
of revenue. These organizations are populated with lawyers and staffers who
may have little knowledge of the entrepreneurial process.
These organizations often demand licensing fees (from patents developed by
these entrepreneurs while students at the institution). Often these fees are
excessive and front-end-loaded.
Although this may appear to be a sound strategy for the institution, it
prevents the entrepreneur from securing needed venture capital to properly
launch the new enterprise; therefore, neither the entrepreneur nor the
institution wins.
When institutions take steps that discourage and stymie the entrepreneurial
process, motivated entrepreneurs will find ways to bypass the institution's
patent and start their company in a different form. They become driven not
only to succeed, but also to ensure their alma mater never receives a dime of
their money, either from licensing fees, royalties or future donations.
A few universities (thankfully not those in Iowa) evaluate their
technology-transfer organizations on the basis of near-term revenue growth.
Thus they become focused on short-term greed at the cost of long-term
annuities. An avarice-laced quest by the institution can result in the
potential of new technologies never being fully realized, and aspiring future
entrepreneurs being discouraged from associating with that institution.
Consider the Massachusetts Institute of Technology. Long a bastion of
engineering excellence, it has spawned its share of successful world-class
entrepreneurs, including Ray Stata, founder of Analog Devices, and Amar Bose,
founder of the Bose Corp.
During the 1950s, Bose invented his sound system technology while at MIT,
and MIT gave him the patent rights for nothing. In return, the Bose Foundation
has donated more than $6 million to MIT. Subsequently, Bose's son, Vanu Bose,
also graduated from MIT. While working on his Ph.D., he invented (and the
university patented) a technology that could ultimately lead to a ''software
radio'' which may allow users to operate all their wireless electronics (e.g.,
cellular phones, security systems and garage door openers) from one device.
Vanu Bose decided to create a new business and approached MIT's Technology
Licensing Office. According to the Wall Street Journal, the TLO initially
demanded more than a million dollars in licensing fees, royalties up to 10
percent covering all services, hardware and software in addition to a 6
percent equity in the new company. As a result MIT has alienated the Boses.
Even though the TLO subsequently reduced its demands, it appears unlikely MIT
will see any further significant donations from the Bose family. This could
result in the loss of many millions of dollars in donations.
Colleges and universities, take heed. If you want to encourage
entrepreneurial activities among your students, scholarship is only one part
of the equation. The other key is an entrepreneurial-friendly
technology-transfer program that seeks equitable compensation in a reasonable
time frame.
Memo: Visit The Company Doctor's Web site at www.saclark.com for additional
information or to share your ideas
Copyright The Arizona Republic (1999)
Scott Clark, POLICY SHOULD BE FRIENDLY TO ENTREPRENEURS. , The Arizona Republic, 10-14-1999, pp 4.
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