UVic Attempts to Engineer Entrepreneurship

As governments spend more on research grants ?to Canadian universities, commercialization of that research continues to lag. A pioneering new program at the University of Victoria, with an explicit market focus and formal ties ?to the private sector, aims to address the imbalance.

New Markets: Student Logan Volkers (right) and professor Ted Darcie are helping UVic created a brand new way for universities to collaborate with industry

As governments spend more on research grants 
to Canadian universities, commercialization of that research continues to lag. A pioneering new program at the University of Victoria, with an explicit market focus and formal ties 
to the private sector, aims to address the imbalance.

The dusty image of a career academic, unsullied by commercial concerns and beavering away on some esoteric research project, doesn’t exactly get electrical-engineering professor Ted Darcie charged up these days. What does is an innovative program between his employer, the University of Victoria, and Wesley Clover International Corp., an Ottawa-based firm that invests in, starts and grows companies in the high-tech arena.

The program, launched last fall, is called the Engineering Entrepreneurship@UVic master’s program. Boiled down to its basic constituents, what it proposes may be blasphemous to academic purists yet painfully commonsensical to anybody with an entrepreneurial bone in their body: take a problem or opportunity that consumers or businesses have already identified, then gear research energy toward finding a marketable solution. And the degree to which the program marries market interests with academic pursuits is in a class all its own. 

Wesley Clover has not only helped cobble together program funding for UVic; it’s had a hand in designing the curriculum and even in selecting students. The program is crisp and practical: after completing eight months of graduate-level engineering and business coursework under the supervision of program chair Darcie, as well as faculty colleagues Jens Weber and Brock Smith, the four students admitted to the pilot project are now working with Wesley Clover executives to select a high-tech business opportunity identified through the firm’s business channels. The governments of Canada and B.C. clearly think it’s a good idea: they kicked in roughly $2.4 million combined to get the program up and running, while UVic and MITACS, a government-funded program that arranges internships for graduates and post-
doctoral fellows, together added another $400,000. At the same time, Wesley Clover has teamed up with the B.C. Innovation Council to form the Alacrity Foundation, with the aim of funding the program into the future without government grants and providing seed money for B.C. startups. As for the students, while they don’t get paid for their work with Wesley Clover, they do receive shares in lieu of salary, with ownership of the project split one-third each to the student team, Wesley Clover and the Alacrity Foundation. If successful, graduates end up with a master’s degree and a stake in a startup that potentially could prove lucrative – or not. 

According to Darcie, instead of letting the market guide technology development, universities too often develop ideas in a vacuum, then try to find homes for them in the marketplace – what he refers to as the not-often-successful technology “push” model. “Having tried that several times,” he says, “I know the probability of success is not very high.” 

Darcie took the lead in developing the program when Wesley Clover execs visited the campus about 1½ years ago. “I 
decided to engage with Wesley Clover so we could identify market opportunities,” he says. “We’re applying a pull versus push model for technology, and I don’t think anybody has attempted to partner with a private company to the degree that a 
student’s goal will be to become owners in a company.”

In addition to having tenure at UVic and enough peer-reviewed papers under his belt to stack a small library, the 54-year-old native of Georgetown, Ontario, also has a good deal of real world experience: working as a researcher at AT&T Labs in New Jersey in the mid-’80s (he left in 2003 as director of innovative network technologies). Now Darcie is channelling his energy toward bridging the worlds of academia and entrepreneurship. The move toward a more entrepreneurial and enterprising post-secondary institution is a shift that’s long overdue, according to many observers. As generous as governments have been – in 2007 $4 billion was doled out by federal, provincial and municipal governments in Canada in research grants to universities, up 3.6 per cent from the previous year – the country has a less-than-stellar record when it comes to commercializing the output of this research. The Conference Board of Canada, in a February 2010 report, noted that Canada consistently gets a D grade measured against its OECD competitors on patents filed per million citizens, one imperfect metric that’s used to gauge how well a country transforms knowledge and technology into usable inventions.

“Canadian industry is not collaborating as well as it could with government and university,” wrote the paper’s authors, in typically understated fashion.

[pagebreak] OTHERS ECHO THAT SENTIMENT. In a 2009 report, Ron Freedman, CEO of Toronto-based Research Infosource Inc. (a private firm that specializes in research and policy analysis in the realm of technology, science and innovation), claims that “Canada is stuck in a 20th century paradigm of research funding that is proving increasingly unsuited to the 21st century.” Instead of pumping dollars into university research in the hopes that discoveries will find a market, Freedman advocates another strategy: shifting funds to companies that have already identified a market opportunity and want to work with universities to develop ideas, part of what he calls a broad university and college industry engagement strategy. 

Closer to home, the Premier’s Technology Council, formed in 2001 to advise government on technology challenges facing the province, recently solicited input from academics and business leaders on how to strengthen the relationship between industry and universities. The results of that online survey suggest the traditional model – where a university-industry liaison office (UILO) acts as the interface between academia and the private sector, negotiates licensing agreements, registers patents, stickhandles industry research collaborations and guards the university’s proprietary interests – needs a thorough tune-up. Five major themes emerged from the survey: the UILOs are too focused on negotiating the best return for the university and lack an understanding of industry needs; there’s a lack of trust between academia and industry; success measures are too narrow and focused on revenue to the institution and therefore undermine commercialization partnerships; government is not doing enough to promote commercialization and research partnerships through tax credits and other incentives; and intellectual property (IP) policies, varying from inventor owned to university owned, are confusing.

Eric Jordan, current president of the Premier’s Technology Council, was a UVic fine-arts wunderkind with a techie bent who back in the early ’90s co-founded the data management software startup PureEdge Solutions Inc. (sold to IBM Corp. in 2005 for an undisclosed amount). The council’s survey was far from scientific, Jordan says, but it shows that some members of industry are concerned parochial universities are killing potentially beneficial research collaborations and business opportunities with outside partners.

“If negotiations are too focused on returns to the university, people will walk away from deals even though there might be great public benefit. To get technology out of the university and into the market, deals have to get done,” Jordan says.

Geof Auchinleck, founder of the Vancouver bio-medical data management firm Neoteric Technology Ltd., which was purchased last year by Edmonton-based Haemonetics Canada Ltd., is one entrepreneur who walked away from a potential university collaboration in frustration.

“I have long been sensitive to the fact that our universities, and in particular my own alma mater, UBC, don’t seem to have had as much success in spinning off new companies as I think they should,” Auchinleck says. “I believe we have a massive pool of talent in B.C., but there seems to be a distinct wall between the universities and industry.” 

While at the helm of Neoteric, Auchinleck says he tried to work with a UBC researcher on developing a product idea. However, before even being able to vet the idea with potential customers, the firm was required to complete a research agreement with the university defining the terms around IP and revenue sharing. In the end, he says it was a waste of time and energy because their customers saw no value in the proposition. 


Startup Guru: SFU’s chief of university –
industry relations, Mike Volker, is also an
active player in B.C.’s angel investment

“I THINK THE BIGGEST PROBLEM is the fundamental mission of the UILOs. I believe that their mission should be to ensure that technology developed in B.C. is commercialized, instead of focusing on ensuring that the university and the researcher maximize their financial return,” Auchinleck says. “Researchers and inventors are by and large smart enough to negotiate with an industrial partner or even start their own business and do not need a bureaucracy to do this for them.”

As B.C.’s leading research institution, UBC has come under fire from some quarters for a strict policy that has the university assuming ownership and administration of IP developed on its campus should the inventor, be it student or faculty, wish to commercialize the invention. 

Angus Livingstone, managing director of the UBC industry-liaison office, takes the criticism in stride; however, he believes much of the criticism reflects old experiences or originates from people who haven’t actually done business with the university in recent years. In the two decades between 1984, when the office was formed, and 2005, UBC has created 117 spinoff companies and now ranks ninth in North America in number of patents filed. 

“We have been saying that it is not about the money for over 10 years now, and that reflects the general sentiment of most technology transfer offices,” Livingstone says, adding that his office’s objectives in order of importance are to support the academic mission of the university, transfer technology, promote economic development and leverage financial returns to the university and inventors: “Making money doesn’t fall off the list as it is necessary to incentivize the inventors to participate in the process, cover the cost of operations and adjudicate which party receives access to the intellectual property.”

Mike Volker, director of SFU’s university-industry liaison office, says the moniker UILO needs to be dropped. He believes it comes with too much baggage, redolent of an old way of doing business in which universities attempt to ram technology out their doors into the private sector, whether there’s a market for it or not, and jealously guard intellectual property. 

“We’ve evolved from a technology push to more of a pull model, encouraging entrepreneurship among students and faculty,” says Volker, an engineer by training who emerged from the high-tech breeding ground at the University of Waterloo back in the mid-’70s with his own successful computer terminals company Volker-Craig Ltd. (he was the first to negotiate an angel investment in Research In Motion): “Frankly, there are quite a few professors who would rather have money than kudos and published papers.” 

Volker’s office provides assistance to entrepreneurs in the form of financing, business experience and connections. Habitat Enterprises Ltd., a company headed by SFU grad Thomas Kineshanko that proposes to finance methane-
capture projects that will, in turn, generate offsets for trade in the still-nascent carbon market, is one of Volker’s incubating startups. In 2009, while the company was still pre-revenue, Volker provided Habitat with office space at SFU’s TIME Centre in downtown Vancouver and also helped to raise funds for the young company. 

AS WELL AS QUARTERBACKING commercialization and startup support, Volker manages two funds of his own: the Western Universities Technology Innovation Fund – an angel fund that has raised almost $6 million and specializes in small early-stage investments typically in the $100,000 range – and Green Angel Energy Corp. He also created the Vancouver Technology Angel Forum that has been gathering investors together since 1999 to cherry-pick promising new companies. Although faculty and students are free to pursue commercialization independently at SFU, Volker says if they bypass his office, he’d have to really think about “what we’re doing wrong.”

Over at UVic, administrators have already dumped the musty UILO designation. Brent Sternig is president and CEO of the university’s Innovation and Development Corp. (IDC). Although licensing and developing spinoff companies is part of the IDC’s mandate, Sternig says that 90 per cent of his effort is aimed at industry-university research collaborations because “a lot of technology at the university is at the very early stage.” Between April 2009 and March 2010, the IDC tallied $504,000 in commercial revenue from deals it helped to negotiate and currently has 33 active, five incubating and four development-stage spinoff companies to its credit. Some of its notable successes include life sciences software specialist Genologics as well as Protox Therapeutics Inc., the brainchild of UVic biochemist Tom Buckley that developed a protein-based prostate cancer therapy and in April 2010 signed a $75-million licensing agreement with Japan’s Kissei Pharmaceutical Co. 

Like SFU’s Volker, Sternig also spends time nurturing connections between promising ideas on campus and private money. As co-host of the Greater Victoria Angel Network, he holds forums three times a year providing a podium for university-based innovators, as well as off-campus entrepreneurs, to pitch their business ideas to discerning investors. At a June angel forum held at the Vancouver Island Technology Park, UVic software engineer Issa Traore was there to tout his startup, Plurilock Security Solutions Inc., which has a patent pending on user authentication software that employs keyboard biometrics as a security tool.

As notable as these university-driven entrepreneurial success stories are, Owen Matthews, executive vice-president at Wesley Clover (and scion of Terry Matthews, the billionaire Welshman behind Newbridge Networks), still believes that this model, whether it goes by the name UILO, IDC or whatever, doesn’t work particularly well. In fact, he thinks the entire relationship between industry and academia needs to be recast. While Canadian universities may be well positioned to obtain research dollars through various funding vehicles, such as the federal government’s NSERC (Natural Sciences and Engineering Research Council) and Industrial Research Assistance Program, Matthews says Canada is woefully deficient at transforming these funds into new companies, jobs and tax dollars. 

“So much of that research doesn’t really benefit Canada in the long run, and we see so many of our high-tech grads heading south to work for Google or Cisco,” Matthews says. “If we can change academic research funding to be far more market and consumer driven, I think society will be better off.” 

Wesley Clover has a long history of trolling campuses from Bristol, England, to Burnaby, B.C., for the best and brightest. For more than a decade, chosen grads have been seconded to so-called technology venture boot camps at Wesley Clover’s Ottawa headquarters to develop business ideas and high-tech startups. The attraction to the company, Matthews admits quite candidly, is that grads are young, energetic, not shackled by kids and mortgage payments, and willing to work long hours for equity and zero up-front pay. Wesley Clover has now injected its entrepreneurial boot camp philosophy directly into the UVic campus – in effect grooming graduate students for service in the company’s growing portfolio of high-tech companies. 

LOGAN VOLKERS IS JUST THE kind of optimistic and intelligent student that Matthews and Wesley Clover have in their crosshairs. At just 24 years of age, the Cranbrook transplant and UVic bachelor of engineering grad is one of four members of the inaugural master’s program. In April Volkers completed the required eight months of coursework and has now moved on to the meat and potatoes: working with his teammates to help Wesley Clover executives assess business problems – or, rather, opportunities – that could form the seed of a thriving startup. 

“When I worked for engineering firms during my co-op, I learned that the soft skills, dealing with people and solving problems, was actually as interesting as the technical side of things,” he says about his undergraduate work experience. “My dream is to be part of something that is growing.” Volkers is tight-lipped about exactly what he’s been working on with Wesley Clover, “but I can say it will be some sort of new application in the mobile sphere. If you talk to me in a year, we’ll have closed a deal that’s generating revenue.” 

Though success is not guaranteed, already Volkers is sounding like a pinstriped executive. At the very least, even if the business fails, he’ll come out with a master’s degree, some excellent experience and priceless business connections. 

However, the university, as an institution, has a much broader mandate than staffing high-tech corporations with fresh recruits. It’s still where groundbreaking science that changes our understanding of the world takes place – work such as the DNA-based chemistry that earned UBC’s Michael Smith a 1993 Nobel Prize or the climate modelling and analysis by UVic’s Canada Research Chair, Andrew Weaver, that doesn’t promise immediate commercial payoff. Universities are also the place where young literary scholars such as Melanie Siebert, whose UVic fine arts thesis became an award-winning book of poetry, can thrive. 

Bradley Bryan, a political science professor and director of UVic’s newly minted technology and society program (which examines the many ways technological change impacts contemporary culture), sees the benefits of strategic partnerships such as the one struck between UVic and Wesley Clover. But he’s wary that increased corporatization of education could narrow the focus of universities to the detriment of students.

“Not all market-driven problems are about buying and selling, and new gadgets. Universities should still be a place where students can go to learn in an open-minded way, learn how to write well and think critically,” Bryan says. “If we start to think of universities as only job training, I think we’re selling students short.”

As for Ted Darcie and Owen Matthews, the one-two driving punch behind UVic’s pioneering program, both admit there are academics and students who will never be motivated by business considerations. But Darcie believes there’s room for both the traditional and entrepreneurial approaches on campus: “I haven’t tried to evangelize and sell this to my colleagues. It’s not for everybody.” 

However, at a time when governments are strapped for cash, when universities are being asked to be much more accountable for their research dollars and when Canada’s productivity needs have never been higher, UVic’s leadership marks a significant philosophical change for post-secondary institutions that might be part of the solution.