In the Spotlight

News & Features
Does the University of Minnesota "Get It?"
By Bill Catlin
November 30, 1999
Part of MPR Online's "Minnesota in the Dot-Com Age" special.
Click for audio RealAudio 3.0

In an economy driven by innovation, research universities are playing an increasingly-important role in developing high tech industries. The University of Minnesota has a long history of fueling economic growth through new ideas, like taconite processing and the cardiac pacemaker. But critics say the university isn't doing enough now.

Cognicity officials (left to right): Ahmed Tewfik, President & CEO and E. F. Johnson Professor of Electronic Communications, Univ. of Minnesota; Mitchell Swanson, co-founder, lead scientist; Bin Zhu co-founder, lead scientist
IN OCTOBER, the University announced its latest home run, royalties from the aids drug Ziagen could bring an estimated $300 million to the university. The money will support research, graduate-student fellowships and efforts to move more university innovations into the marketplace. One-third of the royalties will go to pharmacy professor Robert Vince, and research colleague Mei Hua. University vice president for research Chris Maziar says Ziagen's success is an important lesson that the university and its faculty members can do well fulfilling the mission of education and research.
Maziar: The positive reception has caught the imagination of many faculty members who are looking through their own lab notebooks and saying, "Hey, there might be something in here."
But university critics say a single deal does not make up for the university's shortcomings in promoting innovation. Frank Bennett is a Twin Cities-based venture capitalist who says the university is too bureaucratic and slow, and too aloof from the business and venture-capital communities. He says part of the problem is the university's culture.
Bennett: Which is, "We're here for the purposes of higher learning, and to sully ourselves with the mud of the marketplace, is not something we want to do."
Patents at the "U"
The U typically generates 30 to 50 patents a year - more than the University of Texas at Austin - and a few years ago reported more than Stanford. The same year, only five of the top research institutions had more start-up companies. See chart.
One of the most successful companies to come out of the U recently is Net Perceptions, an e-commerce software firm that has attracted international attention. John Riedl, the university computer scientist who co-founded the company, recalls that university officials were initially supportive, but were unavailable when the company wanted to organize a press conference to tout the company's successes. Riedl's says that was a missed opportunity to raise the U's visibility among Venture capitalists, or "VC's" as they're often known.
Riedl: And I thought that was striking and a real shame. That was an opportunity for the university to say, "Hey guys, we've got great stuff here. We could be a center for creating these technology companies also, and let's go and make sure the world knows about it." That's important. Visibility can change what happens. Perception can become reality. If the VC community perceives that Minnesota companies don't have explosive growth, don't have great IPO's, don't create incredible investor value, they won't invest in Minnesota companies.
University officials say scheduling conflicts were the problem, not a lack of interest in promoting university technology.

A small half-empty office in Edina is home to Cognicity, a start-up company built on a technology that can help music companies prevent piracy of material downloaded from the Web.
Swanson: Everyone here works long hours and there's lots of weekends, and stuff like that.
Mitchell Swanson is a U of M-trained engineer who joined with his academic advisor and two others to start the company. Despite the long hours, he says it's an exciting opportunity.
Swanson: You see the little light on the horizon and you know that it could be big, it really has potential.
MPR: And you've got stock options.
Swanson: Exactly. Right on.
It's a familiar story in the late 1990s, but one rarely linked to the U.

Ahmed Tewfik, the U of M professor who is CEO of Cognicity says university officials provided important early encouragement, and some of the initial funding came from the Sota Tec Fund, a partnership between the University of Minnesota and the Blandin Foundation. But Tewfik says much was left for him and his partners to figure out, including finding investors. He says the experience was a far cry from MIT, where he trained, and where there are strong links between academia, entrepreneurs and venture capitalists.
Tewfik: If you're comparing to MIT, yes, the university definitely is not doing enough. But it's not just the university, it's really a collaborative effort between the university, local entrepreneurs, and local VC's. That collaboration is missing. Had it been there, we probably would have been able to move faster.
Cognicity was trying to get off the ground before university president Mark Yudof took the helm in 1997. And Tewfik says things have improved under Yudof.

Yudof says the University's critics used to be right, but he bridles at the suggestion the ivory tower is locked up tight.
Yudof: I think the historic criticism is true. Just flat out true. I think the people you've talked to recently are out of touch with what's changed around here.
Yudof points to a report by vice president for research Christine Maziar, which affirms many of the concerns and suggested solutions of university critics, from the need for a greater sense of urgency about technology transfer to participating in a fund to help bankroll product development. Yudof's fundamental message is, "We get it." He says Minnesota's economic future is increasingly tied to the university's success as a center for innovation.
Yudof: Where the economy is booming there is always a major research university. It may be MIT and Harvard, it maybe Stanford, Berkeley, it may be the University of Washington, University of Texas. It's much more important than it was 20 or 30 years ago. So this university has to do some things better and it has to have an agenda that makes sense.
Yudof says the U is working on building better ties to venture capitalists and improving its entrepreneurial training programs. The U has launched a new digital technology center and is also trying to build on historic strengths, including the health sciences and agriculture.

Statistically, the University does not appear to be lagging. The U's spending on science and engineering research has ranked it among the top 10 universities in recent years. The U typically generates 30 to 50 patents a year, more than the University of Texas at Austin, and a few years ago reported more than Stanford. The same year, only five of the top research institutions had more start-up companies.

And the criticism is far from unanimous. Brian Jackson is CEO of Actipep Biotechnology, a start up company trying to build a business on the strength of a university discovery that may help fight cancer. Jackson says moving technology out of the U did not bear out the complaints he'd heard that it was like pulling teeth.
Jackson: I found it to be a very straightforward process. I was very pleased. I found them very easy to work with. I thought they represented the university's interests very professionally, and I thought we were able to strike a very fair deal that works for both the university and the company.
So what grade does the university deserve for promoting technology transfer? Art Kydd, gives the U a B-, up from a C+. Kydd is a long-time venture capitalist, and U of M alum whose reports for the Minnesota High Tech Association cheer the U's past successes, but urge it to do more.
Kydd: I think change are happening, slowly, and you're going to see a lot of improvement. You can't rate it an A or A+ because it's not there yet. You've got to see more things happening.
But university president Mark Yudof says academia and business are grounded in two very different cultures and have very different purposes. Universities he says generally produce ideas, not products.
Yudof: So, what I'd ask is, I guess the phrase is, to cut me some slack, and sort of watch us, but it's still not easy, the relationship will never be simple.
But the relationship is also key if Yudof is to succeed. As university vice president for research Christine Maziar says, technology transfer relies on the interaction of people more than anything else.