How Green Technology Goes from the Lab to the Boardroom

“Energy investing may be one of the most significant opportunities in our lifetimes,” said John Banta, CEO and managing director, IllinoisVENTURES, LLC, and moderator of a panel discussion about licensing alternative energy technology at the Midwest Alternative Energy Venture Forum November 29 at the Charles M. Harper Center. Before such investments can be made, however, green technology must transfer from universities and laboratories and into board rooms.

“The biggest issue [in moving intellectual capital from universities to companies] is always around valuation,” said Todd Kimmel, CEO of Coskata, Inc. It’s an issue that “sometimes leads to where you don’t get a company off the ground.”

Kimmel drew from three universities in his work with Coskata. Nefore joining Coskata, he had compiled intellectual property from Berkeley, Harvard, MIT, and Carnegie Mellon. He found that licensing procedures vary. At Berkeley, licensing took 12 months. At MIT it took 12 days. “It shows you that if you have the procedures in place, it can move fairly quickly,” Kimmel said.

Sometimes a university reaps rewards from research while the professor who did the research does not; sometimes the reverse is true, Kimmel said. In three out of four companies he has spun out of universities, the professor hasn’t been rewarded down the road, he said. “I’ve had to bring them on as a chief scientific advisor” or place them on an advisory board and offer shares as incentive, he said.

University of Illinois at Urbana-Champaign has been working on standard template terms for licenses, said Lesley Millar, director of the Office of Technology Management. Terms include licensing at 2 percent to 4 percent, and an equity stake of 10 percent to the university with waived fees in lieu of that, plus specification on patent costs. The university also has criteria that must be met before licensing.

“One of our first things is, we don’t have professors as CEOs of start-up companies,” Millar said. Professors can be company cofounders. To get a license, companies also need evidence of source funding and business plan milestones, she said.

Besides any equity share the investor receives, the university distributes 40 percent of incoming revenues to the inventors, 40 percent goes back to the university, and 20 percent goes back to the investor’s unit, Millar said.

Simran Trana, director of the Office of Technology Commercialization at Purdue University, said at a third goes back to the inventor and a third goes back to the research department at Purdue. Also, the company has to compensate a professor for any future help. Simran said Purdue has almost the same template as the University of Illinois. However, Purdue does allow faculty startups, she said.

Purdue aims to double its $300 million research budget within the next five years, Trana said. Much of its research focuses on energy optimization, Trana said.

Purdue has made “significant breakthroughs” in biomass processing, she said. That includes Ho-Purdue yeast, pioneered by Nancy Ho, founder and president of Green Tech America, Inc., one of the presenting companies at the conference.

“It’s probably one of our most financially successful licenses,” Trana said.
 
The University of Illinois conducts around $800 million worth of research at its three campuses, with more than half of that occurring at the Champaign-Urbana campus, Millar said. She listed a myriad of alternative energy research projects being done there.

The university has 360 patents to its credit and about 200 more pending. It files about 140 patents a year and is issued about 40 a year, she said. It has licensed to 34 start-up companies in the last four years, with five of those, soon to be six, in the alternative energy area.

“Our university has actually embraced commercialization of university technology,” Millar said.

Three of 14 companies making presentations at the conference relied on research drawn from University of Illinois research.

Also, the university, along with U.C. Berkeley and the Lawrence Berkeley National Labs, received a grant from BP that resulted in the formation of the Energy Biosciences Institute. The share for University of Illinois goes for feedstocks research. 

Nielsen, from BP, praised the quality of work going on at Midwestern universities.

“For my money, if I were doing a deal, I’d want to do a deal with a Midwestern university, because we’re not embarrassed by commerce,” she said.

But she said Midwesterners may be too modest when it comes to self-promotion, unlike people from the coasts. “Any Midwesterner when talking about an idea worthy of a Nobel prize says, ‘That’s not a bad idea,’” Nielsen said. “Understatement in the Midwest does not serve us well.”

BP’s investment in alternative energy also includes ownership of a solar energy company, BP Solar. One component in the high cost of solar cells, polysilicon, is “managed by a cartel,” she said. “One of the great bets is new technology that trumps that.”

Argonne’s spending on energy technology and alternative energy research amounted to about $150 million out of its total 2007 operating budget of just over $500 million, Ban said. In addition to research, Argonne is qualified to act as a certified third-party to verify carbon reduction credits, Ban said, which could stimulate business creation.

In fiscal-year 2007 Argonne participated in 42 ongoing industry partnerships and signed over 50 licenses, he said. Its licensing process is relatively quick because “we try to be very direct, we try to reduce friction, we try to operate in a semi-standard way.”

First-year student Sara Hochman said Argonne is a “huge asset” to the Midwest.

She also found it intriguing that BP was interested in renewable energy technology. “You wouldn’t necessarily think of BP as a leader in this, as they are an oil company, but there’s a lot of opportunity because they are a major oil company,” she said.

- Mary Sue Penn