Julia Goines of Pediatric Bioscience in Davis tests blood samples in her research on autism. The company grew out of breakthrough work done at UC Davis.
From biofuels to pharmaceuticals, Sacramento-area inventors have created scores of promising scientific breakthroughs, many of them in the well-funded laboratories of UC Davis.
Turning those inventions into jobs and wealth is hard, however. Starting a high-tech company in Sacramento means overcoming the region’s risk-averse mind-set, a scarcity of big-money investors and the allure of the Bay Area’s tech-friendly landscape.
In at least one respect, though, the climate for entrepreneurs seems to be getting better. After decades of indifference, the University of California, Davis, is laboring to convert its massive portfolio of scientific research into products that could help transform the Sacramento economy.
The university – a “real sleeper,” in the words of one Davis entrepreneur – is becoming more aggressive about cooperating with the private sector. It is licensing its patented technologies and acting as midwife for new companies.
The university’s commitment to commercialization, a process known as technology transfer, has taken on new urgency as the region tries to claw its way out of the recession. UC officials say they’re trying to become a force for rapid-fire economic development in a region known for moving cautiously.
Both the university and the region have “a reputation of not being too open to risk, and we have to change that,” said new UC Davis Chancellor Linda Katehi, who holds 16 engineering patents. She’s appointed a committee to study why the university has not been more successful at tech transfer.
Nobody expects UC Davis to duplicate the success of Stanford University, which perfected the art of tech transfer decades ago and built Silicon Valley. But business leaders say UC Davis has the ability to do much more than it has so far.
“There is significant untapped potential – significant opportunity to increase the number of companies coming out of campus,” said Meg Arnold, who used to work in UC Davis’ tech-transfer office and now runs the Sacramento Area Regional Technology Alliance.
Big research budget at UCD
UC Davis’ science research budget hit $643 million in 2008, the 16th-largest in the nation, says the National Science Foundation.
Yet Davis has spawned just two-dozen or so tech companies since 2003, about a third as many as UC San Diego – a biotech powerhouse that’s been spinning off companies since the late 1970s.
Davis didn’t open a tech-transfer office until 1999, and the culture is changing slowly.
A few years ago, Sacramento construction executive Charles Gardner, a university donor and father of an autistic child, heard about a tantalizing breakthrough developed on campus: a blood test to determine whether a woman is at risk for conceiving a child with autism.
When he approached UC Davis about commercializing the technology, he got puzzled responses.
“I had no idea of the possibilities,” said scientist Judy Van de Water, who developed the test. “As academics, we don’t really think about transferring (technology) out into the public.”
Van de Water warmed to the idea, though. A technology license was signed and a company was born: Pediatric Bioscience of Davis.
Van de Water is an unpaid scientific adviser to the company. She still works on campus, where she’s developing a more accurate autism test.
“The research that I’m doing here feeds right into the next goals of the company,” she said.
Progress happens slowly
Many of UC Davis’ spinoff companies are tiny; some have folded or moved away. After four years, Pediatric Bio employs three workers and has raised just $1 million – a fraction of what it will need to bring its product to market, said Gardner, its chairman.
But the very existence of companies like Pediatric Bio gives hope to investors who’ve been craving spinoff activity from UC Davis for years.
“A significant amount of the entrepreneurial activity has to come from the campus, from UC Davis,” said Oleg Kaganovich, a partner in the Sacramento office of DFJ Frontier venture capital. “If that doesn’t happen, we will never grow significantly beyond where we are now.”
Some critics say the university still isn’t responsive to entrepreneurs. Graduate student Kenth Pedersen wanted to work with UC Davis to perfect an electrode he’d invented. The university made “onerous” financial demands, such as a substantial ownership piece of his technology, he said. So he took the idea to Mountain View, got funding and started his new company, Hyphase Energy.
“This company could have been started in Davis,” he said by e-mail.
David McGee, a former biotech executive who runs UC Davis’ tech-transfer office, InnovationAccess, said the university tries to accommodate potential partners, but “we cannot always agree to every term that someone wants.”
He said red tape is being slashed at every turn. Licensing contracts, which used to run 46 pages, have been cut in half.
“We have shown we can start up companies,” said McGee, who has run the program since 2004. “We can start up a lot more companies than we used to.”
Green tech a UCD strength
One reason for optimism is green technology: solar energy, fuel cells and so on. Venture capitalists have fallen in love with the industry, and green companies are clustering around Sacramento to be near the lawmakers and regulators in charge of California’s war on global warming.
Green tech is also a UC Davis strength; the campus operates research centers devoted to such fields as biofuels and wind power.
“We’re getting a lot more interest from investors and entrepreneurs,” said Andrew Hargadon, director of the university’s Center for Entrepreneurship. “People are starting to want what UC Davis has always been producing.”
UC Davis spinoffs could fill a void as Sacramento’s first generation of tech companies retrenches.
Since the dot-com boom ended a decade ago, Intel Corp.’s Folsom research park has trimmed 2,500 jobs, leaving 5,800 workers. Hewlett-Packard in Roseville has cut half its jobs and is down to 3,200 workers, the city says. NEC Electronics’ Roseville chip plant is mothballing one of its two manufacturing lines and cut payroll to 640 workers, down from 1,500.
The new wave of companies won’t produce a huge number of jobs, at least not right away, but could set the stage for more growth eventually.
“I think it’s a number of singles and doubles,” said Chris Soderquist, who runs a startup company, Octus Energy, that develops energy-efficiency devices based on UC Davis technology.
Soderquist’s late father, Charlie, was a UC regent who preached about the need for greater cooperation between the Davis campus and entrepreneurs. His son says Davis hasn’t done nearly enough despite mammoth intellectual firepower.
“Here’s one of the greatest research universities, and it’s really a sleeper,” he said.
Collaborating with business has sometimes created ill will. In 1980, UC Davis scientist Ray Valentine co-founded biotech company Calgene. He was criticized by many of his colleagues and thrust into a controversy over a possible conflict of interest.
“The blood was let,” said Valentine, now retired. Calgene, creator of the world’s first genetically altered food, a longer-lasting tomato, was taken over by Monsanto in 1997.
Valentine is enthusiastic about UC Davis’ commitment to entrepreneurship but has yet to be convinced it will translate into results: “They’ve got to do something, show they’re on the right track.”
Economy a factor
A weak economy doesn’t help. Without funding, it’s hard to commercialize inventions, UC Davis’ or anyone else’s. Sacramento venture capitalists did only $17 million worth of deals last year, one-seventh the volume they did in 2007, according to PricewaterhouseCoopers.
Folsom entrepreneur John Stone, who once sold a company to Apple for $62 million, has struggled to raise money for his newest startup, software maker Freepath. After launching in 2008, he planned to raise $10 million or more in a second round of funding last year. He got only $500,000.
“While we’re making progress, we’re making it at a much slower pace,” Stone said.
Even in good times, Sacramento’s venture capital community is small. Sometimes the area’s entrepreneurs have to go elsewhere for money, and sometimes out-of-town investors make the company relocate.
In 2003, UC Davis professor Bruce Hammock helped start drug-biotech company Arete Therapeutics. A year later, Bay Area venture capitalists steered the company to Fremont. It’s now in South San Francisco.
“As soon as the VC’s got control of the company, they moved it to the Bay Area,” said Hammock, who remains an adviser to Arete. “It’s their money and they like to be close to it.”
UC Davis graduate student Dan Braunschweig consults with professor Judy Van de Water last week at the campus. Van de Water’s work on a blood test to determine whether a woman is at risk for conceiving a child with autism has led to a new business. “As academics, we don’t really think about transferring (technology) out into the public,” she said.
