NEW YORK, Sept. 21 – The University of California, San Francisco, and Burrill & Company have announced plans to establish a venture capital fund they hope will provide UCSF researchers with a new resource for narrow-focus research funding.
Called the Burrill San Francisco Seed Capital Fund, the plan has been devised to help university faculty, staff, and students nudge young discoveries through the relatively low-cost early-stage development stage—a tricky exercise if capital is either unavailable or if the sought-after cost is considered too modest by traditional capital providers.
The fund, which participants hope will begin operating by mid-October and be worth as much as $25 million, “will enable technology to find its way into the private sector at a place where today there is relatively little capital available,” Steven Burrill, CEO of Burrill & Company, said.
Christopher Scott, assistant vice chancellor for research affairs at UCSF, added that the fund will allow the university “to provide quick support for proof-of-concept research that often falls outside the interest of the [National Institutes of Health] and elsewhere.”
As a concept, the Burrill/UCSF fund is not so much novel as it is a new twist on a well-worn way for university scientists to gain access to private sector capital. It is widely known that many academic centers are likely to have their own in-house seed-venture funds that are kept afloat largely through affluent private donors. The Burrill fund merely introduces a full-time capital partner into that concept.
Supported largely by the CalPERS Fund—California’s state-run retirement investment fund—together with the UCSF Foundation and a number of Burrill’s partners, the Burrill San Francisco Seed Capital Fund will shell out as much as $250,000 per year in seed money to help UCSF researchers launch proof-of-concept studies.
The fund will work like this: scientists at UCSF will present fund managers at Burrill & Company with discoveries that are patentable and that may have commercial potential. After reviewing the application, the fund managers will settle on an invention they wish to pursue, and both parties decide whether to take the next step.
If the projects are successful, Burrill will have the option to help create a start-up company around the original discovery that will be jointly owned by Burrill, UCSF, the individual scientists involved in the research, and the CalPERS Fund.
For Burrill & Company, the setup with UCSF represents a feeder incubator for its other funds, said Burrill, who explained that his fund managers are betting that the new company will become a success and, eventually, “an attractive investment for out other funds.”
For UCSF, it means capital to jump-start stalled or immature research projects.
According to sources familiar with academic science, UCSF faculty and staff are prolific researchers. Each year they churn out between 150 and 200 patentable biotech discoveries with documented commercial potential, the school said in a statement. Scott confirmed that these comprise genomic, bioinformatics, and bioarray discoveries, but said he does not have a specific break down.
Before its agreement with Burrill, UCSF would hawk these discoveries through traditional avenues: government grants, venture capital companies, partnerships with biotechnology and pharmaceutical firms, and other private sources—a largely random, time-consuming, and haphazard exercise, the Scott said.
It may have been clumsy, but the hodge-podge system attracted capital. In fiscal 2000 to 2001, for example, UCSF recorded roughly $390 million from federal and private sources, according to Scott.
The Burrill San Francisco Seed Capital Fund, for its part, would contribute between $10 million and $25 million when it begins operations in mid-October, Burrill said. Through it, UCSF faculty, students, or staff can expect to receive between $50,000 and $250,000 per year to pursue their research.
"A small but important contribution to the research that is conducted at the university," Scott said.
However, some at UCSF believe that incentive-based arrangement like this spell trouble, and are at the heart of an ongoing debate of who, exactly, ought to be allowed to finance medical research, how much can be financed, under what circumstances, and with what goals and rewards.
Stanton Glantz, chair of the UCSF’s academic senate planning committee, recently told a peer-reviewed journal that the deal with Burrill & Company signals “huge potential conflict-of-interest issues.”
“This could have major impacts on the whole mission of the university,” he said.
Glantz was not available for comment. However, Daniel Bickle, the chairman of the academic senate—the body that governs the faculty—believes that this deal may help the university’s research efforts in particular, and should be welcomed by academic centers in general.
“I think there is a lot of potential good here,” Bickle said in an interview with GenomeWeb . “This is the sort of thing that the university should be doing, in terms of promoting high-quality research and bringing it to the public. This is part of our obligation … and I believe this agreement will help that.”
“My concern,” Bickle went on, “is that the faculty, and in particular the senate, have a good look at the agreement and … work through what the implications are.” He said that although the senate has now been given a copy of the proposed agreement, it “has not had the time to evaluate” it. The senate did not participate in the original planning stages of the agreement, Bickle added.
Other potential events may raise red flags, Scott conceded. For example, faculty members can become founders of the new company and then resign their positions at the university. “This is a very rare event,” Scott quickly added. “I can probably count on one hand the number of faculty I knew at Stanford University where I worked who resigned their positions as faculty and went to form companies.”
What usually happens, Scott explained, is that a company founder, as the inventor of the technology, has an equity stake in the new company and will very likely maintain a link to it via a consulting relationship, all the while holding on to the original faculty post.
Bickle also cautioned that “whenever you have financial incentivizing for a component of a faculty’s activities, one always has to be worried about potential conflicts of interest.”
According to Scott, before founding researchers can align themselves with a newly minted company they must first undergo a review process on the UCSF campus to ferret out potential conflicts of interest. A conflict-of-interest review will be launched whenever the funds underwrites a project with the university.
Other safeguards are in place, Scott said: Discoveries will be offered for funding only after the university and the individual researchers have approved the plan; faculty retains the right to publish the results of research supported by the fund; UCSF will continue to hold the rights to any intellectual property and patents produced through funded research; and, as a non-exclusive deal, the university is allowed to enter into similar arrangements with other venture capital firms.