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Florida Mulls $35M Bill to Fund University Startups, Attract Early-Stage VC to State

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MIAMI – A group of university officials, lawmakers, and venture capitalists from Florida have proposed legislation that would appropriate $35 million of the state budget to encourage early-stage investments in emerging companies statewide, establish a “one-stop shop” for marketing university-bred technologies, and provide seed grants for university start-up companies, BTW learned last week.
 
The legislation is currently under review by the governor of Florida and, if signed into law, is expected to attract early-stage VC funding to the state to speed the commercialization of university research and encourage the growth of university start-ups within the state.
 
David Day, director of the University of Florida’s office of technology licensing and a member of the committee that helped guide the plan, disclosed the legislation during a presentation at the Florida Research Consortium’s Fourth Annual Tech Transfer Conference held here this week.
 
“Several years ago, tech-transfer offices were not as popular” in the eyes of state officials and the general public, Day said during a panel on early-stage financing for university startups. “But together we’ve begun to go to the legislature and ask for help, and they have responded.”
 
The bill, HB 83, was drafted by Florida Senator Jeremy Ring (D) after he and a group of university and state officials, including Day, paid a visit to the offices of the Georgia Research Alliance, after which Day said the Florida Research Consortium was modeled.
 
“There is a recognition among the people who are involved here that up in Georgia, they have been doing some things right,” Day said. The GRA was founded almost a decade ago to promote research in Georgia and its commercialization. In particular, the Florida officials took note of GRA’s VentureLab program and Technology Partnership Fund for accelerating the development of early-stage technology, both of which have taken root in the state.
 
Last year, Day said, “the Georgia Tech people and the GRA people were kind enough to meet with us and talk about everything they’ve done – the positives and negatives – and Senator Ring came back and drafted this legislation. It took into account some of his preferences as well as some of the learning that took place during that trip.”
 
Specifics of the bill call for two separate appropriations of $31 million and $4 million for the fiscal year 2007-2008, which begins July 1.
 
The first appropriation would create the Florida Opportunity Fund, a private, non-profit corporation that would be responsible for increasing the availability of seed capital and early-stage venture equity capital for emerging high-technology companies, especially those derived from university research.
 
Of that $31 million, $29.5 million will be a “fund of funds” that will invest in seed and early-stage VC funds from qualified VCs around the US, and $500,000 will be used to initiate the activities of the fund. This endowment may not make direct investments in individual businesses, according to the bill; rather, it is intended to subsidize a number of private investment funds that would then invest in Florida-based start-up companies.
 
According to the bill, “while not precluded from investing in venture capital funds that have investments outside [Florida], the fund must require a VC fund to show a record of successful investment in [Florida], to be based in [Florida], or to have an office in [Florida].”
 
In an interview following the Florida Tech Transfer Conference, Senator Ring told BTW that he drafted this particular part of the bill because “the fear is that if a big VC sees an idea in Florida, they’ll move it out to Silicon Valley. But if we can invest just to keep the business in the state, then we should strongly be considering that.”
 
The remaining $1 million will be used to establish and operate the Institute for the Commercialization of Public Research. This entity, according to Day, would likely be located in South Florida near a major airport, and would serve as a “one-stop shop” for marketing university technologies to visiting VCs.
 
According to Senator Ring, Florida suffers from a lack of regional clustering because its major university-based research centers are scattered throughout the state, unlike Georgia, where activity is mostly centered in Atlanta; North Carolina, where it’s centered in Research Triangle Park; or California, where it’s centered in the northern or southern parts of the state.
 
“If our best and brightest inventions are coming from Gainesville, VCs aren’t lining up to go to Gainesville,” Ring added. “That’s an inherent problem that we need to try and solve.”
 
The new institute would help alleviate this problem, Ring said.
 
“The analogy I use is a department store,” he said. “The first floor is all of our life sciences inventions, the second floor all of our information technology inventions; the third our alternative energy inventions, and so on. And each technology discipline would have an expert, which is really our sales force that goes and sells our inventions within the VC community.”
 
Day said that he believes such an institute would be unique. “We haven’t seen anybody else do statewide marketing of their university technologies in this way,” he said.
 

“When I moved to Florida, I recognized that we lacked an environment to create an innovative economy because we weren’t thinking of it from a university perspective.”

Florida’s economic development arm, Enterprise Florida, will manage the Florida Opportunity Fund and the Institute for the Commercialization of Public Research.
 
Seeding Success
 
The second appropriation of $4 million will go to Florida’s state university system to establish the State University Commercialization Assistance Grant Program.
 
Ring said that this aspect of the bill will serve as an important bridge to bring university technologies to the point where they might draw the VC funding that the Florida Opportunity Fund is expected to attract.
 
“I am trying to create a marriage that doesn’t currently exist in the state of Florida between the early-stage VC community and the universities,” he said.
 
According to the text of the bill, the grant program would comprise three stages, and any state university may apply for the funding to develop products and services resulting from university research.
 
Phase one grants will not exceed $50,000 per project, and will be available “to assist with early market research, independent evaluation, consultation, and other initial activities” to help develop an initial business model for a technology, the bill states.
 
Phases two and three grants will both require dollar-for-dollar matching from a private investor. Phase two grants may not exceed $100,000, and should be used “to assist with the development of a complete business plan” for commercialization of a university research product. Phase three grants may not exceed $250,000, and “shall be available for the implementation and execution of a completed business plan” for a university research product, the bill states.
 
Ring, whose background includes stints with Yahoo! and other IT companies in Silicon Valley, said that overall the bill should help improve Florida’s innovation economy by leveraging university resources.
 
“I am very familiar with what many of the big successes in [IT] have in common – we all came out of Stanford,” Ring said. “When I moved to Florida, I recognized that we lacked an environment to create an innovative economy because we weren’t thinking of it from a university perspective.”
 
Ring and Day both told BTW that they expect the bill to be signed into law by Florida Governor Charlie Crist (R), and that they foresee no potential roadblocks.
 
“It’s really not contentious,” Ring said. “This thing was vetted hard. The president of the University of Florida [James Machen] was highly engaged and involved in this process, as were a number of university presidents, venture capitalists, [and] legislative leaders. All the stakeholders have been on board with this.”
 
Jack Sullivan, president and CEO of the Florida Research Consortium, told BTW that Florida “vitally” needs the legislation.
 
“As a state, we’ve made a lot of headway in research activities, and the challenge we have, as do many others, is that very early-stage venture capital, where federal funding ends and up to the point where you actually have a product or service that’s VC-investment ready,” Sullivan said.
 
“This particular bill addresses that, and is going to give us a great opportunity to get started playing in that field,” he added. “We need to continue to work on it, expand it, and add to it, but it’s a heck of a first step.”

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