The North Carolina Biotechnology Center has established a program that combines $50,000 start-up loans with support and resources from regional businesses to help spin-out companies from North Carolina universities and non-profit research institutes get their legs under them.
The program, called Business Acceleration and Technology Outlicensing Network, has already helped launch biotech companies from North Carolina Agricultural and Technical State University and North Carolina State University, and eventually hopes to help spin out as many as 10 companies per year, an NCBC official said last week.
“Generally speaking, we’re trying to help companies build a bridge from where they are now to a next meaningful point in their progression,” John Richert, vice president of business and technology development at NCBC, told BTW last week.
“This can be anything the company defines as a meaningful point,” he added. “I like to say we’re in the business of building bridges, not piers. We don’t want to supply a loan to a point, and then the company at the end of the loan has nothing to go to.”
The Business Acceleration and Technology Outlicensing Network, or BATON, got its start last year when the NCBC reviewed several of its existing loan programs to gauge their effectiveness.
Examples of these loan programs include $25,000-maximum Business Development loans; $75,000-max Small Business Innovation Research bridge loans; $150,000-max Small Business Research loans; and $250,000-max Strategic Development loans.
Although each of these loans addressed specific growth needs of nascent biotech companies in North Carolina, none focused explicitly on university spin-out companies essentially at their inception point.
“We thought that we could come up with a new loan program that helps companies that are getting spun out of the universities or research institutions in NC,” Richert said. “We wanted to provide not just a loan, but wanted to make this loan a catalyst to bring together the stakeholder community that is here in the state to efficiently help these companies.”
Thus, NCBC established Technology Enhancement and Acceleration Model, or TEAM, loans with a maximum of $50,000 provided by NCBC that requires a match of in-kind contributions from regional service providers such as law firms or accounting firms. These external resources, which constitute the BATON portion of the program, supply the types of services that university technology transfer offices would like to provide to their spin-out companies but do not have the resources to do so.
The TEAM loans and BATON program go hand-in-hand with the goal of readying a spin-out company for the entrepreneurial community.
“We can go put this in front of the entrepreneur community, either here in North Carolina or out of state, to attract a CEO,” Richert said. “It’s a portal – the stakeholders provide what they’re willing to contribute, and we provide the loan and market research support, so a potential CEO or entrepreneur from, for example, Boston, who is fed up with the winters and the cost of living, and may be interested in living in North Carolina but doesn’t know what’s out there, can say, ‘This makes sense for me. I’ve got this $50,000 loan, and the NCBC has listed three law firms and some accounting firms interested in working with us.’
“It’s an efficient packaging of all the things that have to go together to get a company started, basically,” Richert said.
The NCBC is currently courting bankers, lawyers, accountants, and other service providers from across the state to help fledgling companies develop corporate structures, create business and marketing plans, and address other activities requiring specialized skills.
For example, an intellectual property law firm could provide the first $50,000 of its services for free, or in return for an equity stake in the spinout; or companies could provide pro-bono or deferred services. The incentive to the service provider – beyond possible equity stake – is that it is able to get its foot in the door of an emerging biotechnology company for future paid services, according to NCBC.
“These people were already doing this sort of in-kind provision of services,” Richert said. “We’re just making it a lot more efficient and easier for everybody to access it. In a lot of ways, we’re positioning this as another resource that is available to tech-transfer offices,” Richert said.
"Not every tech transfer office is the same, but generally speaking, they’ve got an unbelievable burden on them across the board,” he added. Richert cited an oft-cited but unverified statistic from tech-transfer professionals that only about 10 percent of all the technology licensing opportunities available at a university may be appropriate for a spin-out company. “But that constitutes about 90 percent of the tech-transfer offices’ work,” Richert said. “So they have this bottleneck.”
David Winwood, associate vice chancellor for technology development and innovation at NCSU, corroborated that unofficial statistic. He said that there are other routes that tech-transfer offices can take to move a spin-out company to the point where it might become attractive to entrepreneurs or venture capitalists, but the BATON program should make things easier.
“It’s just that we would have to do much more of the legwork ourselves,” Winwood said. “It would be a comparable process, but our efficiency would not necessarily be as great if we were obliged to handle every aspect of it.”
Winwood added that there isn’t a specific trigger point at which the tech-transfer office might hand off the responsibilities of procuring resources for a spin-out company.
“We’re in the business of building bridges, not piers. We don’t want to supply a loan to a point, and then the company at the end of the loan has nothing to go to.”
“We work these things in a holistic manner in terms of the possible routes of development for start-up companies for any technology we have,” Winwood said. “If it happens that it is appropriate for a start-up company, then in concert with the faculty or the innovators we will discuss what’s needed to put some meat on the bones.
“Some areas might come more easily,” he added. “When there is a need to provide additional resources in terms of potential business opportunities, possible hurdles, outcomes, and challenges, then we don’t have that depth of manpower in the office to do that. This gives us a nice opportunity to tap into a supplementary pool of resources.”
Thus far, NCBC has helped spin out two companies under the BATON program: Provagen, which was formed to commercialize antibody isolation and purification technology developed by John Allen, a molecular biologist from NC A&T State; and Sirga Advanced Biopharma, an NC State spinout based on research by professor Paul Agris in the area of novel therapies for drug-resistant diseases, HIV, and autoimmune conditions.
The accounting firm of Grant Thornton is providing services to Provagen, while Stanislav Antolin of the Smith Moore law firm has also provided services to the firm. In addition, NCBC said that a team of MBA and science graduate students in the NCSU Technology Entrepreneurship and Commercialization program helped develop the company’s core business plan and strategy.
Meantime, Jason Wood of Wyrick Robbins Yates and Ponton is contributing legal guidance to Sirga, and Tim Gupton of Hughes Pittman and Gupton is providing accounting and financial services to the company.
Richert said that NCBC hopes to eventually help spin out 10 new companies per year, but said that the center is “going to ramp up” to that number.
The program is open to any North Carolina university, private or public; and is also available to any research institution – for instance, the Research Triangle Institute or the Department of Defense, Richert said. “Any organization that has a tech transfer mission can take advantage of this,” he said.