Senior Vice President, Treasurer, COO
Purdue Research Foundation
NAME: Joseph Hornett, senior vice president, treasurer, and COO, Purdue Research Foundation, since 2001
BACKGROUND: MBA, Butler University; BBA, University of Notre Dame
Purdue University is among the latest US research universities to launch a specialized internal fund to provide financial support to early-stage technologies in an effort to shepherd them to market.
The Emerging Innovations Fund, announced last week by Purdue and its non-profit technology commercialization and economic development arm Purdue Research Foundation, is a self-sustaining, philanthropic initiative that will provide commercialization funding support for Purdue-developed technologies to help spin them out into startup companies.
Purdue is currently raising private funds to support the venture, which it expects will have an initial capitalization of $1.5 million. Purdue faculty, staff, and students, and Purdue Research Park-based companies are eligible to apply for program funding, which will be doled out in awards of $20,000 to $200,000 over 12 to 18 months, Purdue said.
The fund is designed to be evergreen through equity investments in selected technologies. If successful, startups benefiting from the fund will pay it back with interest through a warrant, stock, or other equity in their company. These returns will be placed back into the Innovation Fund to help future companies, Purdue said.
Although Purdue has been one of the more successful universities at creating startup companies — the 14 it spun out in 2006 was third in the US behind the Universities of California and Utah — school officials anticipate even more startup opportunities in the future as the school’s research budget continues to grow.
Joe Hornett, senior vice president, treasurer, and COO of Purdue Research Foundation, took a few moments last week to discuss with BTW the rationale behind the fund and Purdue’s startup activity.
Purdue has been fairly successful in starting up companies compared with most universities. Why did you feel the need for this Emerging Innovations Fund?
It actually does come out of the experience we’ve had here at Purdue in trying to identify critical needs. The larger funding environment in the state of Indiana has improved substantially in the past three to seven years, but there is still difficulty — and this is true nationwide — at the very early stage, particularly with raw discoveries coming out of the laboratory. Little bets and little grants can make the difference between a technology continuing to move down the pipeline of innovation and withering on the vine.
Our research program here at Purdue has … doubled in the last five to seven years [to $300 million], and we have plans to double that again over the next five years. There is a direct correlation between the number of discoveries that come out of our labs and that research. So we know the demand will be there to continue to move an ever-increasing pool of technologies down that pipeline. The timing was right for the fund, and we know the need is there.
Did you model this fund after any others? Who was behind the creation of this?
We’ve got a program in place at Purdue already called the Trask Fund. It is an endowment fund left by some donors a long time ago. It has been providing grants for some of this work. Those were actual grants that then got repaid out of royalties if and when they hit.
So we have done a little bit of this for quite some time, but this will expand those resources. We hope that a lot of this will be equity-based, which would be in addition to the grants that come out of the Trask fund.
So again, some of this is based on prior experience, based on what we saw as a missing link in the program; and some is based on what we see an ever-increasing pool of technologies.
How does Purdue deal with the inherent risk of taking equity stakes in startup companies?
Part of the rationale behind this is that it is a philanthropic fund, so it will be founded based on gifts. The people that will be doing this will be doing it because they’re interested in seeing the technologies that come out of the labs at Purdue have an impact on society.
Purdue has more than 400,000 alumni around the world, and a good number of those are involved in various aspects of technology commercialization and venture capital, and we hope through the creation of this fund we can also tap into their talents to assist us in the startup and actual performance of this fund.
Are the expected gifts of $20,000 to $200,000 expected to be enough to give these potential companies a boost? Is there a mechanism in place to help them obtain more funding beyond this?
Yes. There is a person named Julie Goonewardene, who is our director of business development, and one of her primary tasks is to work hands on with business startups. One of the bigger tasks that she has is to identify and help secure various sources of funding for those startups. I think we’ve been fairly successful at actually launching technologies into full-blown companies because we have a position like that in place.
I see that faculty, students, staff, and Purdue Research Park-based companies are eligible to apply for program funding. Are all the companies in the Purdue Research park spinouts of the university or based on Purdue-developed technologies?
A large percentage of them are, but not all. By the end of 2008 or early 2009, we will actually have four research parks open statewide, only one of which will be associated with our main campus here in West Lafayette. As we develop those other parks, a fund like this becomes very critical for our remote or pioneering efforts in those areas to identify technologies and seed those in the communities where those parks are located.
On the flip side, will the companies that are expected to come out of this have space available in the Purdue Discovery Parks?
Absolutely. Within the next 10 to 12 months, across the four sites, we’re adding about 200,000 square feet of space.
Will this fund have a slant toward life sciences technologies, or will it seek to commercialize all technological innovations coming out of Purdue?
It will be open to all the technology areas, but I would expect that there will be a natural emphasis on certain areas just based on what’s taking place in terms of research in those arenas.
Cleary biomedical engineering, agriculture, information systems, and finally, homeland security and national defense would be areas where you will likely see a lot of this money funneled.
Have the companies spun out of Purdue over the last several years been concentrated in a certain area? Does it follow along with those four areas that you just mentioned?
It has. Examples of some of these spinouts are Cook Biotech, which is a tissue-engineering firm; Endocyte, which is developing cancer therapies and therapies for other immune-type diseases and rheumatoid arthritis; Quadraspec, a biomarker company; Griffin Analytical Technologies which is now a division of ICx Technologies, [and] which is developing miniaturized mass spectrometers and other technologies for homeland security; and Green Tech America, which is using yeast technology to better break down biofuels.
Are there certain technologies that are better suited for spinning out a company rather than licensing to an existing company? How do you make that decision?
The medical device arena is the place where there seems to be the greatest interest for spinouts, since the regulatory path there is much shorter and simpler than pharmaceuticals and those kinds of things. [Medical devices] do attract larger companies, but spinouts are even more successful because the path to market is shorter than if you had what looked to be a promising drug.
How about technologies for outlicensing?
That varies. I can say that companies that look to license technologies have become more aggressive. Larger companies are definitely more on the prowl than they used to have been. They are looking for complementary technologies to things that are already on the market, or literally buying businesses. But increasingly, the research universities are becoming the R&D arms of larger companies in the US.